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2019 (8) TMI 1352 - AAR - GSTScope of supply - execution of works requiring modification/ augmentation/ shifting/ additions to the transmission system of RVPN at the specific request of the consumer/intending agency under Deposit Work - whether Supply in terms of Section 7 of the CGST Act 2017? - HELD THAT - The term supply has been defined in Section 7 of GST Act 2017 and it includes all forms of supply (goods or services) and includes agreeing to supply when they are for a consideration and in the course or furtherance of business. It specifically includes sale transfer barter exchange license rental lease or disposal. For a transaction to qualify as supply it is essential that the same is in the course or furtherance of business . In the instant case the transaction of facilitating the execution of deposit works to the applicant s transmission system at the specific request of the consumer/ intending agency is included under the scope of supply in terms of section 7 of GST Act 2017 as the same fulfills all the essential ingredients of supply as it is a supply of service in the form of facilitation further there is a consideration as the construction activities carried out by the customer / intending agency will ultimately be the property of the applicant - Thus all the ingredients of section 7(1)(a) are present to be categorized the transaction as supply of services. Considering the fact that the ownership of asset remains with the applicant it is evident that the execution of works requiring deposit works is a facilitation for the access/ use of such transmission system and thus such facilitation is a supply of services. Valuation of supply - Work executed by RVPN itself - Section 15 of the GST Act 2017 - HELD THAT - When the applicant incurred such cost then GST would automatically be leviable on total transaction value without any recourse to section 15(2)(b) of GST Act 2017 - Accordingly even when the cost of deposit work to the applicant s transmission system is incurred by the consumer/ intending agency itself such cost is also required to be included in the transaction value and to be considered as value of supply for the purpose of levy of GST in terms of section 15(2)(b). Valuation of supply - Work executed by the consumer/ intending agency under supervision of RVPN - Section 15 of the GST Act 2017 - HELD THAT - In the present case where the deposit work is undertaken by the consumer/ intending agency under supervision of the applicant the cost is directly incurred by the consumer/ intending agency still the applicant is exclusively liable and responsible for modification/ alteration of the transmission infrastructure as per Electricity Act 2003 so as to comply with the grid standards and that s why the work is mandatorily to be executed under the supervision of applicant - Thus since the applicant is liable and responsible for such work therefore according to section 15(2)(b) of GST Act 2017 the cost of such asset/ infrastructure incurred by the consumer/ intending agency is to be included in the value of supply - in addition to supervision/ shutdown charges by virtue of section 15(2) (b) of GST Act 2017 the cost incurred by the consumer/ intending agency for creating the infrastructure is also required to be included in the transaction value and to be considered as value of supply for the purpose of levy of GST. Applicable rate of GST - HELD THAT - Services provided by the applicant to the consumer/ intending agency falls under HSN/SAC 998631 and will attract GST @ 18% as per Annexure to N/N. 11/2017 Central Tax (Rate) dated 28th June 2017 (as amended).
Issues Involved:
1. Whether facilitating the execution of works requiring modification/augmentation/shifting/additions to the transmission system of RVPN at the specific request of the consumer/intending agency under Deposit Work is a 'Supply' in terms of Section 7 of the CGST Act, 2017. 2. Determination of the value of the supply in terms of Section 15 of the GST Act, 2017 for: a. Work executed by RVPN itself. b. Work executed by the consumer/intending agency under the supervision of RVPN. 3. Applicable GST tax rate on the above supply. Issue-wise Detailed Analysis: 1. Whether facilitating the execution of works is a 'Supply' under Section 7 of the CGST Act, 2017: The applicant, RVPN, is engaged in providing services/facilitation to customers/intending agencies under Deposit Works to its transmission system. The activities include modification, augmentation, shifting, and additions to the transmission system. The facilitation of these works, whether executed by RVPN itself or under its supervision by the consumer/intending agency, is considered a 'Supply' under Section 7 of the CGST Act, 2017. This is because: - The transaction involves a supply of service in the form of facilitation. - There is a consideration involved, as the construction activities carried out by the customer/intending agency will ultimately be the property of RVPN. - RVPN, by facilitating access to its transmission system, becomes the supplier of services, and these activities are in the course of furtherance of business. 2. Determination of the value of the supply under Section 15 of the GST Act, 2017: a. Work executed by RVPN itself: - The value of supply shall be the total cost estimate (including overhead and other charges) plus GST. This is the price actually paid or payable for the said supply. b. Work executed by the consumer/intending agency under the supervision of RVPN: - The value of supply shall include: - Supervision charges. - Shutdown charges. - The cost directly incurred by the consumer/intending agency. - As per Section 15(2)(b) of the GST Act, 2017, the cost of the asset/infrastructure incurred by the consumer/intending agency is to be included in the value of supply. This is because RVPN, being the owner of the asset/infrastructure under regulatory requirements, accounts for it in its books as an asset and income as 'Consumer Contribution.' 3. Applicable GST tax rate on the above supply: - The services provided by RVPN to the consumer/intending agency fall under HSN/SAC 998631. - The applicable GST tax rate is 18% (SGST 9% + CGST 9%), as per the Annexure to Notification No. 11/2017 Central Tax (Rate) dated 28th June 2017 (as amended). Ruling: Facilitating the execution of work (Deposit Work) by RVPN to the consumer/intending agency is covered under the 'scope of supply' in terms of Section 7 of the GST Act, 2017. The value of supply in both cases (work executed by RVPN itself and work executed by the consumer/intending agency under RVPN's supervision) shall be the transaction value, which is the price actually paid or payable in terms of Section 15 of the GST Act, 2017. The rate of GST applicable is 18% (SGST 9% + CGST 9%).
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