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2018 (10) TMI 683 - AAR - GSTClassification of supply - composite supply of goods and services - services provided by the Applicant under the ICT @ School Project - Applicability of Entry No. 72 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 read with Entry No. 72 of Notification No. 12/2017-State Tax (Rate) dated 29.06.2017 - interpretation of afore-mentioned Entry No. 72 of the said Notification to the subject activity of the applicant. Whether the services provided by the Applicant to the Government secondary and higher secondary schools under the ICT Project, are covered under the scope of Entry No. 72 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017? Held that - The Director of Education (Secondary and Higher Secondary), Maharashtra State (hereinafter referred to as DE(S&HS) to implement ICF project in 5000 government secondary and higher secondary schools in ten identified regions in the State of Maharashtra. As per Entry No 72 pertaining to Heading 9992, Services provided to the Central Government, State Government, Union territory administration under any training programme for which total expenditure is borne by the Central Government, State Government, Union territory administration attract nil rate of taxes under the GST law - there are three elements involved as under which have to be satisfied by the applicant to be eligible to avail the benefit of Entry No. 72 of Notification No. 12/2017 -1. Services should be provided to the Central Government, State Government, Union territory administration; 2. under any training programme and 3. for which total expenditure is borne by the Central Government, State Government, Union territory administration. Services should be provided to the Central Government, State Government, Union territory administration - Held that - The applicant has entered into a contract with Maharashtra State, for a period of 5 years, for implementation of the ICT @ school project in Government and Government aided higher secondary schools across the State of Maharashtra. In the preamble of the contract it is mentioned that In its pursuit to improve the quality of education in Secondary and Higher Secondary schools of Maharashtra, the supply of computer hardware, software and connected accessories, Faculty and provision of IT Education Services in Government Secondary and Higher Secondary schools in the State of Maharashtra on Build, Own, Operate and Transfer (BOOT) Model is envisaged under the ICT @school scheme under Public Private partnership - Applicant, has to procure, supply and install requisite number of IT equipment i.e. computer hardware, software, etc and to maintain and keep the same in proper working conditions for the entire contract period of five years along with deployment of manpower (in the form of Faculty member/ Instructors, etc) in the said 1590 Schools to impart computer knowledge to the students and teachers for a total contract value of ₹ 284.61 Crores. Thus it is seen that the applicant, under the contract, is obliged to make taxable supply of goods and services to the during the contract period - There is not only provisions of rendering service under any a training programme, but there is also a provision to create necessary infrastructure in schools for implementation of ICF project. Hence from the terms of the Contract, we find that the applicant is not just providing a supply of Service but is also providing a composite supply of Goods i.e. hardware and network equipments, printers, scanners, power equipments, and also imparting training on use of such equipments as per the syllabus prescribed. Services should be provided to the Central Government, State Government, Union territory administration under any training programme - Held that - The applicant is not just providing a supply of Service but is also providing a composite supply of Goods i.e. hardware and network equipments, power equipments, etc. In view of the fact that the applicant has to set up the site provided by the DE(S&HS) as a computer lab by way of procuring and installing the computers, and other equipments as mentioned above, it would appear that the entire project cannot be termed as a training programme. It would rather be a composite supply of goods and services, not naturally bundled and having distinctly separate components with distinct value attributable to each of the components - It is a composite supply having distinctly identifiable components with distinct value attributable to each of the components. There is no doubt that the applicant has provided computer training service as part of the contract, but the said service is not the pre-dominant/ principal supply. In fact as seen above the contracted supply has many distinct supply components out of which training is a small component - as per para 1(c) of Schedule II of the SGST/CGST Act, any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods and not a service - the second condition/pre-requisite is also not satisfied. Services supplied for which the total expenditure is borne by the Central Government, State Government, Union Territory administration - Held that - From a plain reading of the terms of the contract that payment for the work done is to be made by DE(S&HS) which is a department of the State Government. Thus the source of funding the expenditure is the State Government. Thus there is no dispute in respect of fulfillment of this condition but as per discussions above, the other two conditions of Notification are not satisfied. When the language of a taxing statute is clear, if the conditions of supply falls within the four corners of statute allowing exemption, it is to be exempted. If not, tax is to be levied. In the present case all the conditions of Entry No 72 of the Notification No. 12/2017 have not been fulfilled and therefore there is no question the applicant being eligible for exemption on the basis of the said Entry. Ruling - Entry No. 72 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 read With Entry No. 72 of Notification No. 17/2017-State Tax (Rate) dated 29.06.2017 is not applicable to the services provided by the Applicant under the ICT @ School Project - The supply of goods and services as made by the applicant under ICT @ School project is not in compliance of all conditions of exemption as notified under the above referred Notification.
Issues Involved:
1. Applicability of Entry No. 72 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 to the services provided by the Applicant under the ICT @ School Project. Detailed Analysis: A. Services Provided to the Central Government, State Government, Union Territory Administration: The applicant, IL&FS Education and Technology Services Ltd., entered into a contract with the Director of Education (Secondary and Higher Secondary), Maharashtra State (DE(S&HS)) to implement the ICT project in 5000 government secondary and higher secondary schools. The applicant's activities included the supply and installation of computer hardware, software, and related infrastructure, as well as providing computer training to students and teachers. The contract involved both the provision of goods and services, with the applicant maintaining ownership of the infrastructure during the contract period of five years, after which the ownership would transfer to DE(S&HS) for a nominal value of Re. 1. The judgment noted that the contract required the supply of both goods and services, not just services. This distinction is crucial because Entry No. 72 of Notification No. 12/2017 pertains specifically to services provided to government entities. Since the contract involved a composite supply of goods and services, it did not meet the criteria for the exemption under this entry. B. Services Provided Under Any Training Programme: The applicant argued that the primary objective of the ICT project was to provide computer training, and the infrastructure was merely a means to facilitate this training. However, the judgment highlighted that the contract included significant components beyond training, such as the procurement and installation of hardware and software, site preparation, and maintenance. These activities were not naturally bundled with the training services and had distinct values attributable to them. The judgment concluded that the ICT project could not be classified solely as a training programme. Instead, it was a composite supply of goods and services, with training being just one component. Therefore, the project did not meet the criteria for being considered a training programme under Entry No. 72. C. Total Expenditure Borne by the Central Government, State Government, Union Territory Administration: The applicant demonstrated that the total expenditure for the ICT project was borne by the Central and State Governments. This condition was fulfilled, as the funding came from government sources. However, since the other two conditions were not satisfied, this alone did not qualify the services for exemption under Entry No. 72. Conclusion: The judgment concluded that the services provided by the applicant under the ICT @ School Project did not qualify for the exemption under Entry No. 72 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. The project involved a composite supply of goods and services, not solely services under a training programme. Therefore, the applicant's supply did not meet all the conditions required for the exemption, and the question was answered in the negative.
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