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2024 (9) TMI 663 - AAR - GSTApplicability of Entry 25 (ib) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 02/2021-Central Tax (rate) dated 02.06.2021 - eligibility to avail full Input Tax Credit in respect of purchases made towards completion of works mentioned in the tender - whether the services provided by the applicant qualify as Maintenance, repair or overhaul services (MRO services) in respect of ships and vessels as per the amended notification? HELD THAT - It is evidently clear that there is no specific, that the applicant had enter into a maintenance contract with their customer. Further, there is substance that the nature of the supply rendered by the applicant amounts to work order - The services provided by the applicant, while related to a naval vessel, do not primarily constitute maintenance, repair, or overhaul in the conventional sense. Instead, they appear to be in the nature of upgradation or renovation works. The repair activities carried out by the applicants on the ship are in the nature of supply contract and there is not scope for vivisecting the same as to separate the same into service portion i.e, maintenance, repair etc., and supply of goods portion for the purpose of applicability of the concessional rate of tax. It is observed that ,the services provided do not primarily constitute maintenance, repair, or overhaul services as envisaged in the notification, the contract is more in the nature of a works contract involving supply and installation of goods, there is no specific maintenance agreement between the applicant and the Naval Dockyard and the scope of work primarily involves up gradation and installation activities rather than repair or maintenance of existing equipment. The tender work rendered by the applicant does not fall under the scope of Entry 25(ib) of N/N. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended by N/N. 02/2021 Central Tax (rate) dated 02.06.2021.
Issues Involved:
1. Applicability of Entry 25 (ib) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 02/2021-Central Tax (Rate) dated 02.06.2021 to the tender. 2. Eligibility to avail full Input Tax Credit in respect of purchases made towards completion of works mentioned in the tender. Issue-wise Detailed Analysis: 1. Applicability of Entry 25 (ib) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 02/2021-Central Tax (Rate) dated 02.06.2021 to the tender: The applicant, M/s Visakha Trades, engaged in the business of renting immovable property, was awarded a contract by The Admiral Superintendent, Naval Dockyard, Visakhapatnam for Habitability upgradation works on board INS Ranveer. The applicant sought clarity on whether the concessional GST rate of 5% (CGST 2.5% + SGST 2.5%) under Entry 25 (ib) of Notification No. 11/2017-Central Tax (Rate) as amended by Notification No. 02/2021-Central Tax (Rate) is applicable to their contract. The key issue was whether the services provided by the applicant qualify as "Maintenance, repair or overhaul services" (MRO services) in respect of ships and vessels as per the amended notification. The notification introduced a concessional GST rate for MRO services, but the terms 'maintenance', 'repair', and 'overhaul' are not defined under GST law. Dictionary meanings of these terms indicate that maintenance refers to routine, preventive care; repairs involve fixing broken parts; and overhauling involves a comprehensive examination and restoration. Upon examination, it was observed that the applicant's contract did not involve a specific maintenance agreement with the Naval Dockyard. The services primarily involved supply and installation of various items such as fittings, furniture, and fixtures, aligning more with a works contract involving supply of goods along with installation services rather than pure MRO services. The absence of a comprehensive maintenance agreement and the nature of the contract being more aligned with upgradation or renovation works led to the conclusion that the services provided do not primarily constitute maintenance, repair, or overhaul in the conventional sense. Thus, it was ruled that Entry 25 (ib) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 02/2021-Central Tax (Rate) dated 02.06.2021 is not applicable to the tender in question. The applicant is liable to pay tax at the applicable rates under GST law. 2. Eligibility to avail full Input Tax Credit in respect of purchases made towards completion of works mentioned in the tender: Since the ruling determined that the services provided by the applicant do not fall under the scope of Entry 25 (ib) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 02/2021-Central Tax (Rate) dated 02.06.2021, the question of availing full Input Tax Credit does not arise. RULING: Based on the above discussions and findings, the authority ruled as follows: Question 1: Is Entry 25 (ib) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 02/2021-Central Tax (Rate) dated 02.06.2021 applicable to the tender? Answer: No, Entry 25 (ib) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 02/2021-Central Tax (Rate) dated 02.06.2021 is not applicable to the tender in question. The applicant is liable to pay tax at the applicable rates under GST law. Question 2: Can the applicant avail full Input Tax Credit in respect of purchases made towards completion of works mentioned in the tender? Answer: Does not arise.
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