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2019 (3) TMI 539 - AAR - GSTLevy of tax - SGST/CGST Act - setting up of a comprehensive CCTV based city surveillance system - amount received for supply of services during the post GST period to the Government of Maharashtra (Home Department) as per the contract - Held that - In the present contract, we find that the liability of the contractor-applicant does not end with the supply of goods but it extends till the successful testing, commissioning and also to maintenance of the system. The present contract in our view is a works contract as it involves provision of services and goods, but it is for us to decide whether it is works contract as defined under the GST Act cited supra. The term 'immovable property' has not been defined under the GST Act. However, there are plethora of judgments of the Hon. Supreme Court and the Hon. High Courts which have helped understand the term 'immovable property'. The set up of a comprehensive CCTV based city surveillance system for the city of Pune and Pimpri-Chinchwad does result into installation/commissioning of immovable property wherein transfer of property in goods is involved in the execution of the contract and thus the 'Surveillance Project' is a works contract as defined in Sub-section 119 of Section 2 of the GST Act and is supply of services as per 6(a) of Schedule II of the GST Act. And therefore the amount received for the supply of services post GST are taxable under the provision of GST Act. Rate of tax applicable under GST Act? - Held that - The Surveillance project remains works contract as in the subject case falls under (ii) attracting GST @18%. However in the subject it is seen that applicant is providing composite supply of works contract in respect of surveillance project to Government of Maharashtra but the reduced rate of tax is available only if the work is of the type of original work. The expression 'Original work' has not been defined under any of the Notifications applicable to the present case. Thus' Original Works' would mean ; all new constructions; all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable; erection, installation etc. that results in increase in life and value of property . In the present case the work done by the applicant does not appear to be original works. In the present case, the contract is not related to any original work and is in the nature of composite supply of Works Contract - the activity of the applicant in the present case is nothing but a composite supply of Works Contract, not being original works and they will be covered under Sr. No. 3, item no. (ii) of Notification No. 11/2017 dated 28.06.2017 as amended by Notification No. 1/2018 dated 25.01.2018 and attract 18% GST (9% each of CGST and SGST).
Issues Involved:
1. Taxability of amount received for supply of services during the post-GST period under SGST/CGST Act. 2. Applicable rate of tax under SGST/CGST if the services are taxable. Issue-wise Analysis: Issue 1: Taxability of Amount Received for Supply of Services During Post-GST Period The applicant, Allied Digital Services Ltd, entered into a contract with the Government of Maharashtra (GOM) for the design, development, implementation, and maintenance of a CCTV-based surveillance system. The contract was executed on October 28, 2013, prior to the implementation of GST. The project went "Go Live" on October 27, 2015, and ownership of the assets was transferred to GOM at that time. The applicant received payments post-GST implementation for services rendered under this contract. Observations: - The contract involves a composite supply of works contract as defined in Section 2(119) of the CGST Act, which includes design, development, implementation, and maintenance services. - The contract is considered a works contract as it involves the transfer of property in goods and is for an immovable property. - The CCTV system is permanently fastened to the street lighting poles and cannot be shifted without dismantling, making it an immovable property. - The services provided post-GST are taxable under the GST Act as they constitute a composite supply of works contract. Conclusion: The amount received for the supply of services during the post-GST period to the Government of Maharashtra is taxable under the SGST/CGST Act. Issue 2: Applicable Rate of Tax Under SGST/CGST Having established that the services are taxable, the next issue is determining the applicable rate of tax. The applicant contends that the contract is a composite supply of works contract and should be taxed at 6% under both CGST and SGST. Observations: - As per Notification No. 11/2017-Central Tax (Rate) dated June 28, 2017, and subsequent amendments, the composite supply of works contract is taxable at 18% (9% CGST and 9% SGST). - The reduced rate of 6% each under CGST and SGST is applicable only to specific types of original works, which do not apply to the applicant's contract. - The applicant's contract does not qualify as original works as defined under the CPWD Works Manual 2014. Conclusion: The applicable rate of tax for the applicant's taxable supply of services is 18% (9% each for CGST and SGST). Order: 1. The amount received for supply of services during the post-GST period to the Government of Maharashtra (Home Department) is taxable under SGST/CGST Act. 2. The applicable rate of tax under SGST/CGST for the applicant's taxable supply of services is 18% (9% each for CGST and SGST).
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