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2019 (6) TMI 1171 - AAR - GSTWorks contract services or Composite supply? - turnkey projects for supply, installation, testing and commissioning of Relay Protection Panels with Substation Automation System (SAS) compatible to IEC 61850 protocol, at their various sites/ locations - Naturally bundled services - supply of goods or not - classified under the HSN Code 995461 or otherwise? - rate of tax - HELD THAT - Works contract will be treated as service and tax would be charged accordingly. As per Section 2(119) of the CGST Act, 2017, unless the context otherwise requires, the term works contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract - what we need to find out is whether the applicant in the subject case is dealing in any immovable property which is transferred in the execution of the contract. For items listed in Sr. No. 1 to 16 of the Schedule A to this PO, the prices are inclusive of all taxes and duties, etc and prices for items 17 and 18 of the Schedule included services tax. Thus the PO also has clearly bifurcated the contract into a supply of goods and supply of services. Further clause no. 11 of the PO deals with TERMS OF PAYMENTS. The PO envisages separate payment for supply of works and for supply of materials/equipments. There appears to be a clear bifurcation in the PO with respect to supply of goods and supply of services - For items listed in Sr. No. 1 to 21 of the Schedule A to this PO, the prices are inclusive of all taxes and duties, etc and prices for items 22 and 23 of the Schedule included services tax. Further clause no. 11 of the PO deals with TERMS OF PAYMENTS. The PO envisages separate payment for supply of works and for supply of materials/ equipments. There appears to be a clear bifurcation in the PO with respect to supply of goods and supply of services - For items listed in Sr. No. 1 to 17 of the Schedule A to this PO, the prices are inclusive of all taxes and duties, etc and prices for items 18 of the Schedule included services tax. Here too, the PO envisages separate payment for supply of works and for supply of materials/equipments and there appears to be a clear bifurcation in the PO with respect to supply of goods and supply of services - Thus we find from all the three POs that the contracts are considering a clear demarcation of goods and services to be provided by the applicant but such supplies are naturally bundled and in conjunction with each other. In all the three POs submitted by the applicant the major part of the contract is supply of goods. These goods are sold to the client by the applicant and they receive separate payment for such goods sold. Further we find that the goods that are supplied are used by the applicant to provide services installation, testing and commissioning of the substations. Without these goods the services cannot be supplied by the applicant and therefore we find that the goods and services are supplied as a combination and in conjunction and in the course of their business where the principal supply is supply of goods - Thus,there is a composite supply in the subject case since in the subject case there is no building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of the contract. Thus, there is no works contract involved in the subject case and the supply is nothing but a composite supply with supply of goods being the principal supply. Whether their transaction would be treated a supply of goods if their transaction is not considered a works contract and if yes, what would be the HSN code and rate of tax? - HELD THAT - The goods supplied by them are in the form of Boards, Panels, etc equipped with 2 or more apparatus of heading 8535 or 8536 like fuses, switches, etc, for electric control and distribution of electricity. Hence the principal supply in their composite supply being goods as described under heading 8537, the applicant is liable to pay GST on the whole contract @ 18%.
Issues Involved:
1. Whether the transaction/contract to M/S APTRANSCO is in the nature of Works Contract Services and therefore liable to GST @ 18% under the HSN Code 995461? 2. If not, whether the said transaction is a Supply of Goods, and if yes, at what rate of tax and under which HSN Code? Issue-Wise Detailed Analysis: 1. Whether the transaction/contract to M/S APTRANSCO is in the nature of Works Contract Services and therefore liable to GST @ 18% under the HSN Code 995461? The applicant, M/s. NR Energy Solutions India Pvt. Ltd., engaged in manufacturing and supplying electrical control panels and systems, entered into turnkey projects with M/S APTRANSCO for the supply, installation, testing, and commissioning of Relay & Protection Panels with Substation Automation System (SAS). The applicant contended that the contract is a "works contract" as defined under Section 2(119) of the CGST Act, 2017, involving the transfer of property in goods in the execution of the contract. They argued that the installed systems and panels become part of the immovable property (substation) and cannot be dismantled without damaging the substation, thus inheriting the characteristics of immovable property. The applicant cited various judicial pronouncements to support their claim that the contract is a works contract. However, the jurisdictional officer contended that the project involves both supply of goods and services and is covered under "composite supply" rather than "works contract." They argued that the value of goods supplied constitutes more than 97.5% of the project value, and thus, the principal supply is goods, attracting GST at 28% under HSN code 85372000. 2. If not, whether the said transaction is a Supply of Goods, and if yes, at what rate of tax and under which HSN Code? The Authority for Advance Ruling (AAR) observed that the contracts involve clear bifurcation of supply of goods and services, which are naturally bundled and supplied in conjunction. The AAR referred to the definition of "Composite Supply" under Section 2(30) of the CGST Act, 2017, and concluded that the principal supply in this case is the supply of goods. The AAR noted that the goods supplied are essential for the substation's operation and are classified under HSN code 85372000, which attracts GST at 18%. Therefore, the entire transaction is treated as a composite supply with the principal supply being goods, and the applicable GST rate is 18% under HSN code 8537. Conclusion: Order: 1. The transaction/contract to M/S APTRANSCO is not in the nature of Works Contract Services and is not liable to GST @ 18% under HSN Code 995461. 2. The said transaction is a composite supply where the principal supply is the supply of goods. 3. The entire transaction is taxable at 18% GST under Heading 8537 of the GST Tariff.
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