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2018 (11) TMI 1573 - AAR - GSTErection of a series of transmission towers and commissioning of the transmission line - Supply of a bundle of goods and services - Works contract - Composite supply or not - whether the Tower Package, which includes the erection of a series of transmission towers and commissioning of the transmission line, is an immovable property? Held that - Neither the risk in the goods passes to PGCIL at the factory gate nor that the JV will get any payment, other than the advances paid, until and unless the goods are dispatched. Evidently, property in the goods does not pass to PGCIL at the factory gate. The JV needs to move the goods and deliver them at the work site before claiming 60% of the payment for execution of the First Contract. The balance amount is to be paid in phases till completion of erection of all towers of the transmission line. It is immediately apparent that the First Contract cannot be executed independently of the Second Contract. There cannot be any supply of goods without a place of supply. As it is evident that title to the goods has not been transferred to PGCIL at the factory gate, supply under the First Contract involves movement and/or installation at the site, and the place of supply shall be the location of the goods at the time when movement of the goods terminates for delivery to PGCIL or moved to the site for assembly or installation refer to Section 10(1)(a) & (d) of the IGST Act, 2017 . The First Contract, however, does not include the provision and cost of such transportation and delivery. It, therefore, does not amount to a contract for supply of goods unless tied up with the Second Contract - the First Contract has no leg unless supported by the Second Contract. It is no executable contract unless tied up with the Second Contract. It is evident that although supplies of goods and services to PGCIL are being made under two separate agreements, they are not executable separately. The First Contract for supply of goods cannot be executed unless tied up with the Second Contract. Unless and until supplies under both the contracts are made and the Tower Package is commissioned, PGCIL is not treating either of the contracts as successfully completed and reserves the right to initiate actions for breach of contract. It is thus a single source contract for bundled supplies of goods and services for construction, erection and commissioning of the Tower Package an immovable property. The Applicant is executing an indivisible composite contract for construction, erection and commissioning of an immovable property, namely the Tower Package, execution of which involves bundled supply of both goods and services. It is, therefore, works contract, as defined under Section 2(119) of the GST Act - The contract for the Tower Package, being works contract is service in terms of paragraph 6(a) to Schedule II to the GST Act. Activities covered under Schedule II are to be treated as a supply of the nature described under section 7(1)(d) of the GST Act. Reference to Circular No. 47/21/2018-GST dated 08/06/2018 of CBIC or the e-flyer is, therefore, not relevant in the present context. The price components of both the First and the Second Contracts, including that for transportation, in-transit insurance etc. are, therefore, to be clubbed together to arrive at the value of the supply of works contract service - Transportation of goods and in-transit insurance, being merely parts of the bundled services, should to be treated as components of the value of the works contract and not as separate and independent supplies - The exemption under serial no. 18 of the Exemption Notification is, therefore, not applicable in the present context. Ruling - The Applicant supplies works contract service, the value of which includes inter alia consideration paid for transportation and in-transit insurance. GST is to be paid on the entire value of the works contract, including the supply of materials, transportation, intransit insurance, erection, commissioning etc. The exemption under serial no. 18 of Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017 is, therefore, not applicable in the present context.
Issues Involved:
1. Admissibility of the application for Advance Ruling. 2. Nature of the contract between the Applicant and PGCIL. 3. Determination of whether the Tower Package constitutes immovable property. 4. Applicability of the exemption under Serial No. 18 of Notification No. 12/2017-Central Tax (Rate). Issue-wise Detailed Analysis: 1. Admissibility of the Application for Advance Ruling: The Applicant, engaged in the manufacturing, installation, and ancillary services of integrated transmission towers, sought a ruling on the applicability of Serial No. 18 of Notification No. 12/2017-Central Tax (Rate). The application was admitted as it met the criteria under Section 97(2)(b) of the CGST/WBGST Acts, 2017, and no objections were raised by the concerned officer. 2. Nature of the Contract Between the Applicant and PGCIL: The contract between the JV and PGCIL was for the construction, erection, and commissioning of the Tower Package, including the supply of materials, transportation, insurance, and other services. The contract was not for a standalone tower but for a comprehensive package involving multiple services and goods, making it a composite supply rather than separate supplies. 3. Determination of Whether the Tower Package Constitutes Immovable Property: The judgment analyzed whether the Tower Package is immovable property. The term "immovable property" is not defined under the GST Act, so reference was made to the General Clauses Act, 1897, and the Transfer of Property Act, 1882. The essential character of immovable property is that it is attached to the earth or permanently fastened to anything attached to the earth. The judgment concluded that the Tower Package, being constructed for perpetual enjoyment and not intended for removal, qualifies as immovable property. 4. Applicability of the Exemption Under Serial No. 18 of Notification No. 12/2017-Central Tax (Rate): The Applicant argued that the contract should be treated as separate supplies of goods and services. However, the judgment found that the contract was an indivisible composite contract for the construction, erection, and commissioning of the Tower Package, which is an immovable property. Therefore, it is classified as a works contract under Section 2(119) of the GST Act. Consequently, GST is to be paid on the entire value of the works contract, including transportation and in-transit insurance, and the exemption under Serial No. 18 of the Exemption Notification is not applicable. Ruling: The Applicant supplies works contract service, and GST is to be paid on the entire value of the works contract, including the supply of materials, transportation, in-transit insurance, erection, and commissioning. The exemption under Serial No. 18 of Notification No. 12/2017-Central Tax (Rate) is not applicable in this context. This ruling is valid subject to the provisions under Section 103 until declared void under Section 104(1) of the GST Act.
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