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2018 (6) TMI 559 - AAR - GSTSupply of services - Works Contract - determination of time of supply of services - scope of the word supply - Transitional Credit - credit of material bought in pre-GST era - post-implementation situation - Held that - A contract for any immovable property wherein transfer of property in goods is involved in the execution of such contract fall within the definition of works contract - The underground pipeline network created by joining the pipes either by lamination or welding cannot be dismantled without substantial damage and thus cannot be reassembled, therefore the pipeline network so created would be considered as immovable. As the applicant is engaged in the activity of construction of pipeline network which becomes immovable property wherein transfer of property in goods is involved, the said activity falls within the definition of works contract under the CGST Act, 2017 and the GGST Act, 2017. Admissibility of input tax credit on pipes used in pipeline network - Held that - The work of supply of pipes at the location specified by the Rajkot Municipal Corporation and the work of underground laying of pipes had already been completed before the appointed date and the work of testing and commissioning of network of pipeline was pending - Only the work of Testing and Commissioning of network of pipeline was pending on the appointed date, for which no input in stock was required to be used on or after the appointed date. Therefore, the condition prescribed at clause (i) of sub-section (6) of Section 140 ibid is not fulfilled. Testing and Commissioning of network of pipeline being part of the contract, Goods and Service Tax is leviable, however, since no input / material is required for such Testing and Commissioning of network of pipeline, transitional Input Tax Credit is not allowable - Applicant is not entitled to avail input tax credit under Section 140(6) of the CGST Act, 2017 and the GGST Act, 2017. Ruling - The work of laying of underground pipeline network falls under the definition of works contract provided under Section 2(119) under the CGST Act, 2017 and the GGST Act, 2017. In respect of that part of supply wherein time of supply is on or after the appointed date, Goods and Services Tax is required to be paid. Transitional credit - The applicant is not entitled under Section 140(6) of the CGST Act, 2017 and the GGST Act, 2017 to avail input tax credit.
Issues Involved:
1. Classification of the work executed and invoice to be raised for the pending event of testing and commissioning under the Goods and Services Tax Act. 2. Entitlement to input tax credit under the transition provisions for materials bought in the pre-GST era. Detailed Analysis: Issue 1: Classification of Work Executed and Invoice to be Raised Query: Does the work executed and invoice to be raised for the pending event of testing and commissioning after the implementation of the Goods and Services Tax Act amount to supply, specifically supply of works contract? Ruling and Analysis: - Definition and Scope: The work of laying an underground pipeline network is considered a "works contract" as per Section 2(119) of the CGST Act, 2017 and GGST Act, 2017. This is because it involves the construction of an immovable property where the transfer of property in goods is involved. - Nature of Work: The applicant's activities, including excavation, laying, and joining pipes to form a permanent underground pipeline network, result in the creation of an immovable property. The pipeline network cannot be dismantled without substantial damage, thus confirming its status as an immovable property. - Supply of Services: According to clause 6(a) of the Second Schedule read with Section 7 of the CGST Act, 2017, a works contract is treated as a supply of services. The time of supply of services is determined as per Section 13 of the CGST Act, 2017, which includes the date of invoice issuance, receipt of payment, or provision of service, whichever is earlier. - GST Liability: The part of the supply made after the implementation of the CGST Act, 2017, is subject to GST. Provisions under Section 142(11) of the CGST Act, 2017 ensure that tax is not levied under both the existing laws and the GST laws. Conclusion: The work of laying the underground pipeline network falls under the definition of "works contract" and is treated as a supply of services. GST is required to be paid for the part of the supply made on or after the appointed date. Issue 2: Entitlement to Input Tax Credit under Transition Provisions Query: Is the applicant entitled to enjoy proportionate credit worth 10% duty of excise and VAT paid on materials bought under the transition provisions? Ruling and Analysis: - Section 140(6) of CGST Act, 2017: This section allows a registered person to take credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day, subject to certain conditions. - Conditions: The conditions include using the inputs for making taxable supplies, not paying tax under Section 10, eligibility for input tax credit, possession of duty-paid documents, and invoices issued not earlier than twelve months preceding the appointed day. - Completion Status: The supply of pipes and underground laying of pipes were completed before the appointed date. Only the testing and commissioning of the pipeline network were pending. - No Input Required: Since no input/material is required for the testing and commissioning of the pipeline network, the condition prescribed in clause (i) of Section 140(6) is not fulfilled. Conclusion: The applicant is not entitled to avail input tax credit under Section 140(6) of the CGST Act, 2017 for the materials bought in the pre-GST era. Final Ruling: (A) The work of laying the underground pipeline network is classified as a "works contract" under Section 2(119) of the CGST Act, 2017 and GGST Act, 2017. GST is required to be paid for the supply made on or after the appointed date. (B) The applicant is not entitled to avail input tax credit under Section 140(6) of the CGST Act, 2017 and GGST Act, 2017.
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