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2019 (9) TMI 877 - AAR - GSTLevy of GST - value of material supplied by the recipient of service - mechanism to calculate the taxable value as per section 15 of the Act - HELD THAT - Section 15 of CGST Act, 2017 contains provisions with respect to Valuation of taxable supply - In the subject case, the material is supplied by the contractee and therefore the question raised by the applicant as to whether they can charge GST on the same is irrelevant. The applicant, on this issue of supply of concerned materials, is not a supplier of goods/services and as per the provisions of section 95 of the CGST Act, they cannot raise this question - the question not answered. Mechanism to calculate the taxable value as per section 15 of the Act - HELD THAT - The concerned material supplied by the contractee are essential components for supply of Construction service i.e. Construction of Main Factory Building. As per section 15, any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both shall be included in the value of taxable supply. The amount certified by the architect for the invoice to be issued before deducting the value of Cement, Mild Steel, Tor Steel and Structural Steel shall be the value of supply for the purpose of Levy of tax as per section 15 of the Act.
Issues Involved:
1. Whether the contractor can charge GST on the value of material supplied by the recipient of service. 2. The mechanism to calculate the taxable value as per section 15 of the CGST Act, 2017. Detailed Analysis: Issue 1: Whether the contractor can charge GST on the value of material supplied by the recipient of service Applicant's Contention: The applicant, M/s. Tejas Constructions & Infrastructure Private Limited, is providing construction services to a contractee. The contract includes the supply of materials like Cement, Mild Steel, Tor Steel, and Structural Steel by the contractee. The value of the contract is ?600 lakhs, inclusive of material and labor. GST is calculated on the percentage completion of work, and the value of materials supplied by the contractee is deducted after charging GST on the contract price. Relevant Provisions: Section 15 of the CGST Act, 2017, states that the value of a supply includes any amount that the supplier is liable to pay but which has been incurred by the recipient and not included in the price paid for the goods or services. Authority's Observations: The materials supplied by the contractee are essential components for the construction service. According to Section 15(2)(b) of the CGST Act, the value of supply includes any amount that the supplier is liable to pay but incurred by the recipient. The applicant is discharging GST on the entire contract value, which includes the value of materials supplied by the contractee. Therefore, the question of whether the contractor can charge GST on the supplied materials is irrelevant, as the applicant is not the supplier of these materials. Conclusion: The question of whether the contractor can charge GST on the value of materials supplied by the recipient of service is not answered. Issue 2: The mechanism to calculate the taxable value as per section 15 of the CGST Act, 2017 Applicant's Contention: The applicant seeks clarity on the mechanism to calculate the taxable value under Section 15 of the CGST Act, 2017. Relevant Provisions: Section 15 of the CGST Act, 2017, specifies that the value of supply includes the transaction value, which is the price actually paid or payable. It also includes any amount that the supplier is liable to pay but incurred by the recipient and not included in the price paid for the goods or services. Authority's Observations: The value of the outward supply of construction services and GST is paid on the total contract value, inclusive of material and labor. The certificate issued by the Architect (RA Bill) includes the total contract value, and the value of materials supplied by the contractee is deducted. The supply by the contractee to the applicant is not free; hence, the value of these materials should be included in the taxable value. The Supreme Court's decision in the case of M/s. N.M. Goel & Co vs. Sales Tax Officer supports this conclusion, where materials supplied by the contractee were considered part of the taxable value. Conclusion: The taxable value should be calculated based on the entire contract value as per the certificate issued by the Architect (RA Bill), without deducting the value of materials supplied by the contractee. Order: 1. The question of whether the contractor can charge GST on the value of materials supplied by the recipient of service is not answered. 2. The mechanism to calculate the taxable value as per Section 15 of the CGST Act, 2017, is that tax is payable on the entire contract value as per the certificate issued by the Architect (RA Bill) without deducting the value of materials supplied by the contractee.
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