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2021 (12) TMI 109 - AAR - GSTClassification of services - composite supply of mining service or supply of works contract service - services of construction of the R R Colony supplied by the Applicant - Eligibility to avail Input Tax Credit of tax paid to the sub-contractor on works contract services for construction of R R colony - Section 17(5)(c) of the CGST Act, 2017 - HELD THAT - As per para 8.2 (c), of agreement signed between the Applicant and APMDC, it is only mentioned that R R activities provided at clause 1B of Schedule 2 of this Agreement. The said para is mentioned under the heading of Mine operator obligation during the development stage of the Agreement - as per the Agreement with APMDC, Applicant as a Mine Operator planning, engineering, financing, construction, development, operation and maintenance of Suliyari coal mine and subsequent delivery of coal to the Owner. It is observed that in the said Agreement mainly the work is given related to mining of Coal and during the development stage of mines, there are certain obligation to the Mine operator including construction of R R colony. In the Agreement, each and every work define separately in the said Agreement/Schedule of Agreement. The construction of R R colony service is not in any way in combination with mining service as the construction of R R colony is one time job whereas the mining service is a regular job for longer period, hence both the services are not going together or not depend on one another, supplied independently - Further, the terms of payment of each service mentioned separately in the Agreement and there is no connection/combination of payment of both the services. Invoices of the services is also raised separately. Hence both the services can be identifiable separately and has no conjunction with each other for qualify the same as composite service. Thus, the services of construction of R R colony is not composite supply with mining service. Works contract service or not - HELD THAT - As per definition of Works Contract Service, any construction of colony/building wherein transfer of property in goods is involved in the execution of such contract is covers under the definition of Works contract service for payment of GST. In this case as per the submission of the applicant, satisfied the condition for construction of Building and transfer of property in goods is involved inasmuch as the title of the steel, cement, etc. which goes in the construction of the building i.e. R R colony is transferred to APMDC, hence, the construction of R R colony is covers under the definition of Works Contract Service and GST is leviable on the said service under the Works contract service. Whether the applicant will be eligible to avail ITC of tax paid to the sub- contractor on Works Contract Service for construction of R R Colony or the same would be disallowed in terms of Section 17(5) (c ) of the CGST Act, 2017? - HELD THAT - Section 17(5) of the CGST Act, 2017 deals with blocked credits under the GST law and enlists various circumstances under which the Input Tax Credit cannot be availed by the Recipient of Supply, notwithstanding the provisions of Section 16(1) (1) of CGST Act. The Sub-Section (c) of Section 17(5) deals with blocked/ineligible credit relating to Works Contract Services . The applicant is receiving the Work contract services i.e. construction of R R colony from the sub-contractor in the course of further supply of the same as Works contractor to APMDC, hence the restriction of section 17(5)(C) shall not applicable to the Applicant. Hence, it is found that in respect of the construction of RR colony, the applicant is eligible to take ITC of tax paid to sub-contractor under works contract service which will be used for providing the same to the APMDC - the Applicant is eligible for ITC of the tax paid to the sub-contractor for construction of R R Colony under Works contract service but the said ITC is not allowed to utilize for payment of tax for mining services. The construction of the R R colony by the applicant is supply of works contract service and also eligible for ITC of tax paid to sub-contractor for providing further Works contract service only.
Issues Involved:
1. Whether the services of construction of the R&R Colony supplied by the Applicant would be taxed as a part of the composite supply of mining service or separately as a supply of works contract service. 2. Whether the Applicant will be eligible to avail Input Tax Credit (ITC) of tax paid to the sub-contractor on works contract services for construction of R&R colony, or the same would be disallowed in terms of Section 17(5)(c) of the CGST Act, 2017. Issue-wise Detailed Analysis: 1. Taxation of Construction Services: The main issue is to determine whether the construction of the R&R Colony by the Applicant forms part of a composite supply of mining services or is a separate supply of works contract services. - Definition of Composite Supply: As per Section 2(30) of the CGST Act, a composite supply consists of two or more taxable supplies of goods or services that are naturally bundled and supplied in conjunction with each other in the ordinary course of business, with one being the principal supply. - Applicant's Agreement with APMDCL: The Agreement dated 08.03.2019 between the Applicant and APMDCL appoints the Applicant as a Mine Operator (MO) for various activities, including the construction of the R&R Colony. The construction of the R&R Colony is a separate obligation under the Agreement, distinct from mining services. - Independent Nature of Services: The Applicant argues that the construction of the R&R Colony and the mining services are independent activities. The construction is a one-time activity, while mining is ongoing. The payment terms and considerations for both services are distinct and separate. - Department's View: The Additional Commissioner (Tech) CGST, Jabalpur, supports the view that the construction service for the R&R Colony and mining services are not naturally bundled and should be treated separately. - Authority's Findings: The Authority agrees that the construction of the R&R Colony is not naturally bundled with mining services and is not supplied in conjunction with each other in the ordinary course of business. Therefore, the construction of the R&R Colony is a separate supply of works contract services. 2. Eligibility for Input Tax Credit (ITC): The second issue is whether the Applicant is eligible to avail ITC on tax paid to the sub-contractor for the construction of the R&R Colony. - Section 17(5)(c) of the CGST Act: This section disallows ITC for works contract services when supplied for the construction of immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service. - Applicant's Argument: The Applicant contends that since it is using the works contract services received from the sub-contractor for further supply of works contract services to APMDCL, the disallowance under Section 17(5)(c) should not apply. - Department's View: The Additional Commissioner (Tech) CGST, Jabalpur, concurs that the Applicant may be entitled to ITC for the works contract services received from the sub-contractor, provided it is used for further supply of works contract services. - Authority's Findings: The Authority concludes that the Applicant is eligible to avail ITC of tax paid to the sub-contractor for the construction of the R&R Colony, as it is used for further supply of works contract services to APMDCL. However, this ITC should not be utilized for payment of GST liability related to any other service, including mining services. Ruling: 1. The services of construction of the R&R Colony supplied by the Applicant would be taxed under Works Contract Service. 2. The Applicant will be eligible to avail ITC of tax paid to the sub-contractor on works contract services for the construction of the R&R Colony and utilize the same for providing/supplying works contract services only. The ITC should not be utilized towards the payment of GST liability for any other service, including mining services. This ruling is valid subject to the provisions under section 103(2) until and unless declared void under Section 104(1) of the GST Act.
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