2023 (6) TMI 1298 - AAR - GST

Scope of Supply - work done by the applicant (NHAI) in shifting the transmission lines for the widening of road under the supervision of MVVNL - Applicability of GST on the full amount of work done for shifting the transmission lines by NHAI - payment of same amount of GST on the same transaction to two separate entities, amounting to double taxation or not - HELD THAT - The applicant is a Central Government entity whose primary work is building roads and bridges. Shifting, dismantling arid raising of transmission lines is done by the applicant as and when required for safe electrical clearances during the widening of the National Highways, which is an ancillary to its main work. In the process of the activity, nowhere any assets are transferred to the applicant and therefore ownership lies with the MVVNL. It is merely an activity where just shifting of power transmission towers/lines is done to widening of the National highways. It is observed that MVVNL is not supplying any material or goods or services to the applicant, except the supply of services of supervision and shut down with GST duly charged thereon, which can be used in the shifting or modification of transmission lines. Every material and labour involved in the work is being purchased by the NHAI or its contractors and ITC is claimed against this transaction and TDS is being deducted by the NHAI on payments made to their contractors. The MVVNL is only supplying the services of supervision and shutdown to the NHAI. It is observed that MVVNL is not a supplier of goods or services in relation to shifting of transmission lines and other assets which are required to be shifted during construction or widening of roads, the work being undertaken by NHAI itself. Hence, there is no relationship between NHAI and MVVNL which can be categorized as that of supplier and recipient except for the services of the supervising the whole operation for which NHAI is paying consideration along with GST leviable thereon. The supplier in the instant operation is the contractor who is undertaking the work of shifting transmission lines and not the MVVNL who are just supplying services of supervision and not that of construction or replacement of transmission lines. MVVNL is not demanding the cost of total project of shifting of transaction lines rather they are only concerned with supervision charges and GST on the estimated project cost. It is nothing but a case of double taxation because the project cost is being borne by NHAI through its contractors where GST is charged and paid and ITC being availed. But by demanding GST only and not the cost of project being undertaken by NHAI, M/s MVVNL have shown utter disregard to canons of taxation - the element of consideration is not involved in the activity and therefore the said activity i.e. shifting of transmission lines for widening of roads is not a supply under Section 7 of GST Act, 2017. Thus, assets constructed by the applicant do not fall under category of goods, thus no supply is involved. Therefore, the applicability of GST does not arise.

Summary

Issues Involved:
1. Whether the work done by the applicant (NHAI) in shifting the transmission lines for the widening of road under the supervision of MVVNL comes under the definition of supply as per section 15(2)(b) of C.G.S.T. Act, 2017?
2. Whether GST is to be paid to MVVNL on the full amount of work done for shifting the transmission lines by NHAI?
3. If NHAI pays GST on the entire value of work done to its contractors and also to MVVNL, how will this not constitute double taxation?

Detailed Analysis:

Issue 1: Definition of Supply
The core question is whether the shifting of transmission lines by NHAI under MVVNL's supervision constitutes a "supply" under section 15(2)(b) of the CGST Act, 2017.

- Applicant's Argument: NHAI argued that the work done does not constitute a supply because there is no consideration involved between NHAI and MVVNL. The ownership and operational control of the transmission lines remain with MVVNL, and NHAI only pays for supervision charges.

- Authority's Finding: The authority observed that there is no transfer of ownership or consideration involved in the shifting of transmission lines. The activity is ancillary to NHAI's primary work of road widening, and MVVNL is only providing supervision services. Therefore, this activity does not meet the criteria of "supply" as defined in Section 7 of the GST Act, 2017.

Issue 2: GST on Full Amount of Work Done
The question here is whether GST is payable to MVVNL on the entire value of the work done for shifting the transmission lines by NHAI.

- Applicant's Argument: NHAI contended that GST should only be levied on the supervision charges paid to MVVNL, not on the entire cost of shifting the transmission lines. They cited a similar ruling by the Rajasthan Authority of Advance Ruling and practices followed by the Power Grid Corporation of India Ltd.

- Authority's Finding: The authority concluded that GST is only applicable on the supervision charges levied by MVVNL. The cost of shifting the transmission lines, which includes materials and labor, is borne by NHAI and its contractors, who are already paying GST on these transactions. Hence, demanding GST on the entire project cost from MVVNL would result in double taxation.

Issue 3: Double Taxation
The concern is whether paying GST to both the contractors and MVVNL on the same transaction constitutes double taxation.

- Applicant's Argument: NHAI argued that paying GST twice would be a heavy burden and result in double taxation, which is against the provisions of law and natural justice.

- Authority's Finding: The authority agreed with the applicant's argument, stating that since the project cost is borne by NHAI through its contractors, who are already paying GST, demanding GST from MVVNL on the same amount would indeed constitute double taxation. The authority emphasized that MVVNL is only providing supervision services and should only charge GST on those services.

Conclusion:
1. Definition of Supply: The work done by NHAI in shifting the transmission lines does not come under the definition of supply as per section 15(2)(b) of the CGST Act, 2017.
2. GST on Full Amount: GST is not to be paid to MVVNL on the full amount of work done for shifting the transmission lines. GST is only leviable on the supervision charges.
3. Double Taxation: Paying GST to both the contractors and MVVNL on the same transaction would constitute double taxation, which is not permissible.

Order:
1. The work done by NHAI in shifting the transmission lines does not constitute a supply under section 15(2)(b) of the CGST Act, 2017.
2. GST is only leviable on the supervision charges charged by MVVNL.
3. The issue of double taxation is addressed by the above findings.

This ruling is valid within the jurisdiction of the Authority for Advance Ruling, Uttar Pradesh, and subject to the provisions under Section 103(2) of the CGST Act, 2017 until declared void under Section 104(1) of the Act.