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2022 (7) TMI 641 - AAR - GSTClassification of supply - supply of services or not - works contract services - composite supply or not - benefit of Sl. No. 3 (v)(a) of notification no. 11/2017-Central Tax (Rate) as amended vide notification no. 20/2017-Central Tax (Rate) - HELD THAT - As per Sl. No. 12B of Form GST ARA-01, the applicant is providing sub-contract services in relation to supply and commissioning of machinery and plants, mechanical engineering, electrical works etc. to IV' who has been allotted with a work by RVNL for construction of PEB shed, structure, building, water supply arrangement, drainage, sewerage, road works, track works, power supply and general electrical works, OHE works, signal telecommunication works and supply, installation and commissioning of machinery and plant in connection with setting up of Electric Loco Shed at Saiyedpur Bhitri, Uttar Pradesh. Whether the works awarded to the applicant is a composite supply of the works contract service? - HELD THAT - It is the Joint Venture Company and not the applicant which has been awarded the contract for construction of Electric Loco Shed. A Joint Venture Company, which is formed by two or more entities, has a separate existence than that of the said entities. The applicant has himself submitted that they are providing sub-contract services in relation to supply and commissioning of machinery and plants, mechanical engineering, electrical works etc. to JV'. The supply of goods/services by the applicant can't be bundled with the JV which is separate entity, both having their separate GSTINs. As such, the goods/services supplied by the applicant to JV are to be examined for the purpose of their coverage in works contract. In the case of M/S. VIRGO INDUSTRIES (ENGINEERS) PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE CHENNAI II COMMISSIONERATE, CHENNAI 2015 (4) TMI 247 - MADRAS HIGH COURT the Madras High Court observed that an item fixed to the earth can continue to be movable if the same is capable of being shifted to another place without having to dismantle the same into constituent components and without causing substantial damaging to such individual components. For the goods/services supplied by the applicant to be covered in the works contract, it is necessary that the contracts enumerated therein should relate to immovable property. If the contract is otherwise or if the same results in movables, then it may be a composite supply but-not the works contract - the activities of installation, commissioning, testing, supplying mechanical work and electrical work are not in respect of immovable property as the Machinery and plant is attached to concrete base to prevent vibration/wobble free operation and preventing vibration/wobble free operation does not qualify for being described as attached to the earth under any one of the three clauses described above (para 14.5). Hence, the said supply of goods/services by the applicant to JV is not works contract. Whether the benefit of Sl. No. 3(v) of notification no. 11/2017-Central Tax (Rate) as amended vide notification no. 20/2017-Central Tax (Rate) is applicable to the subject works? - HELD THAT - Sl. No. 3 (v) of the Notification No. 11/2017-Cetral Tax (Rate) dated 28.06.2017, as amended prescribed CGST rate @ 6% for composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, (other than that covered by item (i), (ia), (ib), (ic), (id), (ie) and (if) above) supplied by way of construction, erection, commissioning, or installation, of original works pertaining to railways, including monorail and metro - The rate prescribed vide sl. No. 3 (v) of the Notification No. 11/2017-Cetral Tax (Rate) dated 28.06.2017, as amended is applicable to composite supply of works contract and as the supply entrusted to the applicant vide JV Agreement is not a works contract, the applicant is not entitled for the benefit of the said notification.
Issues Involved:
1. Whether the works awarded to the applicant is a composite supply of the works contract services. 2. Whether the benefit of Sl. No. 3(v)(a) of notification no. 11/2017-Central Tax (Rate) as amended vide notification no. 20/2017-Central Tax (Rate) is applicable to the subject works. Issue-wise Detailed Analysis: 1. Composite Supply of Works Contract Services: - The applicant, M/s HYT Engineering Company Private Limited, entered into a Joint Venture (JV) with M/s Indwell Constructions Private Limited and was awarded a contract by Rail Vikas Nigam Limited (RVNL) for the construction and setup of an Electric Loco Shed. - The applicant sought an advance ruling on whether the works awarded to them qualify as a composite supply of works contract services under the CGST Act, 2017. - The applicant argued that the works involve a composite supply as defined in Section 2(30) of the CGST Act, 2017, which includes various elements like mechanical, civil, and electrical works bundled together to set up the Electric Loco Shed. - The applicant further contended that the works contract involves immovable property as defined under Section 2(119) of the CGST Act, 2017, since the installation of machinery and plant results in an immovable property. - The Authority examined the definition of "composite supply" and "works contract" and found that the major part of the contract involves the supply of goods (machinery, plant, tools, etc.), which are used to provide installation, testing, and commissioning services. - The Authority concluded that the principal supply in this case is the supply of goods, and the services are ancillary to the supply of goods. Therefore, it does not qualify as a composite supply of works contract services. 2. Applicability of Notification No. 11/2017-Central Tax (Rate): - The applicant also sought a ruling on whether the benefit of Sl. No. 3(v)(a) of notification no. 11/2017-Central Tax (Rate) as amended by notification no. 20/2017-Central Tax (Rate) is applicable to the subject works. - This notification prescribes a concessional GST rate of 6% for composite supply of works contract services related to railways, including monorail and metro. - The Authority reiterated that since the supply by the applicant does not qualify as a composite supply of works contract services, the benefit of the concessional rate under the said notification is not applicable. - The Authority referenced several legal precedents and definitions to support its conclusion that the supply of machinery and plant, along with installation services, does not constitute an immovable property and thus does not fall under the definition of works contract. Conclusion: - The Authority ruled that the works awarded to the applicant do not qualify as a composite supply of works contract services. - Consequently, the applicant is not entitled to the benefit of the concessional GST rate under Sl. No. 3(v)(a) of notification no. 11/2017-Central Tax (Rate) as amended. Order: - Question 1: Whether the works awarded to the applicant is a composite supply of the works contract services? Answer: Replied in negative. - Question 2: Whether the benefit of Sl. No. 3(v)(a) of notification no. 11/2017-Central Tax (Rate) as amended vide notification no. 20/2017-Central Tax (Rate) is applicable to the subject works? Answer: Replied in negative. This ruling is valid within the jurisdiction of the Authority for Advance Ruling Uttar Pradesh and subject to the provisions under Section 103 (2) of the CGST Act, 2017 until declared void under Section 104(1) of the Act.
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