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2020 (3) TMI 190 - AAR - GSTActivity of operation and maintenance part of Contract/s entered prior to implementation of GST - operation and maintenance part of contract/s entered post implementation of GST - applicability of N/N. 12/2017- CT(R) as amended by Notification No.02/2018- CT(R)dated 25.01.2018 S.No.3A. HELD THAT - In the case at hand, from the documents furnished in respect of contracts (2) and (3), it is evident that the contract is for execution of works and Post-work maintenance for a specific period. The Operation and Maintenance in both the contracts are dealt in Section-II of the Agreement. The applicant has to bear the charges for chemicals, consumable, labour and other services in the course of execution of Operation and Maintenance . Thus, the Operation and Maintenance undertaken as per the contracts (2) and (3) are supplies which are Composite Supplies as per Section 2(30) and are taxable to GST. In respect of Contract 1, the applicant has not furnished the RA bills/ Invoices/any documents to establish the Time of supply and therefore the applicability of GST on the Operation and Maintenance of the said contract is not discussed. In respect of Contract (2), the Time of Supply for the composite supply of Operation and Maintenance under the said contract starts from March 2018 only as seen from the submissions before us. Hence on the entire activity of Operation and Maintenance under Contract (2) GST is leviable. In respect of Contract (3), the first RA bill is raised on 20.12.2017 for the main works as per Section-I of the contract and the applicant has furnished details upto L.S.9,h Part Bill dated 25.01.2019 and it is seen that the supply of Operation and Maintenance agreed to in the said contract as per Section -II of the Agreement for a receivable of ₹ 69,64,307.76 is not billed in any of these bills and the services are yet to be supplied. Therefore, it is amply evident that GST is leviable in respect of Operation and Maintenance agreed to be supplied under Contract (3). Applicability of SI. No. 3A of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017 as amended by Notification No. 02/2018-C.T.(Rate) dated 25.01.2018 - HELD THAT - In the case at hand, M/s, TWAD Board is a Board, constituted by an Act of Tamil Nadu State Legislature called Tamil Nadu Water Supply and Drainage Board Act, 1970 with 100% contribution by way of Government and controlled by Government by way of appointing Directors of the TWAD Board entrusted with the development of Water Supply and Sewerage facilities in Municipalities and Panchayats in the State of Tamil Nadu, except Chennai Metropolitan Development. Thus M/s. TWAD is a Governmental Authority as defined under 2(zf) of the Notification No. 12/2017-CT (Rate) as amended effective from 13.10.2017 and the supply is made to the Government Authority by the applicant - The contracts under consideration are for providing Combined Water Supply Scheme (CWSS) to various regions. Thus, it is clear that the supplies as per the contracts are works received by TWAD and are in relation to functions entrusted to Panchayat or Municipality. In respect of Contract (2), the Operation and Maintenance of the executed project is undertaken after implementation of GST and is a composite supply. The contractor is obligated to borne the cost of water, gas, consumables, chemicals and other services during the period of Maintenance as seen from the VIII. Special Conditions of Contract . The details of the quantum of materials and Labour involved in the said contract are not furnished separately before this authority. In respect of contract (2), the exemption provided at SI.No. 3A of Notification No. 12/2017-C.T.(Rate) is applicable if the total value of the supply of goods involved in the RA bills raised for such supply do not constitute more than 25 percent of the value of such bills which are raised after 25.01.2018 and the break-up of the value of goods and other supplies are mentioned in such bills and all the other required conditions of the said entry stands fulfilled. In respect of Contract 3, the maintenance is to be undertaken after the execution of the project. In this contract also, the vivisection of the material and labour component is not furnished before this authority. Therefore, we hold that in respect of this contract, if the value of supply of goods involved in such supply as raised in each such bill does not constitute more than 25 percent of the value of such bill, then the exemption under SI.No. 3A of the Notification No. 12/2017-CT (Rate), inserted vide Notification No. 02/2018 -C.T.(Rate) dated 25.01.2018 is applicable to the Operation and Maintenance Part(Section-II) of the Contracts, in as much as all the other required conditions stands fulfilled.
Issues Involved:
1. Applicability of Notification No. 12/2017-CT(R) as amended by Notification No. 02/2018-CT(R) dated 25.01.2018 S.No.3A to the operation and maintenance part of contracts entered prior to the implementation of GST. 2. Applicability of Notification No. 12/2017-CT(R) as amended by Notification No. 02/2018-CT(R) dated 25.01.2018 S.No.3A to the operation and maintenance part of contracts entered post-implementation of GST. Detailed Analysis: Issue 1: Applicability of Notification No. 12/2017-CT(R) as amended by Notification No. 02/2018-CT(R) dated 25.01.2018 S.No.3A to the operation and maintenance part of contracts entered prior to the implementation of GST. The applicant, M/s. Indian Hume Pipe Company Limited, entered into contracts with the Tamil Nadu Water Supply and Drainage Board (TWAD) for water supply schemes before the implementation of GST. The contracts included two parts: construction (Section-I) and operation and maintenance (Section-II). The ruling sought to clarify whether the operation and maintenance part of these contracts would attract tax at 12% or be exempt under Notification No. 12/2017-CT(R) as amended by Notification No. 02/2018-CT(R) dated 25.01.2018. The Authority examined the definition of "supply" under Section 7 of the CGST Act, 2017, and "composite supply" under Section 2(30) of the CGST Act. It was observed that the operation and maintenance activities are composite supplies and taxable under GST. However, for Contract (1), the applicant did not furnish the RA bills/invoices to establish the time of supply, and hence, the applicability of GST on the operation and maintenance part was not discussed. For Contract (2), the RA bill-29 raised on 28.03.2018 included operation and maintenance charges, making it evident that GST is leviable on the operation and maintenance part. For Contract (3), the operation and maintenance charges were not billed yet, and services were yet to be supplied, indicating GST applicability. Issue 2: Applicability of Notification No. 12/2017-CT(R) as amended by Notification No. 02/2018-CT(R) dated 25.01.2018 S.No.3A to the operation and maintenance part of contracts entered post-implementation of GST. The Authority considered whether the exemption under S.No. 3A of Notification No. 12/2017-CT(R) as amended by Notification No. 02/2018-CT(R) applies to the operation and maintenance part of contracts entered post-GST implementation. The conditions for the exemption include: 1. Time of supply should be after 25.01.2018. 2. The supply should be a composite supply of goods and services in which the value of goods does not constitute more than 25% of the total value. 3. Supply must be made to the Central Government, State Government, Union Territory, Local Authority, Government Authority, or Government Entity. 4. The supply should relate to functions entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution. It was established that TWAD is a "Governmental Authority" as defined in the Notification, and the supplies were in relation to functions entrusted to Panchayats or Municipalities. For Contract (2), the exemption applies if the total value of goods in the RA bills raised after 25.01.2018 does not exceed 25% of the bill value, provided all other conditions are met. Similarly, for Contract (3), the exemption applies if the value of goods in each bill does not exceed 25% of the bill value, provided all conditions are met. Ruling: 1. The exemption under Sl.No. 3A of Notification No. 12/2017-CT(R) as amended is applicable to the operation and maintenance part of Contract (2) entered into with TWAD, provided the value of goods in each bill does not exceed 25% of the bill value. 2. The exemption under Sl.No. 3A of Notification No. 12/2017-CT(R) as amended is applicable to the operation and maintenance part of Contract (3) entered into with TWAD, provided the value of goods in each bill does not exceed 25% of the bill value.
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