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2018 (12) TMI 1228 - AAAR - GSTClassification of services - Works Contract or Composite Supply - combination of services of excavation of sand including loading with machinery at reach, Formation of Ramps and Maintenance of Roads, Transportation charges for the tractors/tippers of sand from reach to stockyard and Loading cost at sand from stockyard to lorries - rate of tax. Principal supply in a composite supply - Whether, in the services provided by the applicant under the Agreement with TSMDC, the principal supply is that of excavation of sand as held by the Central Member or transportation of goods i.e., sand as held by the State Member? - Held that - The basic intent and purpose of the Tender / Contract-Agreement and the concomitant description of the scope of the work therein is to move / shift the mineral sand from one place to another, by means of transport by roads/ramps; for enabling the further despatch by TSMDC. The said activity i.e., transport of sand from one place to another therefore constitutes the predominant element in the instant case; the other activities of excavation (or extraction as also mentioned in Agreement), loading, unloading and reloading as also formation / maintenance of ramps/roads, are the incidental or ancillary activities, preceding, coinciding or following the said main activity of transportation from one place to another - the principal supply involved in this case is transportation of goods as held by the State Member and not excavation of sand as held by the Central Member. What is the classification of the principal supply which would thereby be the classification of the composite supply as held by the lower Authority? - Held that - The principal supply in the instant case is that of transportation of goods i.e., sand. It is an urn-disputed fact and also explicitly recorded in the Agreement and tender documents that the said transport is by road only. The Scheme of Classification of services is laid down in the Annexure to the Notification No. 1 1/201 7-Central Tax (Rate) dated 28-6-201 7 which contains the entries pertaining to Land transport services - The classification of the services rendered by the applicant which have been held to be composite supply and in which the principal supply is found to be transport of goods by road are correctly classifiable under the Service Code (Tariff) 996511 under the Scheme of Classification of services laid down in Annexure to Notification No. 1 1/201 7- Central Tax (Rate) dated 28-6-2017. Whether the vehicles used by applicant for transport of sand i.e, lorries / trucks (or tractors / tippers, as mentioned in the application) are to be considered as covered by the term vessel appearing in the Notification-entry as held by the State Member or as not covered by the term as held by the Central Member? - Held that - The vehicles used by applicant for transport of sand i.e, lorries / trucks (or tractors / tippers, as mentioned in the application) are not covered by the term vessel appearing in the Notification-entry as held by the Central Member; the contrary opinion expressed by the State Member is found to be not legally correct. What is the applicable rate of tax on the consideration received by the applicant for the impugned services? - Held that - The applicable entry in respect of the impugned services would be the entry item Sl.No. (v) viz., Goods transport services other than (i), (ii), (iii) and (iv) above for which the applicable rate of tax is prescribed as 9% CGST (and correspondingly 9 % SGST). Hence, the applicable rate of tax on the impugned services is 9 % CGST 9 % SGST (aggregating to 18%). Ruling - The opinion expressed by the State Member in so far as holding that the Transport of goods is the principal supply in the impugned services, is confirmed. The classification of the impugned services is under Service Code (Tariff) 996511 Road Transport of goods.., as per Annexure to the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017. The opinion expressed by the Central Member in so far as holding that the term vessel (appearing in item (ii) under Column (3) against entry at Sl.No.9 of the above Notification), is not applicable to the applicant s case, is confirmed.
Issues Involved:
1. Classification of the services provided by the applicant. 2. Determination of the principal supply in the composite supply. 3. Applicability of the term 'vessel' to the vehicles used by the applicant. 4. Applicable rate of tax on the consideration received for the services. Issue-wise Detailed Analysis: 1. Classification of the Services Provided by the Applicant: The applicant, M/s. RVRC, entered into an agreement with TSMDC for excavation, transportation, and loading of sand. The services involved were considered a "composite supply" by both members of the lower Authority. The applicant initially claimed the services fell under "Works Contract" but later conceded this claim. Therefore, the classification issue focused on whether the services are "Excavating and Earthmoving Services" or "Goods Transport Services." 2. Determination of the Principal Supply in the Composite Supply: The principal supply in a composite supply is defined as the predominant element. The Central Member held that "excavation of sand" was the principal supply, while the State Member held that "transportation of goods" was the principal supply. The Appellate Authority analyzed the intent and scope of the contract, the predominant activity, and the breakup of the upset price. They concluded that the principal supply is "transportation of goods" as it constitutes the main purpose of the contract, with excavation, loading, and road formation being ancillary activities. 3. Applicability of the Term 'Vessel' to the Vehicles Used by the Applicant: The term 'vessel' was debated for its applicability to the applicant's vehicles (trucks/lorries). The Central Member referred to definitions from the Major Port Trusts Act and the CGST Act, concluding that 'vessel' pertains to water transport. The State Member inferred that 'vessel' includes containers for goods transport. The Appellate Authority found that the term 'vessel' in the Notification and the Act is specifically used for water transport services and does not cover land transport vehicles. Thus, the vehicles used by the applicant are not considered 'vessels.' 4. Applicable Rate of Tax on the Consideration Received for the Services: The applicable rate of tax was determined based on the classification of services. Since the principal supply is "transportation of goods by road," the services fall under Service Code 996511 (Road Transport Services of Goods). The rate of tax for this service is 9% CGST + 9% SGST, aggregating to 18%, as per Notification No. 11/2017-Central Tax (Rate) dated 28-6-2017. Conclusion: The Appellate Authority concluded that the services provided by the applicant are a composite supply with the principal supply being "transportation of goods by road." The services are classifiable under Service Code 996511, and the applicable rate of tax is 9% CGST + 9% SGST, totaling 18%. The vehicles used by the applicant are not covered by the term 'vessel' in the relevant Notification. The subject reference was disposed of accordingly.
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