IN RE: R. VIDYASAGAR RAO CONSTRUCTIONS
GST
2019 (1) TMI 1367 – AUTHORITY FOR ADVANCE RULINGS, HYDERABAD TELANGANA – 2019 (20) G. S. T. L. 482 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULINGS, HYDERABAD TELANGANA – AAR
Dated:- 6-6-2018
A. R. Com/9/2018
GST
S/Shri V. Srinivas, Member (Central Tax) And J. Lakshminarayana, Member (State Tax)
ORDER
M/s. R. Vidyasagar Rao Constructions, Plot No. 98 & 99, Lumbini layout, near Euro School, Gachibowli, Hyderabad-36 (GSTIN No. 36AAGFR6627L12Q) has filed an application in Form GST ARA-01 under Section 97(1) of TGST Act, 2017 read with Rule 103 of CGST/TGST Rules, 2017 and sought advance ruling on the following issues:
* The combination of services of excavation of sand including loading with machinery at reach, formation of Ramps and maintenance of Roads, transportation charges for the tractors/ tippers of sand from reach to stockyard and loading cost of sand from stockyard to lorries, is whether “Works Contract” or “Comp
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e
* formation of ramps, roads and their maintenance
(b) The place where the above contract is being executed in all its respects is in fact related to the Kaleshwaram project when it comes into existence, the sand existing there would hit the flow/ storage of water when the object of the project is sought to be achieved and therefore it is the reason for removal of sand there from. The State of Telangana sought to remove the sand and it is to be done through contractors. Such sand being a mineral when removed, the role of TSMDC came into existence and hence the contractual obligation between TSMDC and the applicant originated.
(c) The important feature of above contract is formation of ramps and roads in which there is supply of goods involved which owned by the applicant at the time of their supply which are bought by the applicant in the local market by paying required royalty, taxes etc. by theory of accretion. When the said goods like, morrum, metal and pipes etc. are incorpora
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ties they are rendering to the contractee amounts to composite services in which the transportation part is predominant and therefore also the rate would be 5% GST (2.5% CGST+2.5% SGST).
4. The applicant submitted copy of the Contract Agreement No. 08-TSMDC/Damerakunta-III/Annaram.Sand/Legal/2017, dated 18th March, 2017 entered between Telangana State Mineral Development Corporation Ltd., a Company registered under Companies Act, 2013 and M/s. VidyaSagar Rao Constructions (i.e. the applicant).
I. Opinion expressed by the member representing Central Tax:
1. A perusal of the said Agreement dated 18-3-2017 entered between Telangana State Mineral Development Corporation Limited, a Registered Company under the Companies Act, 2013 (TSMDC for brevity) and M/s. R. VidyaSagar Rao Construction, a registered partnership firm dealing with mining business and having its place of business at Yellareddyguda, Hyderabad (contractor/applicant for brevity), we find that TSMDC had accepted the tender
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ation of sand;
(ii) transportation of the excavated sand from the submergence area to the identified stockyard and
(iii) loading of the sand into lorries at the stockyard.
(b) The contractor receives an amount of Rs. 74.36 per CBM of sand for the above said three activities mentioned at (i) to (in) above. It is the look out of the contractor to transport the excavated sand by laying the roads/ ramps wherever it is required from the submergence area to the identified stockyard and laying of road/ramps is out of the scope of the contract as specified in the subject agreement. Hence the service rendered by the applicant do not encumber the works related to roads/ramps as claimed by the applicant.
(c) The contractor should have under their possession through ownership or lease, equipment such as Excavators, Mobile water tanks, Tractors/ Tippers throughout the contract period.
(d) The contractor shall obtain all necessary licences, permits, approvals, etc., before commencement of the
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enable.
3. The service supplied by the applicant is a 'composite supply'. As per Clause (30) of Section 2 of the CGST Act, 'Composite supply' is defined as:
“composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply”;
The three components of the services:
(i) excavation of sand;
(ii) transportation of the excavated sand from the submergence area to the identified stockyard and
(iii) loading of the sand into lorries at the stockyard,
as mentioned above are naturally bundled and the principal supply is 'excavation of sand'. Without excavation of sand, transportation and loading of sand to the lorries doesn't arise. The services of transportation of sand and loading of sand to the lorries are ancilla
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-Centra1 Tax (Rate), dated 28-6-2017 is extracted hereunder for ready reference:
Sl. No.
Chapter, Section or Heading
Description of Service
Rate (per cent.)
Condition
(1)
(2)
(3)
(4)
(5)
9
Heading 9965 (Goods Transport services)
(i) Transport of goods by rail [other than services specified at item no. (iv)]
2.5
Provided that credit of input tax charged in respect of goods in supplying the service is not utilised for paying central tax or integrated tax on the supply of the service
(ii) Transport of goods in a vessel.
2.5
Provided that credit of input tax charged on goods (other than on ships, vessels including bulk carriers and tankers) used in supplying the service has not been taken [Please refer to Explanation no. (iv)]
(iii) Services of goods transport agency (GTA) in relation to transportation of goods (including used household goods for personal use).
Explanation. – “goods transport agency” means any person who provides service in relation to transport of good
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med by the applicant. The word 'vessel' has been defined under clause (z) of Section 2 of Major Port Trusts Act, 1963 and the same is extracted here under:
“(z) “vessel” includes anything made for the conveyance, mainly by water, of human beings or of goods and a caisson”
As per Section 2(34) of the CGST Act, 2017 “Conveyance” includes a vessel, an aircraft and a vehicle. Hence the words “Transport of goods in a vessel” as Specified at (ii) under column (3) against Sl. No. 9 of the Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 mainly refers to the mode of transport, and the word “vessel” cannot be considered as a “container” as argued by the applicant.
7. In terms of the above statutory provision, vessel includes all types of transport conveyances by water like ships, barges, boats, tankers, etc. But the case on hand is distinguishable as the vehicles used for transportation of the sand is by road and therefore the same are not covered under 'vessel'
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plicant:
Tender Document Reference: TSMDC/SAND/EXC/Damerakunta-III/Annaram/2016, dated 29-12-2016
Excavation of Sand 560000CBM of Block III, Damerakunta-III over an extent of 52.0 Ha from Submergence area of Annaram Barrege, Kaleswaram Project and transport the same to the nearby Stockyard and again loading of the same into the Lorries at Stockyard…………. Page 1.
The Corporation upset price is Rs. 100/per CBM (Rs.30 for loading charges for machinery at Reach, Rs. 7.50 for formation of Ramps and maintenance of Roads, Rs. 32.50 for transportation charges for the tractors/ tippers of sand from reach to stockyard and Rs. 30 for loading cost of sand from Stockyard to lorries…… Page 8.
At the cost of repetition, the upset price ratios are drawn hereunder as per the above tender document:
Loading charges for machinery at reach: 30%
Formation of ramps, formation and maintenance of roads: 7.50%
Charges for transportation of sand through tractors/tippers from reach to stockyard
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mmunicated by the contractee.
In view of the above terms of tender called for which was fructified into an agreement between TSNMDC and the applicant since the applicant quoted the lowest bid and hence was successful in the bid and need to execute this contract.
Understanding by the applicant: about the nature of contract and rate of tax there on :
1. Firstly as per the information/ details provided along the application for ruling and also written submissions filed at the time of hearing the case, the applicant opines this contract is a works contract falling under Section 2(119) and hence when it is being done to Government connected to Kalaeswaam Projected and hence liable to CST @ 2.5% CGST and 2.5% SGST as per the Notification No. 31/2017, dated 13-10-2017, vide G.O.Ms No. 253, Revenue (CT-II) Department, dated 23-11-2017 the portion of which is as under:
Heading
Description of Service
Rate (percent.)
Condition
9954
(vii) Composite supply of works contract as defined in
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port of goods by rail [other than services specified at item no. (iv)].
2.5
Provided that credit of input tax charged in respect of goods in supplying the service is not utilised for paying central tax or integrated tax on the supply of the service
(ii) Transport of goods in a vessel.
2.5
Provided that credit of input tax charged on goods (other than on ships, vessels including bulk carriers and tankers) used in supplying the service has not been taken [Please refer to Explanation no. (iv)]
(iii) Services of goods transport agency (GTA) in relation to transportation of goods (including used household goods for personal use).
Explanation. – “goods transport agency” means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called.
2.5
Provided that credit of input tax charged on goods and services used in supplying the service has not been taken [Please refer to Explanation no. (iv)]
(iv) Transport of goods in
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ervices joined together' in the event of which the transaction between the provider and the receiver is in the nature of a 'Composite supply' under the scheme of the Act.
4. Though in the letter of intent and in the Agreement it is referred that the price is for one CBM of work done such work is not just simple as 'excavation' i.e. culling out sand form the nature and placing the excavated movable goods viz. sand nearby the source wherefrom it is excavated. The pre and post excavation activities joined among them in fact could be gathered from the tender document/agreement as per which the following are they:
1. Rs. 30 for loading charges for machinery at Reach,
2. Rs. 7.50 for formation of Ramps and maintenance of Roads,
3. Rs. 32.50 for transportation charges for the tractors/ tippers of sand from reach to stockyard
4. Rs. 30 for loading cost of sand from Stockyard to lorries = Summed up to Rs. 100/- CBM of work done.
5. As a matter of fact out of Rs. 100/-
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(119) of the Act. Such WCT is antecedent to the work of excavation and loading. Therefore, formations of ramps, roads i.e. internal roads before excavating the sand and loading can be said to be a Works contract in which certain goods are embedded to earth permanently amounting to immovable property. Therefore, the so formed roads and ramps in the submergible area after the Kaleswaram project comes into existence to facilitate the transportation of sand.
8. In the above activity, the construction of ramps and roads and their maintenance falls under WCT.
9. The next one is supply of transportation service i.e. from reach i.e. source wherefrom the sand culled out and loaded and to the place of stockyard.
10. Then the service of loading the sand from stockyard to lorries of 3rd parties starts.
11. Last service is formation of the road from the stockyard to the nearest village road and its maintenance till the entire contract is over. To form these roads, the provider needs to use good
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ysis, the request of the applicant in his written statement and as per his argument at the time of hearing the case that the entire contract is WCT is not tenable since the intention between the recipient and the provider is not to see the emergence of an immovable property i.e. ramps and roads either internal or external whatsoever but the intention is to see that the sand stagnated at one place be shifted to other place by means of transportation of the sand. So that laying the ramps and roads came into picture but not shifting the sand from one place to other brought such ramps and roads into picture, if the entire contractual obligations are overviewed.
15. In view of the above factual matrix, the above contract is a composite contract but not exclusively works contract service as defined under Section 2(119) and as per paragraph No. 6(a) of Schedule II to the Act.
16. Since the above contract is held to be composite contract, the request of the applicant what is the rate of tax
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en above is one for the same amongst the worldly.
20. Whether supplies more than one in the ordinary course of business a matter to be gathered from the facts and circumstances of each case depend on the business line of activity and for that matter there is no and can't be a thumb rule/no straight jacket formula. Same as the case in the case of 'naturally bundled together'. Thus each case is to be examined in the back drop of several factors.
21. In the instant case the recipient for whatever may be the reasons, instead of engaging different providers for different supplies engaged one supplier for all the supplies referred to above in detail. This fact only making the instant contract a composite one. In the facts of this case, laying internal ramps and roads excavation of sand, loading to containers, transportation of sand, unloading, stacking, loading to 3rd party containers, making ready the external roads and their maintenance for free flow of transportation of integrally c
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of the above Section and keeping in view of the above facts and circumstances of the case of the appellant the principle supply in this composite supply is identified as 'transportation of goods'.
26. As per Notification No. 11/2017, dated 28-06-2017 the following are the tax rates for rendering the above service.
27. The Sl. No. 9 of the Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 is extracted hereunder for ready reference:
Sl. No.
Chapter, Section or Heading
Description of Service
Rate (percent.)
Condition
(1)
(2)
(3)
(4)
(5)
9
Heading 9965 (Goods transport services)
(i) Transport of goods by rail [other than services specified at item no. (iv)].
2.5
Provided that credit of input tax charged in respect of goods in supplying the service is not utilised for paying central tax or integrated tax on the supply of the service
(ii) Transport of goods in a vessel.
2.5
Provided that credit of input tax charged on goods (other than on ships, vessels
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or 18% under residuary entry.
30. The applicant stated in the application for ruling and also in his written submissions his contract is not works contract, it is transportation of goods by vessel.
31. The meaning of 'vessel' is not defined under the Act.
32. As per the condition in column 5 in respect of 'Transportation of goods by vessel' the position of input tax credit is as under:
'Provided that credit of input tax charged on goods (other than on ships, vessels including bulk carriers and tankers) used in supplying the service has not been taken.
33. Therefore, the meaning of 'vessel' can be ascertained from the above proviso to the enumeration of 'Transportation of goods by vessel' and when it is done so, vessel include bulk carriers and tankers any goods used for transportation of other goods. Thus the meaning of vessel for the purpose of this entry stands as container which contains other goods which carries the goods from one place to othe
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