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2022 (11) TMI 80 - AAAR - GSTClassification of supply -Works Contract - composite supply of works contract service or not - movable or immovable project - work of supply, installation and commissioning of the plant and machinery, mechanical engineering works, electrical works etc. as per the J.V. Agreement between the J.V. Partners - applicability for benefit of SI No. 3(v)(a) of the Notification No. 11/2017-Central Tax (Rate), as amended vide Notification No. 20/2017-Central Tax (Rate). HELD THAT - The instant contract consists of transfer of property in goods, coupled with supply of services which leads to the inevitable conclusion that this is a case of Works contract, covered under the definition of Works contract defined under Section 2(119) of the CGST Act, 2017. The details of works as enumerated and as forthcoming from the contract, goes to show that the said project awarded to the Appellant by the JV is not as simple or movable. The work consists of an entire system comprising of a variety of different structures which are installed after a lot of prior work which involves Civil work, Civil engineering, Ground work, supply, Foundation work, Fabrication, various mechanical and electrical works etc. The magnitude of project covers a large area of about 40 thousand sq meter tailored specifically to fit the dimensions and orientation of the needs of the project. It is no one's case that these items will ever be removed from their position. Therefore, they qualify under clause (c) of Section 3 of the Transfer of Property Act, 1882. Thus, the project of setting up of Electric Loco Shed at Saiyedpur Bhitri, Uttar Pradesh, fulfills the conditions of it being an immovable property. Accordingly, we in affirmation with the Appellant that the said project of construction for Railways, on the basis of the scope of work as can be seen from the documents submitted by the Appellant, it is concluded that the said project are immovable in nature. This is a composite supply of works contract service - benefit of SI. No. 3(v)(a) of the Notification No. 11/2017-Central Tax (Rate), as amended vide Notification No. 20/2017-Central Tax (Rate) for the subject work is available.
Issues Involved:
1. Whether the work awarded to the appellant is a composite supply of works contract service. 2. Whether the benefit of SI No. 3(v)(a) of the 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 Service: The appellant entered into a joint venture (JV) with M/s Indwell Constructions Private Limited to execute work related to the construction of an electric loco shed, including various infrastructural and electrical works. The appellant sought an advance ruling on whether the work awarded is a composite supply of works contract service. The Authority for Advance Ruling (AAR) initially ruled negatively, stating that the activities performed by the appellant did not relate to immovable property and thus did not qualify as a works contract. Upon appeal, the appellate authority examined the nature of the property involved. The authority referred to Section 2(119) of the CGST Act, 2017, which defines a "works contract" as a contract for building, construction, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration, or commissioning of any immovable property involving the transfer of property in goods. The authority also considered the definition of "immovable property" under Section 3(26) of the General Clauses Act, 1897, and Section 3 of the Transfer of Property Act, 1882, which includes things attached to the earth or permanently fastened to anything attached to the earth. The appellate authority observed that the machinery and structures installed by the appellant, such as Under Floor Wheel Lathes and EOT Cranes, were permanently affixed to the site, making them immovable. The authority cited various Supreme Court judgments, including Duncans Industries Ltd. v. State of U.P. and M/s. T.T.G. Industries Ltd. v. Collector of Central Excise, which emphasized that the intention of permanent attachment to the earth determines the immovable nature of the property. The authority concluded that the project involved the transfer of property in goods coupled with the supply of services, leading to the conclusion that it was a works contract. The project covered a large area and involved substantial civil, mechanical, and electrical work, making it immovable in nature. Therefore, the appellate authority ruled that the work awarded to the appellant is a composite supply of works contract service. 2. Benefit of SI No. 3(v)(a) of Notification No. 11/2017-Central Tax (Rate): The appellant also sought clarification on whether the benefit of SI 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. The AAR had initially ruled negatively on this issue as well. The appellate authority noted that the notification provides a reduced GST rate for certain works contracts, specifically those involving the construction of a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession. Given that the project involved setting up an electric loco shed for the Indian Railways, which is a public utility service, the authority found that the project met the criteria specified in the notification. Therefore, the appellate authority ruled that the appellant is eligible to take the benefit of SI No. 3(v)(a) of Notification No. 11/2017-Central Tax (Rate), as amended, for the subject works. Ruling: 1. The work awarded to the appellant is a composite supply of works contract service. 2. The appellant is eligible to take the benefit of SI No. 3(v)(a) of Notification No. 11/2017-Central Tax (Rate), as amended, for the subject works.
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