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2022 (4) TMI 185 - AAR - GSTClassification of services - rate of GST - provision of project management consultancy (PMC) services - PMC services are provided to various natural oil and gas companies as well as oil and gas mining and exploration companies - to be classified under SI No. 24 (ii) of heading 9986 of the Rate Notification as 'Support services to exploration, mining or drilling of petroleum crude or natural gas or both' under SAC 998621 or under SI No. 21 (ia) of heading 9983 of the Rate Notification as 'Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both'? Whether the services provided by the Applicant are classified under SI No. 24 (ii) of heading 9986 of the Rate Notification as 'Support services to exploration, mining or drilling of petroleum crude or natural gas or both' under SAC 998621 and attracts GST @ 12% in terms of SI. No. 24(11) of Rate Notification? - HELD THAT - The work of exploration, mining or drilling of petroleum crude or natural gas or both Vedanta Limited and support services in such respect are performed by the EPC contract or who have been contracted to and are responsible for all the engineering, procurement, and construction activities to deliver the subject Projects. It is seen that the service code 998621 includes services provided to the oil and gas mining sector by way of actual participation in the mining activity, and in the subject case, it would appear that it is actually the EPC contractor who is giving support services to VL by being responsible for all the engineering, procurement, and construction activities to deliver the completed Projects - the impugned activity is not covered under Heading 998621. Whether the services provided by the Applicant are classified under SI No. 21(ia) of heading 9983 of the Rate Notification as 'Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both' and attracts GST @ 12% in terms of SI. No. 21(ia) of Rate Notification? - HELD THAT - Circular No. 114/33/2019-GST states that the scope of the entry at Sr. No. 21 (ia) under heading 9983 of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 inserted with effect from 1st October 2019 vide Notification No. 20/2019- CT(R) dated 30.09.2019 shall be governed by the explanatory notes to service codes 998341 and 998343 of the Scheme of Classification of Services. The relevant Explanatory Notes are already mentioned in the Circular above and are not reproduced for the sake of brevity - From a reading of the Circular and the relevant Explanatory Notes to service codes 998341 and 998343 of the Scheme of Classification of Services, it is clear that the impugned services are not covered by the said Explanatory Notes since, the Notes to service code 998341 is restricted to Geological and geophysical consulting services and the Notes to service code 998343 is restricted to Mineral exploration and evaluation and the impugned services cannot be considered as being connected to either Geological and geophysical consulting services or Mineral exploration and evaluation services - thus, the impugned services are not covered under Sr. No. 21 (ia) also of Notification 11/2017-CTR dated 28.06.2017 as amended by Notification No. 20/2019-CTR dated 30.09.2019 (SAC 9983). In the subject case, even though the impugned services consist of professional, technical and business services, the same are not covered under Sr. No. 21 (ia) (SAC 9983) and Sr. No. 24 (SAC 9986) of Notification 11/2017-CT(R ) dated 28.06.2017 as amended. Therefore, the said professional, technical and business services supplied by the applicant to VL are clearly covered under the residual Entry No. 21 (ii) of Notification 11/2017-CT(R) dated 28.06.2017 as amended, attracting tax rate of 18%.
Issues Involved:
1. Classification of services under SI No. 24(ii) of heading 9986. 2. Classification of services under SI No. 21(ia) of heading 9983. 3. Appropriate classification and applicable GST rate if not covered under the aforementioned entries. Detailed Analysis: Issue 1: Classification under SI No. 24(ii) of heading 9986 5.2 The Applicant provides Project Management Consultancy (PMC) services to Vedanta Limited (VL) for the RDG GAS Development Project and the All Development/Production-Debottlenecking Project. These services involve managing the projects from design to commissioning, reviewing, monitoring, managing, and controlling all aspects of the execution. 5.7 Both projects pertain to the oil and gas sector, specifically for the augmentation of oil/gas facilities, thus relating to mining of oil/gas. The Applicant was previously classifying their services under SAC 998339 as 'Project management services for construction projects' and paying GST at 18%. 5.9 The Applicant contends that their services should now fall under Sr No. 24(ii) of heading 9986 as 'Support services to exploration, mining or drilling of petroleum crude or natural gas or both' under SAC 998621, attracting GST at 12%. 5.11.2 However, the Explanatory notes for service code 998621 include services provided to the oil and gas mining sector by way of actual participation in the mining activity, such as derrick erection, repair, dismantling services, well casing, cementing, pumping, plugging, and abandoning of wells, test drilling and exploration services in connection with petroleum and gas extraction. The Applicant's services do not directly involve these activities but rather involve operational and administrative assistance. 5.11.3 Therefore, the impugned activity is not covered under Heading 998621, and the first question is answered in the negative. Issue 2: Classification under SI No. 21(ia) of heading 99835.12.1 The second question is whether the services provided by the Applicant are classified under SI No. 21(ia) of heading 9983 as 'Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both' attracting GST at 12%. 5.12.2 The Applicant's activities include reviewing, monitoring, managing, and controlling all aspects of the execution of the project undertaken by the EPC Contractor, such as reviewing project performances, investigating performance issues, reviewing EPC Contractor's costing schedule, identifying milestones, and monitoring schedule variances. 5.12.5 According to Circular No. 114/33/2019-GST, the scope of entry at Sr. No. 21(ia) under heading 9983 is governed by the explanatory notes to service codes 998341 and 998343 of the Scheme of Classification of Services. These notes include geological and geophysical consulting services and mineral exploration and evaluation. 5.12.7 The impugned services are not covered by these explanatory notes as they are not connected to geological and geophysical consulting services or mineral exploration and evaluation services. 5.12.8 Therefore, the impugned services are not covered under Sr. No. 21(ia) of Notification 11/2017-CTR dated 28.06.2017 as amended by Notification No. 20/2019-CTR dated 30.09.2019 (SAC 9983). Issue 3: Appropriate Classification and GST Rate5.13 The professional, technical, and business services supplied by the Applicant to VL are not covered under Sr. No. 21(ia) (SAC 9983) and Sr. No. 24 (SAC 9986) of Notification 11/2017-CT(R) dated 28.06.2017 as amended. Therefore, they fall under the residual Entry No. 21(ii) of Notification 11/2017-CT(R) dated 28.06.2017 as amended, attracting a tax rate of 18%. Order:Question 1: Whether the services provided by the Applicant are classified under SI No. 24(ii) of heading 9986? Answer: Negative. Question 2: Alternatively, whether the services provided by the Applicant are classified under SI No. 21(ia) of heading 9983? Answer: Negative. Question 3: Appropriate classification and GST rate if not covered under the aforementioned entries? Answer: The services are covered under Sr. No. 21(ii) of Notification 11/2017-CTR dated 28.06.2017 as amended, attracting a tax rate of 18%.
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