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2019 (3) TMI 925 - AAR - GSTClassification of supply - composite supply or not - Whether the works awarded by Integral coach Factory, Chennai for Construction of shed, provision of M Ps in ICF Shell/ furnishing Division, retro-fitment / re-conditioning / re-sitting /disposal of obsolete M Ps of shell division including wet leasing of M Ps and associated Electrical works on turn-key basis to the applicant is composite supply of services? - benefit of sl.No.3 (v) (a) as well as Sl.no. 3(vi) (a) of Notification No. 11/2017-C.T. (Rate) as amended - raising of invoice on completion of events/milestones - value of invoice. Held that - This agreement is for supply of more than one taxable supply involving supply of goods and services such as machinery (both mechanical and electrical), construction, erection, installation, commissioning service etc. These supplies are bundled together in the agreement which is on turnkey basis and are required to be supplied together. Further, these activities are for an immovable property which is the factory here and involves transfer of property of all the goods involved in executing it. Therefore, this constitutes a supply of composite supply of works contract by the Applicant which is a supply of service as per Schedule II of CGST Act 2017. The agreement for wet leasing of Robotic spot welding machine and Laser cutting and welding machine as per Schedule V(a) and Schedule V(b) for a period of 10 years is a supply of right to use the equipment along with manpower service maintenance service etc. As multiple taxable supplies of services are involved, this is a composite service of service. However, this is not a works contract as there is no immovable property nor transfer of title of goods is involved. As per explanatory notes to classification of services for SAC 9973. The agreement of wet leasing of machinery falls under this classification of SAC 997319 for leasing of machinery with or without operator etc. - The agreement for Comprehensive Annual Maintenance Contract (CAMC) of Mechanical Electrical under Schedule VI (a) and VI (b) will involve supply of goods, spares etc. and services and hence is a composite supply. This maintenance is in relation to the factory being erected, commissioned involving transfer of goods and hence is a composite supply of works contract which is a supply of service as per Schedule II of CGST Act 2017. Whether the benefit of SI.No.3 (v) (a) 3(vi) (a) of notification no. 11/2017 as amended vide Notification 20/2017 - Central Tax (Rate) is applicable to subject works? - Held that - The agreement for erection, commissioning, installation of plant and machinery for a factory to manufacture stainless steel coaches covering Schedule I, II, III, it is for supply of machine, plant and equipment s including commissioning spares in Schedule I, erection and commissioning of all civil structures in Schedule Il, supply of electrical equipment including commissioning spares in Schedule Ill which is a composite supply of works contract for original works of construction, erection, commissioning, or installation pertaining to railways, is taxable at 6% CGST and as per Sl.No. of Notification No. 11/2017 -C.T.(Rate) and 6% SGST as per Sl.No. 3(v)(a) of Notification No. II(2)/CTR/532(d-14)/2017 vide G.O. (Ms) No. 72 dated 29.06.2017 as amended with effect from 22.08.2017. Prior to that, it is taxable at 9% CGST and as per Sl.No. 3(ii) of Notification No. 11/2017 -C.T.(Rate) and 9% SGST as per Sl.No. 3(ii) of Notification No.ll(2)/CTR/532(d-14)/2017 vide G.O. (Ms) No. 72 dated 29.06.2017 as amended - The agreement for wet leasing of Robotic spot welding machine and Laser cutting and welding machine as per Schedule V(a) and Schedule V(b) is not a works contract though it is a composite supply and hence is not eligible for SI.no. 3(v)(a) of this notification. Whether the applicant is required to raise invoice on completion of events/ milestones and remit the tax? - Held that - As per Section 97 (2) of the CGST Act, time of raising invoices is not covered under the question on which Advance Ruling can be sought. Therefore, we are not examining this issue in this order. What is the value on which invoice has to be raised in case of event/milestone invoicing is required? - Held that - The agreements prescribe the value of the various supplies of goods or services in the respective Schedules. It also prescribes the payment schedule and the delivery schedule for such works. The Applicant will be raising invoice based on the agreements in terms of Section 31 of CGST Act. The value of supply for each such invoice will be the transaction value and should include the amounts, if any, as specified in Section 15(2) and exclude the discounts, if any, as specified in Section 15(3) of CGST ACT 2017.
Issues Involved:
1. Classification of the supply under the contract. 2. Applicability of the benefit of Sl.No.3 (v) (a) and Sl.No. 3(vi) (a) of Notification No. 11/2017-C.T. (Rate) as amended. 3. Requirement to raise invoices on completion of events/milestones and remit tax. 4. Value on which invoices have to be raised in case of event/milestone invoicing. Detailed Analysis: 1. Classification of the Supply: The contract involves the "Modernization of ICF for Complete Switch-over to Stainless steel coach manufacturing-Phase II," which includes various works such as construction of sheds, provision of machinery and plant (M&Ps), retro-fitment, reconditioning, re-sitting, disposal of obsolete M&Ps, wet leasing of M&Ps, and associated electrical works on a turnkey basis. The supply in the agreement for erection, commissioning, installation of plant and machinery for a factory to manufacture stainless steel coaches (covering Schedule I, II, III) is a composite supply of works contract. This is because it involves multiple taxable supplies bundled together for an immovable property, making it a composite supply of services as per Schedule II of the CGST Act 2017. The supply for wet leasing of Robotic spot welding machines and Laser cutting and welding machines (Schedule V(a) and V(b)) is a composite supply of services but not a works contract, as it does not involve immovable property or transfer of title of goods. The Comprehensive Annual Maintenance Contract (CAMC) of Mechanical & Electrical under Schedule VI (a) and VI (b) is also a composite supply of services related to works contract maintenance. 2. Applicability of Notification No. 11/2017-C.T. (Rate): The supply in the agreement for erection, commissioning, installation of plant and machinery for a factory to manufacture stainless steel coaches (covering Schedule I, II, III) qualifies as a composite supply of works contract for original works of construction, erection, commissioning, or installation pertaining to railways. Therefore, it is taxable at 6% CGST and 6% SGST as per Sl.No. 3(v)(a) of Notification No. 11/2017 -C.T. (Rate) with effect from 22.08.2017. Prior to this date, it was taxable at 9% CGST and 9% SGST. The supply for wet leasing of Robotic spot welding machines and Laser cutting and welding machines (Schedule V(a) and V(b)) does not qualify for the benefit under Sl.No. 3(v)(a) of the notification as it is not a works contract. The CAMC of Mechanical & Electrical (Schedule VI (a) and VI (b)) also does not qualify for the benefit under Sl.No. 3(v)(a) as it pertains to maintenance, which is not covered under this provision. The contract for the erection, installation, commissioning of a factory for ICF, Chennai, which will manufacture stainless steel coaches, does not qualify for Sl.No. 3(vi)(a) of the notification as it is an activity of industry. 3. Requirement to Raise Invoices on Completion of Events/Milestones: The question of whether the applicant is required to raise invoices on completion of events/milestones and remit the tax is not covered under the questions on which Advance Ruling can be sought as per Section 97(2) of the CGST Act. Therefore, this issue is not examined in the ruling. 4. Value on Which Invoices Have to Be Raised: The value of supply for each invoice raised by the Applicant should be the transaction value as per the agreements. This includes amounts specified in Section 15(2) and excludes discounts specified in Section 15(3) of the CGST Act 2017. Rulings: 1. The supply in the agreement for erection, commissioning, installation of plant and machinery for a factory to manufacture stainless steel coaches (covering Schedule I, II, III) is a composite supply of services. The supply in the agreement for wet leasing of Robotic spot welding machines and Laser cutting and welding machines (Schedule V(a) and V(b)) is a composite supply of services. The supply in the agreement for CAMC of Mechanical & Electrical (Schedule VI (a) and VI (b)) is a composite supply of services. 2. The supply in the agreement for erection, commissioning, installation of plant and machinery for a factory to manufacture stainless steel coaches (covering Schedule I, II, III) is taxable at 6% CGST and 6% SGST as per Sl.No. 3(v)(a) of Notification No. 11/2017 -C.T.(Rate) with effect from 22.08.2017. Prior to this, it was taxable at 9% CGST and 9% SGST. The supply in the agreement for wet leasing of Robotic spot welding machines and Laser cutting and welding machines (Schedule V(a) and V(b)) and CAMC of Mechanical & Electrical (Schedule VI (a) and VI (b)) are not eligible for Sl.No. 3(v)(a) of this notification. 3. The value of supply for each invoice raised by the Applicant will be the transaction value as per Section 15 of the CGST Act 2017. 4. The Authority cannot give a Ruling on the supply for up-rooting and disposal of condemned M&Ps (Schedule IV) as the Applicant is a recipient. 5. The Authority cannot give a Ruling on the question of when to raise invoices as per Section 97(2) of the CGST Act.
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