IN RE: ANKIT TANDON AND ENTERPRISES & TOLLWAYS PRIVATE LIMITED
GST
2018 (9) TMI 1039 – AUTHORITY FOR ADVANCE RULING, MADHYA PRADESH – 2018 (17) G. S. T. L. 499 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, MADHYA PRADESH – AAR
Dated:- 9-8-2018
AAR No. 11/2018/A. A. R/R-28/36 – Order No. 09/2018
GST
SHRI RAJIV AGRAWAL AND SHRI MANOJ KUMAR CHOUBEY, MEMBER
Present on behalf of applicant: Shree Ankit Tandon, Director and CA Abhishek Jain
PROCEEDINGS
(Under section 98 of the Madhya Pradesh Goods and Services Tax Act, 2017)
1. The present application has been filed u/s 97 of the Central Goods & Services Tax Act, 2017 and MP Goods & Services Tax Act, 2017 (hereinafter also referred to CGST Act and MPSGT Act respectively) by M/S Ankit Tandon Enterprises & Tollways Private Limited (hereinafter also referred to as applicant), registered under the Goods & Services Tax.
2. The provisions of the CGST Act and MPGST Act are identical, except for certain provisions. Therefor
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on payment of toll charges” under heading 9967.
4. QUESTION RAISED BEFORE THE AUTHORITY –
An entity has been allotted Toll Collection work of certain road by NHAI. The said entity wishes to sublet the Toll Collection work to the company. Now, as the “Service by the way to access to a road or by a bridge on payment of toll charges” is exempted service as per Notification No. 12/2017-Central Tax(Rate) dated the 28th June, 2017 (Sr. No.23)(Heading No. 9967).
Whether the same exemption will apply to services provided by the Applicant, i.e. Service by the way of access to a road or a bridge on payment of access to a road or a bridge on payment of toll charges on subcontract basis.
5. DEPARTMENT'S VIEW POINT- The concerned officer submitted that services providing access to a Road or Bridge on payment of toll charge as exempted by notification no. 12/2017 Central Tax(Rate) Dated 28-06-17 issued Under CGST Act and Notification no. FA-3-42/2017/1/V/53 Dated 30-06-2017 issued under MP
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er into agreements with any person for the activity of collection of toll charges.
6.3. Normally, in terms of the aforesaid agreement, the NHAI appoints a person (known as “contractor”) for collecting the prescribed toll charges from the users of the road/highways at one or more toll collection plazas. Thus, NHAI transfers the right to collect the toll charges from users through the contractor at the toll collection plazas.
6.4. Further, the contractor is generally required to remit a certain agreed amount every week to NHAI in terms of the aforesaid agreements irrespective of the actual amount of toll charges collected by the contractor. The amount remaining, if any, after remittance of the agreed amount from the toll charges to NHAI, is retained by the contractor.
6.5. In terms of the agreement between the NHAI and the contractor, the Central Governments' toll fee collection rights under the NHFR are transferred to the contractor in lieu of the contractor remitting an agreed s
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leakage of revenue etc. Thus, the contractor, in its own interest would ensure that the toll charges are being properly collected and remitted to NHAI. For the contractor, higher the amount of toll charges collected higher is its own revenue.
6.10. In the present case, the Applicant M/S Ankit Tandon Enterprises is a company registered on 07/07/2017 with the main object of providing services of construction of roads, bridges etc and collection of Toll on direct or subcontract basis.
6.11. The Applicant company is considering a proposal with another entity for allotment of toll collection work on sub contract basis as the main contract for toll collection has been allotted to the said entity by the Government on the same terms and conditions as main contractor.
Now, as the Toll collection service is exempted from GST vide clause 23 of Notification No. 12/2017 dated 28/06/2017, the company claims that the service provided by it are in the nature of Toll Collection services only and he
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the proposed agreement, the Applicant company would collect toll charges on behalf of the Entity. So nature of receipt for all parties i.e. NHAI, the Entity and the Applicant Company is Toll Charges only, i.e. all the parties are engaged into toll collection service through different channels and as the Toll collection service is exempted from GST vide clause 23 of Notification No. 12/2017 dated 28/06/2017, the Applicant company claims that the service provided by it are in the nature of Toll Collection services only and hence are exempt from GST under the said notification.
6. The services provided by the Applicant Company and by the Entity are clearly falling under the category of toll collection services and cannot be categorised as any other type of service merely because of sub-contact as all the terms of agreement between the NHAI and the Entity as well as the Entity and the Company are same and the company is only entering into the shoes of the Entity by agreeing to accept th
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o. Bid/Package on NHAI/13013/CO/RFP/Long Term/Nagpur-Betul/2017 Dated 11-01-2018. APC Rs. 39,70,00,000/- (Thirty Nine Crore Seventy Lac Only).
2. For the above said work we bid for Rs. 46,07,00,000/- (Forty Six Crore Seven Lac Only).
3. Second Party will make the payment of monthly remittance basis and this payment will change every year due to rate revision done by NHAI.
4. Security deposit for 1.5 months remittance basis and bank Guarantee of 3 months Remittance will be make by first Party and advance of a month remittance will be provided by Second Party.
5. All expenses such as interest charge on draft will be @11% P.A. and Bank Guarantee charges actual to be reimbursed by Second Party to First Party.
6. For all liabilities of Taxes and others Second Party will be responsible.
7. DISCUSSIONS AND FINDINGS-
7.1 In the instant case, there are two sets of supply of service –
a) Supply of service relating to maintenance of Roads as sub-contractor provided by the applicant
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n.
7.4 In case where the exemption is based on the recipient of service, the exemption is at times not available to the sub-contractor since the principal contractor receiving supplies from the sub-contractor may not fulfil the qualification regarding recipient as per the exemption notification. In some cases, specific provision has been given in the Notifications itself to take into its fold, the supply by a sub-contractor. For example in Clause (ix) and (x) of Sl.No.3 in Notification No. 11/2017 – Central Tax (Rate) dated 28.06.2017 makes provision for lower rate of GST for sub-contractor also.
7.5 In case of providing access to a Road or Bridge on payment of Toll, the exemption is totally based on service of providing access to a road or a bridge on payment of toll charges. There is no restriction regarding the supplier or the recipient of the supply. In the instant case, therefore, even though the supply of the service to the user of the Toll Road is by the sub-contractor, GST is
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June, 2017 and corresponding notification under MPGST Act,2017. Which reads as:
Chapter, Section or Heading
Description of service
SGST
CGST
Heading 9967
services providing access to a Road or Bridge on payment of toll charge
NIL
NIL
8.2 The above ruling in the application is limited to the question stated in Sl. No. 14 of the Application, which relates to the liability of Goods & Services Tax on the “Toll Charges” collected. It has no bearing on the consideration received by the applicant from of Highway Infrastructure (P) Limited for the supplies made by the applicant to Highway Infrastructure (P) Limited.
8.3 As per the facts of the case, the applicant receives Toll Charges on behalf of Highway Infrastructure (P) Limited and remits a fixed sum to Highway Infrastructure (P) Limited out of the Toll Charges collected. In other words, the consideration for the supplies made to Highway Infrastructure (P) Limited is retained by the applicant, out of the Toll Charges.
8.4 The To
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