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2019 (12) TMI 1462 - AAR - GSTDetermination of Time of Supply - 'Deposit Works' being executed by the applicant - time of receipt of funds from the client government department or the time when expenditure incurred towards execution of the work is debited to 'Deposit Works account'? - value of such supply. HELD THAT - The amount received by the applicant is for certain supply of service, to be carried out by them. Further, as and when some part of the work gets completed, the proportionate amount gets debited from advance amount. Accordingly, it is observed that the contention of the applicant that the amount received by them as Deposit Work is a deposit and not advance, is not tenable. The amount received by them is rightly classifiable under advance received for supply of service. As regard to the proviso to sub section 31 of Section 2 of CGST Act 2017 i.e. Provided that a deposit given in respect of supply of goods or service or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply , it is observed that the above said provision envisages a situation wherein the amount is received by the service provider as Security deposit for any particular work and the same get refunded after the completion of said work. Whereas, in the instant case, the amount received by the applicant is in the nature of Advance payment and not Security deposit . Thus the proviso in question does not apply in the instant case. Time of supply of service - Section 13 of the CGST Act, 2017 - HELD THAT - The time of supply is determined with reference to the time when the supplier receives payment with respect to the supply as well as a few other references like issue of invoice, receipt of goods etc. In general, the time of supply is earliest of issuance of invoice or receipt of payment. Therefore, in case of advance received for any supply, time of supply is fixed at the point when advance is received, irrespective of the fact whether the supply is made or not. Accordingly, GST needs to be paid with reference to the time at which advance is received. In view of this we observe that the time of supply in case of 'Deposit Works' being executed by the applicant would be the time of receipt of funds from the client (Government department). Value of supply - Section 15 of the CGST Act 2017 - HELD THAT - The value of the supply, on the advance payment received by the applicant, will be the amount of advance received by the applicant towards that particular work/ supply.
Issues Involved:
1. Determination of the time of supply for 'Deposit Works' under GST. 2. Determination of the value of supply for 'Deposit Works' under GST. Detailed Analysis: 1. Determination of the Time of Supply for 'Deposit Works' Under GST: The applicant, M/s Uttar Pradesh Avas Evam Vikas Parishad, sought an advance ruling to determine the time of supply for 'Deposit Works.' The applicant contended that the funds received for 'Deposit Works' should be treated as deposits and not advances, arguing that these funds are restricted for use solely for the execution of the project and cannot be utilized for any other purpose. They compared this arrangement to an 'Escrow Account' and argued that the consideration for services is received only when the funds are debited for project expenses. However, the Authority for Advance Ruling (AAR) examined the provisions of Section 13(2) of the CGST Act, 2017, which defines the time of supply for services. The AAR concluded that the funds received by the applicant are in the nature of advance payments and not deposits. According to Section 13(2), the time of supply is the earliest of the date of issue of invoice or the date of receipt of payment. Therefore, the AAR ruled that the time of supply for 'Deposit Works' will be the time of receipt of funds from the client government department. 2. Determination of the Value of Supply for 'Deposit Works' Under GST: The applicant also sought clarity on the value of supply in the context of 'Deposit Works.' They argued that since the funds are treated as deposits, the value of supply should be determined when the funds are debited for project expenses. The AAR referred to Section 15 of the CGST Act, 2017, which defines the value of taxable supply as the transaction value, i.e., the price actually paid or payable for the supply of goods or services. The AAR reiterated that the funds received by the applicant are advance payments for the supply of services. Therefore, the value of supply should be the amount of advance received by the applicant for the particular work or supply. The AAR also referred to the Central Board of Indirect Taxes and Customs (CBIC) flyer on "Advance received for future supply," which states that the time of supply to the extent of the advance received is at the time of receipt of advance. Ruling: 1. Time of Supply: The time of supply in the case of 'Deposit Works' being executed by the applicant will be the time of receipt of funds from the client government department. 2. Value of Supply: The value of the supply, on the advance payment received by the applicant, will be the amount of advance received by the applicant towards that particular work/supply. This ruling is valid subject to the provisions under Section 103(2) until and unless declared void under Section 104(1) of the CGST Act, 2017.
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