In Re : IAC Electricals Pvt Ltd
GST
2018 (5) TMI 1701 – AUTHORITY FOR ADVANCE RULING – WEST BENGAL – 2018 (13) G. S. T. L. 339 (A. A. R. – GST), [2018] 2 GSTL (AAR) 66 (AAR)
AUTHORITY FOR ADVANCE RULING – WEST BENGAL – AAR
Dated:- 28-5-2018
Case Number 08 of 2018 – Order No. & 05/WBAAR/2018-19
GST
Vishwanath Member And Parthasarathi Dey Member
Applicant's representative Sri Biplab Paul, Accountant
ORDER
1. The Applicant is stated to be a manufacturer of Overhead Power Transmission Line Hardware and Accessories. His question is related to contracts obtained from M/s Power Grid Corporation of India (hereinafter referred to as “the Contractee”) who has entered into two separate contracts – one for supply of materials at ex-factory price (hereinafter referred to as “the First Contract”), and the other for supply of allied services like transportation, insurance, loading/unloading etc for delivery of materials at the contractee's site (hereinafter referred to as “the
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lity of services supplied by them. The Applicant has drawn attention and referred to Facts as stated in Point No. 15 and Interpretation as stated in Point No. 16, of the Form.
3. According to the above submissions the Applicant is not a goods transport agency (hereinafter referred to as “GTA”) or engaged in the business of in-transit insurance and loading, which are naturally bundled with and dependent of the transportation services. He, according to the Application, arranges such services and pays the GST, as applicable, on the consideration paid to the suppliers of such services. The Applicant is of the opinion that this service to the Contractee is exempt under the GST Act. According to the Applicant, it is a composite supply with road transportation as the principal supply, and loading/unloading, in-transit insurance etc as ancillary supplies to the transportation service. As the Applicant is not a GTA, his supply of transportation service is exempt. [Reference may be made to Seri
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5. Before deciding the issue of taxability of the consideration payable under the Second Contract for inland/local transportation and ancillary services like in-transit insurance, the two contracts referred to above need to be examined.
6. The Applicant has been awarded a package for supply of hardware fittings and accessories at different projects under two separate Notifications of Award (hereinafter referred to as “NOA”).
7. NOA No.CC-CS/651-SR1/HWF-3670/3/G2/NOA-I/7540 dated 12/12/ 2017 is the First Contract, involving ex-works supply of all equipment and materials. The scope of the work includes design, manufacture, testing and supply of hardware fittings and accessories. The consideration payable includes only the ex-work price component of the materials.
8. NOA No.CC-CS/651-SR1/HWF-3670/3/G2/NOA-II/7541 dated 12/12/2017 is the Second Contract, which involves all other activities required to be performed for delivery of the goods to the Contractee's site. The consideration is
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nd Contract.
10. The Contractee is aware of such interdependence of the two contracts. Although he awards the contract under two separate NOAs, Clause 3.2 of both of the NOAs makes it abundantly clear that “Notwithstanding the break-up of the Contract Price, the Contract shall, at all times, be construed as a single source responsibility Contract and any breach in any part of the Contract shall be treated as a breach of the entire Contract.”
It is further elaborated under Clause 2.2 of both the Contracts. Second paragraph of Clause 2.2 of the First Contract says, “Notwithstanding the award of work under two separate Contracts in the aforesaid manner, you shall be overall responsible to ensure the execution of both the Contracts to achieve successful completion and taking over of the Goods under the package by the Purchaser as per the requirements stipulated in the Bidding Documents. It is expressly understood and agreed by you that any default or breach under the 'Second Contract' sh
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rate Contracts in the aforesaid manner, you shall be overall responsible to ensure the execution of both the Contracts to achieve successful completion and taking over of the Goods under the package by the Purchaser as per the requirements stipulated in the Bidding Documents. It is expressly understood and agreed by you that any default or breach under the 'First Contract' shall automatically be deemed as a default or breach of this 'Second Contract' also and vice-versa, and any such default or breach or occurrence giving us a right to terminate the 'First Contract', either in full or in part, and/or recover damages there under, shall give us an absolute right to terminate this Contract, at your risk, cost and responsibility, either in full or in part and/or recover damages under this 'Second Contract' as well. However, such default or breach or occurrence in the 'First Contract', shall not automatically relieve you of any of your obligations under this 'Second Contract'. It is also ex
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rate contracts but forms only parts of an indivisible composite contract with 'single source responsibility'. Composite nature of the contract is clear from the clause that defines satisfactory performance of the First Contract (supply of goods) as the time when the goods have been transported to the Contractee's site under the Second Contract. In other words, the First Contract cannot be performed satisfactorily unless the goods have been delivered to the Contractee's site in terms of the Second Contract. Moreover, the discussion in paragraph no. 8 above settles that the First Contract is no contract at all unless tied up with the Second Contract. The two promises – supply of the goods and their transportation to the Contractee's site – are, therefore, not separately enforceable in the present context. The supplies of goods and services of transportation etc are, therefore, naturally bundled. The recipient has not contracted for ex-factory supply of materials, but for the composite su
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