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2020 (10) TMI 807 - AAR - GSTClassification of services - rate of tax - sub-contractor - composite supply of services - works contract provided by way of construction, erection, commissioning, or installation of original works pertaining to Metro - applicability of N/N. 11/2017 amended vide Notification No.1/2018- Central Tax(rate) dated 25th January 2018. HELD THAT - In the case at hand, it is seen that Siemens has secured the contract- the Signalling, Platform Screen Doors and Telecommunications works for Chennai Metro Rail Project Phase I from CMRL and has sub-contracted certain portion to the applicant. SAC 995421 covers General Construction services of highways, streets, roads, railways, airfield runways, bridges and tunnels which are Civil engineering related works which is not the work awarded to Siemens and therefore not undertaken by the applicant in the case at hand. SAC 995461 covers installation services of telecommunication wiring, telecommunication equipment, electrical installation services of illumination and signaling system for railways - the applicant undertakes Design, manufacture, supply, installation, testing and commission of Integrated Control and Management System, Public Address and Voice Alarm System, Driver Only Operation (DOO) CCTV System, Closed Circuit Television (CCTV) System, Access Control and Intruder Detection System, Passenger Information Display(PID) System, Office Telephone System, Operational Telephone System and Master Clock System. The works are supply and Installation of lines and equipments meant for telecommunication, signaling in the CMRL project and not related to any civil engineering work - thus, the supply of the applicant to Siemens is covered under SAC 9954, more specifically under 995461 and the first requirement of the entry stands satisfied. Composite Supply or not - HELD THAT - In the case at hand from the Purchase Order furnished by the applicant it is seen that there is supply of goods (equipments, goods, etc)) and services (installation, testing, etc) for a particular cost center/Line and the work is considered to be done on that basis. Thus, there is a natural bundle of goods and services per cost center/Line and the supply is construed to be made when the entire supply of the line/cost center is made. Hence, the supply of the applicant is a composite supply and this criterion is satisfied. Works Contract or not - HELD THAT - A work shall be treated as Works Contract if that work is done for land or earth or for immovable property and there is transfer of property in goods involved in the execution of such contract. Immovable property cannot be moved. It cannot be separated from the land or earth. If it is detached it shall have to destroy. In the case at hand, the Employer s Requirements, Particular Specifications-4B Telecommunication General Specification - Volume 4B Section 3 and 4 (furnished on 26.02.2020), gives the outline summary of the various systems and sub-systems which are applicable to the Telecommunication scope and Para 3.1.2 to 3.1.10 gives the outline description of the works said to be the works of the applicant. On going through these sections it is observed that the work involves installation of the individual systems at platforms, stations, other select locations along the corridor and is integrated at the Operation Control Corridor(OCC) at Koyambedu and the Telecommunications Infrastructure implementation is to be synchronized with the civil construction phases. The applicant has stated that in the Pre-GST regime, under Service Tax, the applicant being a supplier of Works Contract Service relating to infrastructure project of railways, in the capacity of Sub-contractor was exempted from service tax and had claimed the benefit of entry 3 (v) of Notification 11/2017-C.T.(Rate) dated 28.06.2017 as above. The definition of Works Contract as it existed in the Service Tax law is different from that defined under Section 2(119) of GST Act. Under GST, only those defined works carried out on any immovable property is covered under Works Contract . Thus without documentary proof of the works contracted/undertaken like related diagrams /plans /schedules/ Pictures/detailed write-up on the works, etc in the absence of submission of the entire sub-contract agreement, it is not possible for this authority to conclude that the works are done on the immovable property and once installed, the goods/equipments cannot be dismantled without damage so as to hold that the work undertaken is Works Contract as per Section 2 (119) of the Act. As the applicant has stated that it will not be possible for them to furnish the entire sub-contract agreement which contains the requisite details, we record that in the absence of the documentation we are not in a position to hold the works as Works Contract as per Section 2 (119) of the Act. Whether supply should be by way of construction, erection, commissioning, or installation of original works pertaining to railways, including monorail and metro? - HELD THAT - The work of the applicant includes Installation of the various systems on designing, manufacture and supply and therefore is Original work as defined in the notification - The work of the applicant is on the lines, stations and locations of land appurtenant and therefore this criterion is satisfied. In the case at hand, the applicant is entrusted with certain works of design, manufacture, installation and commissioning of the Telecommunication systems including signaling system by Siemens who has been awarded the entire work relating to signaling and Telecommunication under CMRL project Phase-1 and from the preceding paragraphs it is seen that the works are composite supply of original work pertaining to railways and the only leg of the entry No. 3(v) of the Notification which has not been established is whether the works satisfies the definition of Works Contract under Section 2 (119) of the GST Act for which sufficient documentary proof is not furnished - considering all the submissions and that the application is pending before this authority for long, we find it appropriate to hold that the benefit of the entry at Sl.No. 3 (v) will be applicable to the applicant subject to the works undertaken by them being Works Contract as per Section 2 (119) of the Act and the applicable GST is @, 12% effective from 25.01.2018.
Issues Involved:
1. Applicability of the 6% CGST rate for composite supply of works contract services provided by a sub-contractor for metro rail projects. Detailed Analysis: Issue 1: Applicability of the 6% CGST Rate for Composite Supply of Works Contract Services by a Sub-Contractor Background: M/s. ST Engineering Electronics Limited, a wholly-owned subsidiary of Singapore Technologies Engineering Limited, entered into a sub-contract agreement with Siemens Ltd., India, to provide services related to the Chennai Metro Rail Project. The applicant sought an advance ruling on whether the 6% CGST rate, applicable to composite supply of works contract services for metro projects, can be availed by them as a sub-contractor. Applicant's Submission: The applicant argued that their services fall under the definition of "works contract" as per Section 2(119) of the CGST Act, and thus should be eligible for the 6% CGST rate as per Notification No. 11/2017, amended by Notification No. 1/2018. They referenced the Metro Railways Act, 1978, and previous service tax exemptions for similar projects to support their claim. Authority's Examination: 1. Classification of Services: - The services provided by the applicant include the design, manufacture, supply, installation, testing, and commissioning of telecommunication systems for the metro project. - The services fall under SAC 995461 (Electrical installation services), which includes telecommunication equipment installation. 2. Composite Supply: - The applicant's services are a composite supply, as they involve a natural bundle of goods and services supplied together in the ordinary course of business. 3. Works Contract: - The definition of "works contract" under Section 2(119) of the CGST Act requires the work to be on immovable property and involve the transfer of property in goods. - The applicant failed to provide complete documentation to establish that their work is on immovable property and cannot be dismantled without damage. Therefore, the authority could not conclusively determine if the services qualify as a "works contract." 4. Original Works: - The services provided by the applicant include new constructions and installations, qualifying as "original works" as defined in the notification. Conclusion: The authority ruled that the 6% CGST rate as per entry No. 3(v) of Notification No. 11/2017, amended by Notification No. 1/2018, is applicable to the applicant, provided the works contracted and undertaken by them satisfy the definition of "works contract" under Section 2(119) of the CGST Act, 2017. The ruling emphasized the need for sufficient documentary evidence to establish the nature of the works as a "works contract." Ruling: The rate of tax of 6% CGST as per entry No. 3(v) of Notification No. 11/2017, amended by Notification No. 1/2018, effective from 25.01.2018, may be applicable to the applicant provided the works contracted and undertaken by them satisfy the definition of "works contract" as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017.
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