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2022 (4) TMI 404 - AAR - GSTValuation of service - contract for construction of road to the applicant by NHAI - time of supply - escalation in value during the course of completion of service, i.e. construction of road as per contract - whether such escalated value shall be added to the taxable value u/s 15 of the act or otherwise? - HELD THAT - Section 15 (1) says that the value of a supply of goods or services or both shall be the Transaction value and the transaction value in the subject case will also include the escalated value (as per the impugned contract), which is being recovered from NHAI by the applicant, both being unrelated parties. Therefore, such escalated price/value which is added to contract price shall be liable for payment of GST as per the said provision of Section 15 of the Act - As per the provisions of Section 15(1) of CGST Act, 2017, the actual transaction value which includes the escalated value should be considered for payment of tax under GST Laws. Thus, the escalated value shall be added to the original value of the contract and the total of the escalated value plus the original value of the contract will be the transaction/taxable value u/s 15 of the Act, on which GST must be discharged by the applicant.
Issues:
1. Whether escalated value in a construction contract should be added to the taxable value under Section 15 of the CGST Act, 2017. Analysis: The applicant, M/s. B P Sangle Constructions Pvt. Ltd., sought an advance ruling regarding the treatment of escalated value in a construction contract awarded by NHAI. The contract was initiated before the GST regime but executed after its introduction. The applicant inquired whether the escalated value should be included in the taxable value under Section 15 of the CGST Act, 2017. The applicant contended that as per Section 15(1) of the Act, the value of a supply includes the transaction value, which is the price actually paid or payable. The applicant argued that since the escalated value is added to the contract price and recovered from NHAI, it should be liable for GST payment as per the provision. The Authority for Advance Ruling analyzed the facts and applicable laws. It noted that the impugned supply was undertaken during the GST period, making the GST laws applicable to the case. The authority referred to Section 13 of the CGST Act, which determines the time of supply of services. Since the service was provided entirely during the GST period, the time of supply falls within the GST era, making the relevant provisions of the CGST Act applicable. The authority emphasized that the transaction value under Section 15 of the Act includes the escalated value, which, when recovered from NHAI, becomes part of the taxable value for GST purposes. During the proceedings, the jurisdictional officer did not make any submissions. The applicant's representative provided oral and written submissions, clarifying the contractual terms and the escalation in value during the construction of the road. The authority observed that the applicant completed the work during the GST period, and the escalated value should be added to the original contract value to arrive at the taxable value under Section 15 of the Act. Therefore, the authority ruled that the escalated value must be included in the taxable value for GST payment by the applicant. In conclusion, the Authority for Advance Ruling determined that the escalated value in the construction contract should be added to the original contract value. The total of the escalated value and the original contract value constitutes the transaction/taxable value under Section 15 of the CGST Act, 2017, on which GST must be discharged by the applicant.
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