2022 (3) TMI 1085 - AAR - GST

Classification of supply - composite supply of works contract - Government entity or not - project of Tolling, Operation, Maintenance Transfer - Toll Management System (TMS) - classified under Entry (vi) of Serial No. 3 of the Notification No. 11/2017-C.T. (R), dated 28th June, 2017 or under Entry (iv) to Serial No. 3 of the CGST Rate Notification read with the GGST Rate Notification - applicable rate of GST - HELD THAT - TMS works is supplied by Tecsidel to M/s Adani and not to any Central/ State Government, Union Territory, local authority, Government Authority or Government Entity. Further, the activity of collection of Toll excludes the TMS works from the category of predominantly meant for use other than for commerce, industry, or any other business or profession . The word Business has a wide inclusive definition vide Section 2(17) CGST Act including, inter alia, any trade, commerce, or any other similar activity, whether or not it is for a pecuniary benefit, including activities in connection with/ incidental/ ancillary to it, whether or not there is regularity of such transactions. We find that the conditions of this sr. no 3(vi) of said NT is not satisfied in subject matter. The subject Service order is for supply of Toll Management System (TMS)to be erected and commissioned, on an expressway. Supply does not include construction of expressway/ road/ terminal but is for limited purpose of supply of TMS simpliciter. The purpose will be for collection of the tolls/ toll fee and not for control/ management of the traffic on road - the conditions of this sr no 3(iv) of said NT is not satisfied in subject matter. Service provided by sub contractor to main contractor liable to@ 12% in respect of entry No. (iv) and (vi) of Not. No. 11/2017-CT (Rate) - HELD THAT - In the present matter, only the supply of TMS is under consideration but in the cited Ruling supply of Intelligent transport system installation project which includes Advanced Traffic Management system (AMTS), TMS and Digital Transmission system along with operation and maintenance of AMTS for 4 years to provide real time information about traffic conditions, pollution, weather conditions and status of expressway to road users making road travels convenient, faster and safer was considered. The present case does not involve supply of Road along with TMS, but simply supply of TMS itself on an already constructed national highway stretch. Thus, subject supply is not covered at sr no 3(iv/vi) of said NT. Further, as per discussion at para 11.3, sr no 3(ix) of said notification is not attracted in subject case. GST is leviable at 18% vide Sr. No. 3 (xii) of Not. No. 11/2017-CT (Rate) dated 28-6-17 as amended.

Summary

Issues involved:
Classification of composite supply of works contract under Entry (vi) and Entry (iv) of Notification No. 11/2017-C.T. (R) for GST rate determination, and applicability of GST rate for services rendered by subcontractor to the main contractor.

Analysis:
1. Classification under Entry (vi) of Notification:
- Criteria for eligibility under Entry (vi) includes a composite supply of works contract provided to specific entities for structures meant predominantly for non-commercial use.
- The Toll Management System (TMS) provided by Tecsidel to the contractor does not meet the criteria as it is not intended for non-commercial use, given its toll collection purpose.

2. Classification under Entry (iv) of Notification:
- Eligibility under Entry (iv) requires a composite supply of works contract for specific types of infrastructure for public use.
- The TMS supplied by Tecsidel does not involve the construction of public infrastructure like roads, bridges, tunnels, or terminals, but is solely for toll collection purposes.

3. Applicability of GST rate for subcontractor services:
- Tecsidel, acting as a subcontractor to the main contractor, sought clarification on the GST rate applicable for its services.
- The supply of TMS by Tecsidel to the contractor does not align with the criteria specified under Entry (vi) or Entry (iv) of the Notification.
- The cited Uttar Pradesh Advance Ruling was distinguished as it involved a different scenario with a broader scope of services compared to the present case.
- The ruling pronounced by the Authority is binding only on the respective applicant, thus the cited ruling cannot be relied upon.

4. Final Ruling:
- The Authority ruled that the supply of TMS by Tecsidel does not fall under Entry (vi) or Entry (iv) of the Notification.
- Considering the detailed analysis provided, the GST rate applicable for the services rendered by Tecsidel as a subcontractor is determined to be 18% under a different entry of the Notification.

This comprehensive analysis of the judgment outlines the key issues addressed, the criteria for classification under specific entries of the Notification, and the final ruling provided by the Authority for the GST rate determination in the context of the composite supply of works contract and subcontractor services.