2024 (7) TMI 356 - AAR - GST

Determination of value - value of the Deposit Contribution Works that must be adopted by this Applicant on the Self Execution Schemes for the purposes of paying applicable taxes - value adopted by the Applicant for Deposit Contribution Works for the purpose of discharging applicable Goods Services Tax be restricted to the Establishment and Supervision Charges other charges if applicable that the Applicant charges for and receives in the case of the self-execution scheme or not. Determination of the value of Deposit Contribution Works (DCW) - HELD THAT - It is seen that TANGEDCO is neither the supplier nor the recipient of service, ..and, .the works contract service involved in the demolition, shifting, construction, and installation of the service line is provided by a thirty party contractor and is received by the customer under whose request the service line gets shifted. Once no goods or service is supplied by TANGEDCO to any person, except for the 'Supervision Services', the question of inclusion of value of all other services for which TANGEDCO is not a privity to the contract, does not arise. Further, when the TANGEDCO is not a supplier in so far as it relates to shifting of infrastructure, the question of covering the same under 'composite supply' also does not arise. Whether value adopted by the Applicant for Deposit Contribution Works for the purpose of discharging applicable Goods Services Tax be restricted to the Establishment and Supervision Charges other charges if applicable that the Applicant charges for and receives in the case of the self-execution scheme? - HELD THAT - MWNL is not a supplier of goods or services in relation to shifting of transmission lines and other assets which are required to be shifted during construction or widening of roads, the work, being undertaken by NHAI itself. Hence, there is no relationship between NHAI and MWNL which can be categorized as that of supplier and recipient except for the services of supervising the whole operation for which NHAI is paying consideration along with GST leviable thereon. The supplier' in the instant operation is the contractor who is undertaking the work of shifting transmission lines and not the MWNL who are just supplying services of supervision and not that of construction or replacement of transmission lines.

Summary

Issues Involved:
1. Determination of the value of "Deposit Contribution Works" (DCW) for the purpose of paying applicable taxes under the Central Goods and Services Tax Act, 2017 (CGST Act) and Tamil Nadu Goods and Services Tax Act, 2017 (TNGST Act).
2. Whether the value for DCW should be restricted to "Establishment and Supervision Charges" and other charges applicable in the case of the self-execution scheme.

Issue-Wise Detailed Analysis:

1. Determination of the Value of "Deposit Contribution Works" (DCW):
The Applicant, engaged in the generation and distribution of electricity, sought an advance ruling on the value of DCW under the self-execution scheme for GST purposes. The Applicant argued that the value of taxable supply should be limited to the "Establishment and Supervision Charges" and other charges, if any, received from the contracting parties. The Applicant emphasized that they do not incur or charge any additional costs for materials or labor, which are borne directly by the consumers. The tax authorities and the Applicant agreed that the charges for DCW are taxable under GST, as confirmed by previous rulings and pending litigation before the Madras High Court.

2. Restriction of Value to "Establishment and Supervision Charges":
The Applicant's position was that only the "Establishment and Supervision Charges" and other charges, if any, should be considered for GST purposes. The tax authorities, however, suggested that the entire value of the DCW, including materials and labor costs borne by the consumers, should be included in the taxable value. The Applicant argued that Section 15(2)(b) of the CGST Act, which includes costs incurred by the recipient in the value of supply, does not apply since the Applicant has no contractual obligation to pay these costs.

Discussion and Findings:
The Authority for Advance Ruling (AAR) examined the submissions and the legal provisions. They noted that the taxability of DCW charges had been settled in previous rulings, and the current issue was limited to the valuation for GST purposes. The AAR differentiated between general DCW and DCW under the self-execution scheme, where consumers bear all costs except the "Establishment and Supervision Charges." The AAR agreed with the Applicant that the value for GST should be restricted to the charges received by the Applicant, as the materials and labor costs are directly incurred by the consumers and not by the Applicant.

Ruling:
1. The value of "Deposit Contribution Works" to be adopted by the Applicant on "Self Execution Schemes" shall be the amount charged and received by the Applicant in relation to the said service.
2. The value to be adopted by the Applicant for "Deposit Contribution Works" under the "Self Execution Schemes" shall be restricted to "Establishment and Supervision Charges" and "Other charges" if charged and received from the recipient of service.

The ruling clarifies that GST is payable only on the "Establishment and Supervision Charges" and other applicable charges received by the Applicant, and not on the entire cost of materials and labor incurred by the consumers.