2020 (3) TMI 295 - AAR - GST

Levy of GST on Mobilization Advance received before GST era - Applicability of Transitional Provisions under Section 142(11)(c), (Chapter XX) of TNGST Act, 2017/CGST Act, 2017 - remaining installments of Mobilization Advance , which transitioned into the GST regime - adjustment of the same post GST regime - Levy of GST - input tax credit on Service Tax paid which was transferred from Pre-GST period through TRAN-1 Return filed in terms of the section 142(11)(c), under Transitional Provisions (Chapter XX) of both TNGST Act, 2017/CGST Act, 2017. HELD THAT - The applicant has received the advance against the service to be provided and as per the explanation above, the supply is deemed to have been made to the extent it is covered by the invoice or of the payment and the date of payment is the date on which it is entered into the books of account of the supplier, i.e, the applicant. In the case at hand the applicant has raised the invoice to the full Mobilisation Advance received by them and is, therefore, deemed to have supplied works contract service to CMC prior to 1-7-2017 to the extent covered by the Mobilisation advance that stood credited to its account as per Section 13 of the GST Act. Whether GST is to be paid on the amount raised in the RA Bill periodically post implementation of GST, without deducting the part of mobilisation advance adjusted in the bills raised or the liability to GST is to be arrived at after deducting the part of Mobilisation advance being adjusted in the RA bill. The applicant has stated that their case is covered under the provisions of Section 142(11)(c) and accordingly, the liability to GST arises inclusive of that part of advance sought to be adjusted against the receivables in a particular RA Bill. It can be deduced that Section 142(11) (c) is applicable in cases with respect to transactions in which both VAT and Service Tax are paid in the Pre-GST regime and on which GST would be leviable to the extent supply is made after the appointed date for the recipient who has actually paid the tax. In the case at hand, the applicant has paid Service Tax on the advance received as per the said statute for which the applicant has raised invoice on their service receiver along with the component of service tax but no VAT has been paid/received from their customer on that part of the Mobilisation Advance pertaining to materials and therefore, this provision do not apply to the case at hand - the transitional provisions under Section 142(11)(c) is not applicable to the case of the applicant. Further Supply of Works Contract is deemed to be a service under GST. Under the pre-GST regime, service tax was leviable on the service portion of the Works Contract, which in the case at hand being original work, was levied on 40% of the value. The applicant on receipt of advance has paid the service tax on the 40% of the value as required under the provisions of Service Tax - GST is not payable on the Mobilisation advance which has been received prior to GST implementation as per Section 142(11)(b) of the Act. Eligibility of ITC as per Section 142(11)(c) - HELD THAT - Section 142(11)(c ) will not be applicable on the Mobilisation Advance. However, the admissibility of transitional credit is not in the ambit of Advance Ruling and therefore not considered.

Summary

Issues Involved:

1. Applicability of Transitional Provisions under Section 142(11)(c) of TNGST/CGST Act, 2017 for Mobilization Advance.
2. Liability to pay GST on installments of Mobilization Advance transitioned into the GST regime.
3. Eligibility to avail Input Tax Credit (ITC) on Service Tax paid during the Pre-GST period through TRAN-1 Return.

Issue-wise Detailed Analysis:

1. Applicability of Transitional Provisions under Section 142(11)(c) of TNGST/CGST Act, 2017 for Mobilization Advance:

The applicant, engaged in the construction business, received Mobilization Advance from CMC before the implementation of GST and paid Service Tax on it. Post-GST, the remaining installments transitioned into the GST regime. The applicant argued that Section 142(11)(c) should apply, allowing them to adjust these installments under GST. However, the ruling clarified that Section 142(11)(c) applies only when both VAT and Service Tax were paid on the supply before GST, which was not the case here as only Service Tax was paid. Therefore, Section 142(11)(c) was deemed not applicable.

2. Liability to pay GST on installments of Mobilization Advance transitioned into the GST regime:

The ruling examined whether GST should be paid on the RA Bills raised post-GST implementation, including the part of the Mobilization Advance adjusted in these bills. The applicant contended that GST should be paid on the gross value, inclusive of the adjusted advance, under Section 142(11)(c). However, the authority concluded that Section 142(11)(b) is more appropriate, which states that no GST is payable on services to the extent Service Tax was already levied under the Finance Act, 1994. Therefore, GST is not applicable on the Mobilization Advance received prior to GST implementation.

3. Eligibility to avail Input Tax Credit (ITC) on Service Tax paid during the Pre-GST period through TRAN-1 Return:

The applicant sought clarity on availing ITC for Service Tax paid during the Pre-GST period, transferred via TRAN-1 Return. The ruling noted that the question of ITC eligibility under transitional provisions is beyond the scope of Advance Ruling Authority as per Section 97(2) of the Act. Consequently, this issue was not addressed in the ruling.

Ruling:

1. The Transitional Provisions under Section 142(11)(c) are not applicable to the case at hand.
2. The Mobilization Advance received prior to GST implementation is not subject to GST as per Section 142(11)(b) of the GST Act 2017.
3. The eligibility to credit based on transitional provisions is not answered as it is beyond the scope of Advance Ruling Authority under Section 97(2) of the Act.