2019 (11) TMI 530 - AAR - GST

Classification of Works contract - work under e-tender process by MP Power Generating Company Ltd (MPPGCL) for Balance General Civil and Related Electrical And Mechanical Works Package For 2X660 MW Shree Singaji Thermal Power Project (SSTPP) Stage - II Near Village Dongalia. Distt. Khandwa, Madhya Pradesh ,India - composite contract or is it separate contract for each work under taken? - Government Entity or not - rate of tax. HELD THAT - MPPGCL is a Government Entity for the purpose of provisions of CGST Act 2017 and MPGST Act 2017. In the instant case, the applicant have been awarded a consolidated contract for carrying out different specified works at Shri Singaji Thermal Power Project, which includes erection, commissioning, installation etc. - It is also necessary to place on record that there are certain items mentioned in the subject contract including, but not limited to, Fitness Centre cum Gym , which definitely do not find place in the ambit of essential work entrusted by the State Government to MPPGCL. Needless to mention that such work shall not qualify for exemption as envisaged under Sr.No.3(vi) to the Notification no. 11/2017-CT(Rate), in as much as it does not fall within the scope of work entrusted by Government of Madhya Pradesh to MPPGCL. The work entrusted vide subject tender document/contract awarded to the Applicant by MPPGCL cannot be termed as composite supply and thus entire work under the said contract shall not be entitled to concessional rate in terms of Notification No.11/2017-CT(R) dtd.28.06.2017 - Also, the supply of goods and/or services which squarely fall within the ambit of scope of work entrusted to MPPGCL by the Government of Madhya Pradesh shall be entitled for concessional rate under Sr.No.3(vi) to Notification No.11/2017-CT(R). Accordingly, each and every supply under the subject contract shall be treated separately for determining the rate of tax under the CGST Act 2017 read with the provisions of GST Tariff and respective exemption notifications. Thus, the tender document in question is a not consolidated contract and each supply under the said contract shall be chargeable to tax individually, depending upon the individual classification of such supplies and rate of tax applicable at the time of supply.

Summary

Issues:
Classification of work as composite or separate contract, effective rate of tax.

Analysis:
1. The applicant, a company registered under The Companies Act, filed an application under Section 97 of the Central Goods & Services Tax Act, 2017 and MP Goods & Services Tax Act, 2017, seeking clarification on the nature of the contract undertaken with MP Power Generating Company Ltd.

2. The Concerned Officer opined that the tender document constituted a consolidated contract, chargeable to tax as a composite supply under SAC 9954, not eligible for concessional GST rate of 12%. The rate of tax would be based on the nature of the work done.

3. During the personal hearing, the applicant argued that the work order was for a consolidated contract, invoiced on a consolidated basis, and should be considered a composite supply. The applicant claimed that the work was being supplied to a Government entity, MP Power Generating Company Ltd., entitling it to the concessional GST rate.

4. The Authority considered the tender document, which detailed individual works with specific remunerations, and concluded that the works were not naturally bundled for classification as a composite supply. The Authority also noted that certain works, like a Fitness Centre cum Gym, did not align with essential works entrusted by the State Government to MP Power Generating Company Ltd.

5. It was established that MP Power Generating Company Ltd. qualified as a Government Entity, meeting the conditions under Notification No.11/2017-CT(R). However, the Authority ruled that the entire work under the contract did not qualify as a composite supply eligible for the concessional GST rate. Only supplies falling within the scope of work entrusted by the Government of Madhya Pradesh to MP Power Generating Company Ltd. would be entitled to the concessional rate.

6. The ruling declared that each supply under the contract would be chargeable to tax individually, based on its classification and applicable tax rate. The ruling was valid unless declared void under the GST Act.

7. The judgment clarified the classification of the contract, the eligibility for concessional GST rates, and the tax treatment of individual supplies under the contract, providing a detailed analysis of the applicant's contentions and legal provisions.