2021 (8) TMI 671 - AAR - GST

Levy of GST - Composite supply or Principal supply - street lighting activity undertaken under the Energy Performance Contract dated 1st March 2019 (which involves supply of various goods and rendition of various services) - supply of luminaires, without which there can be no energy conservation, and which is the primary deliverables, constituting approximately 70% of the total project cost, can be construed as the principal supply - applicable rate of GST - benefit of exemption under Entry 3A of Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017, as amended - time of supply of luminaires - Explanation 1 to Section 12(2) of the CGST / KGST Act - valuation of taxable supply - payments are to be received based on energy savings. HELD THAT - The Applicant entered into an Energy Performance Contract dated 01.03.2019 with BBMP to install and implement energy conservation measures and also to operate and maintain the project Public Lighting Network, in the city of Bengaluru, for a period of ten years, through a special purpose vehicle incorporated by the consortium bidder. The Applicant is primarily required to supply LED luminaires so as to replace the existing luminaries as part of the said project, dimming of switching point LUX during designated hours, and also to undertake measures to achieve guaranteed energy savings - the applicant contends that their supply includes LED luminaries etc., and operation maintenance of the same and thus the said supply qualifies to be a composite supply wherein the supply of LED luminaries becomes principal supply and hence the rate of GST would be the rate of tax applicable to supply of LED luminaries. Further the time of supply is date of invoice. The street lighting activity undertaken under the Energy Performance Contract dated 1st March 2019 (which involves supply of various goods and rendition of various services), is to be considered as a Composite Supply under the CGST / KGST Act 2017, where the principal supply is the service, classified under SAC 999112 - applicable rate of GST on supply made under this contract is 18% as per entry SI.No.29 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. O M of the installed equipments would constitute the principal supply and the applicable rate of GST on the said supply - Applicant is not entitled to the benefit of exemption under Entry 3A of Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017, as amended - The time of supply of luminaries is not relevant as the impugned transaction is held to be a supply of service - The value of the taxable supply includes all the amounts received from BBMP pursuant to the contract dated 01.03.2019.

Issues Involved:
1. Classification of street lighting activity under the Energy Performance Contract as a Composite Supply.
2. Determination of the principal supply and applicable rate of GST.
3. Eligibility for exemption under Entry 3A of Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017.
4. Time of supply for the transaction.
5. Value of the taxable supply.

Issue-wise Detailed Analysis:

1. Classification of Street Lighting Activity as Composite Supply:
The applicant entered into an Energy Performance Contract with BBMP to install, operate, and maintain energy conservation measures for the Public Lighting Network in Bengaluru for ten years. The applicant contends that their supply includes LED luminaires and other equipment, along with operation and maintenance services, qualifying the supply as a composite supply under Section 2(30) of the CGST Act. The Authority concluded that the street lighting activity under the Energy Performance Contract is indeed a composite supply involving both goods and services.

2. Determination of Principal Supply and Applicable Rate of GST:
The applicant argued that the principal supply is the supply of LED luminaires, which constitutes approximately 70% of the total project cost. However, upon examination, it was observed that the LED luminaires, feeder panels, and other equipment are not handed over to BBMP but are installed, operated, and maintained by the applicant. The consideration received is based on energy savings and fixed payments for operation and maintenance (O&M) services. The Authority determined that the principal supply is the service of operation and maintenance, classified under SAC 999112. The applicable rate of GST on this composite supply is 18% (9% CGST and 9% KGST) as per entry Sl.No.29 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017.

3. Eligibility for Exemption under Entry 3A of Notification No. 12/2017-Central Tax (Rate):
The applicant sought exemption under Entry 3A of Notification No. 12/2017-Central Tax (Rate), which provides exemption for composite supply where the value of goods does not exceed 25% of the total value. Since the value of goods in this contract exceeds 25%, the applicant is not eligible for this exemption.

4. Time of Supply for the Transaction:
The applicant argued that the time of supply should be the date of the invoice, as per Section 12(2)(a) of the CGST Act. However, since the transaction is considered a supply of service, the time of supply for the luminaries is not relevant.

5. Value of the Taxable Supply:
The value of the taxable supply includes all amounts received from BBMP under the contract dated 01.03.2019. This includes payments based on energy savings and fixed payments for O&M services.

Ruling:
i. The street lighting activity under the Energy Performance Contract is a Composite Supply under the CGST/KGST Act 2017, with the principal supply being the service classified under SAC 999112.
ii. The applicable rate of GST on this supply is 18% (9% CGST and 9% KGST).
iii. The principal supply is the O&M of the installed equipment, and the applicable rate of GST is as stated above.
iv. The applicant is not entitled to the exemption under Entry 3A of Notification No. 12/2017-Central Tax (Rate).
v. The time of supply of luminaries is not relevant as the transaction is considered a supply of service.
vi. The value of the taxable supply includes all amounts received from BBMP under the contract.

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