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2023 (4) TMI 421 - AAAR - GSTClassification of supplies - rate of tax - pure services - supply of works contract services - services procured by the appellant from 3rd party contractor in providing services to GHMC and I CAD - eligibility to obtain services at reduced rate of 12% as per entry 3(iv) of Notification 11/2017 CTR dated 28 June 2017 - HELD THAT - Works contract will be treated as service and tax would be charged accordingly. As per Section 2(119) of the CGST Act, 2017, unless the context otherwise requires, the term works contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract. - It is evident from the abstract of estimate that they are supplying and erecting cables, OH line and Stainless Steel (SS) during the course of the work. Therefore, the implication is that the cables are enclosed in such RCC pipes which are kept under the ground at a certain depth and then the entire pipes with the enclosed cables are covered back with filling to make the road as it is. This clearly satisfies the condition of being attached to earth. The work schedule submitted by the applicant also indicates that their work involves shifting of HT LT Overhead line cable through underground. The contract for shifting of cables and replacing with underground cables can be classified as contract for building, construction, fabrication, completion, erection, fitting out, improvement, modification, etc., of immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract. Hence, there is no hesitation in holding that the applicant is supplying Works Contract Services. It is also apparent that the nature of the works undertaken by the applicant are not in the nature of Original Works and is to be classified as works contract service. The applicant is not eligible for exemption available against Sl.No. 3 of the Notification ibid and the services are liable to classified as works contract services and therefore is subject to payment of tax as applicable. Rate of Tax applicable to services procured by the appellant from 3rd party contractor in providing services to GHMC and I CAD - HELD THAT - As per definition of business in section 2(17) of the CGST Act,2017 any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit is a business. It is evident from the above facts that TRANSCO is in the business of transmission of electricity and collecting charges for the said activity - it is seen that TRANSCO has been established on commercial principles in as much as Section 61 of the Electricity Act, 2003 stipulates the guiding principles for determination of tariff by the STATE Regulatory Commission and mandates that the Tariff should progressively reflect cost of supply of electricity, reduce cross subsidy and recover the cost of electricity in a reasonable manner. The legal maxim noscitur a sociis is not applicable to the present case as there is no ambiguity in relation to the word business having been clearly defined in the Act itself. The word business encompasses within itself activities undertaken whether or not for a pecuniary benefit, which removes any scope for exclusion of the activities undertaken by the appellant from the ambit of business . It is immaterial, if the Government entity (Appellant) is running with or without generating any surplus as long as the activity undertaken has commercial implication - the services provided by 3rd party are works contract services covered under residual entry 3(xii) of the notification as amended. As such, the appellants claim that the services procured by them from private contractors are eligible for concessional rate of tax is not sustainable. Tax liability for supply of works contract service by the applicant to South Central Railway - HELD THAT - The work contract executed by the applicant is meant for the purpose of business. Thus, the facts of the case are analogous to the circular issued by CBIC vide No.152/08/2021-GST dated 17-06-2021. Hence, works contract service provided by M/s TRANSCO by way of construction of the said civil structure meant predominantly for the purpose of business is not covered under Entry 3(vi) of Notification No. 11/2017-CT(R) - The documents furnished indicate the service rendered to SCR where the service rendered was for construction of certain transformers for the purpose of extending the power supply including certain telecommunication work. The Services provided by TS Transco (Appellant) to SCR are classifiable as Works Contract Service falling under Chapter 99, Group 99542 as per the Scheme of Classification of Services provided under Annexure to Notification No. 11/2017- CT(Rate) dated 28.06.2017 as amended and are taxable @ 18% in terms of Serial No. 3(xii) of Notification No. 11/2017- CT(Rate) dated 28.06.2017 as amended. Appeal disposed off.
Issues Involved:
1. Exemption of tax on the services provided by TS Transco to GHMC. 2. Tax liability for supply of works contract service by the applicant to South Central Railway. 3. Rate of tax applicable to services procured by the appellant from 3rd party contractor in providing services to GHMC and I&CAD. I. Exemption of Tax on Services Provided by TS Transco to GHMC: The appellant, TS Transco, undertook the replacement of overhead cables with underground cables for GHMC. The core issue was whether this service qualifies as a "works contract" or "pure service." The State Member opined that the contract does not involve the transfer of property in goods and thus qualifies as a "pure service" under Entry 3 of Notification 12/2017 CT(R), making it exempt from tax. Conversely, the Central Member held that the significant material involvement makes it a "works contract service," taxable at 18%. Due to this difference in opinion, no advance ruling could be issued as per Section 101(3) of the Act. II. Rate of Tax Applicable to Services Procured by TS Transco from 3rd Party Contractors for GHMC and I&CAD:The appellant contended that these services should be taxed at a concessional rate of 12% under Entry 3(vi) of Notification 11/2017-CT(R). However, the Appellate Authority determined that the services are "works contract services" and taxable at 18% under Serial No. 3(xii) of Notification 11/2017-CT(R). The Authority found that the services provided by private contractors involved the transfer of property in goods, classifying them as works contract services. III. Tax Liability for Supply of Works Contract Service by the Applicant to South Central Railway (SCR):The appellant claimed that the services provided to SCR were "pure services." However, the Authority found that the work involved construction, fabrication, erection, installation, and commissioning, resulting in immovable property. As such, these services were classified as "works contract services" and taxable at 18% under Serial No. 3(xii) of Notification 11/2017-CT(R). Order:1. No advance ruling issued for the exemption of tax on services provided to GHMC due to a difference of opinion.
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