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TMI Blog2018 (9) TMI 545X X X X Extracts X X X X X X X X Extracts X X X X ..... lue and 2-3% as Oil and Lubricant and pertains to consumable Purchase to operate the Existing Plant. At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act/ MGST Act would be mentioned as being under the "GST Act". FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- 1. Appellant Company is a registered Civil Contractor, carrying out the business of a. Construction, erection, commissioning of Sewerage treatment plant. b. Operation & Maintenance of Sewerage Treatment and Disposal Plants. as per the Work awarded by various Municipal Corporations / Councils/ Local Authority. 2. During the FY 2016-17 appellant had made the Total Contract Receipts amounting to Rs. 200,89,26,040/-, which included a. Rs. 1,78,11,70,457/- in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h contract related to Operation and Maintenance of STP Plant comes under Rule 243 W and Not Applicable for GST. The service of Operation and Maintenance of STP Plant related to Public Interest and no GST is applicable for all such Job. As per Annexure - 17. Similar to the above Operation & Maintenance work order for STP's we have work Order for below sites b. Comprehensive Contract for Operation Maintenance of Sewerage Treatment and Disposal Plant at Site Vashi STP Agreement dated 30.11.2017 against Letter of Acceptance vide Ref. No. NNMC/CE/1408 dated 27.11.2017 for Tender vide Ref. No. B-2/ ACE/10(02)/2015-16. As per Annexure -10. c. Comprehensive Contract for Operation Maintenance of Sewerage Treatment and Disposal Plant at Site Airoli STP Agreement dated 12.12.2017 against Letter of Acceptance vide Ref. No. NMMC/CE/1534/2017 dated 1212.2017 for Tender vide Ref. No. B-2/ACE/10(03)/2015-16. As per Annexure - 11. d. Comprehensive Contract for Operation & Maintenance of Sewerage Treatment and Disposal Plant at Site CBD Belapur STP Agreement dated 19.12.2017 against Letter of Acceptance vide Ref. No. NMNC/E.E. (B)/124/2017 dated 12.12.2017 for Tender vide Ref. No. B-2/ACE/16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repared and submitted the financials bid for the Operation & Maintenance work order considering the old Indirect Tax Laws wherein, Service Tax & VAT was exempt as per Notification no-25/2012 dated entry no. 12. 4. As per the Earlier Indirect Tax Laws i.e. Service Tax (Finance Act,1994) the Operation & Maintenance Service of Sewerage Treatment and Disposal Plant was exempt Under Notification no.25/2012 dated entry no. 12 as per Annexure-3. 5. As per the Goods & Service Tax Act, 2017 notification no. 11/2017 dated 28.06.2017 and notification no. 20/2017 dated 22.08.2017 read as below; complete notification as per Annexure - 4 & Annexure-5. 6. As per the notification no. 12/2017 of GST Act, 2017 dated 28.06.2017 exempt list of services issued by GST Council read as below; complete notification as per Annexure - 6 and Article list under 243W of the constitution of India is as per Annexure - 7. 7. For the betterment development of Town, City & Villages and in Public Interest we feel that all such Contracts related to Operation & Maintenance of STP Plants and Solid waste Management should come under Rule 243 W and Not Applicable for GST. 8. There is lack of clarity about GST chargea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appear to be correct. As per Not No. 12/2017-Central Tax (Rate) dated with effect from 01.07.2017, pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Govt, State Govt or Union Territory or local Authority or a Governmental Authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243 W of the Constitution or in relation to any function entrusted to a Municipality under Article 243VV of the Constitution are exempt from tax. It can be seen from the submission of the applicant that they use some consumables such as oil, lubricant etc. As such their services cannot be termed as pure services attracting under Not No. 12/2017 and the applicant will have to pay the GST on the services provided by them. However, their services have been exempted from GST vide Notification No. 2/2018- Central Tax (Rate), dated 25.01.2018 which reads as below; "Composite supply of goods and services in which the value ofsupply of goods constitutes not more than 25 per cent. of the value of the aid composite supply provided to the Central Government, State Government or union territory or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... City & Industrial Development Corporation of Maharashtra, Ltd. (CIDCO). The other issue raised before us is weather the Applicant is entitled to Input Credit Tax (ITC), of purchases against such work order and whether it is the responsibility of municipal authority to discharge such GST Liability payable to the Applicant. The Applicant has submitted that their Company is a registered Civil Contractor, carrying out the business of Construction, erection, commissioning of sewerage treatment plant and Operation & Maintenance of Sewerage Treatment and Disposal Plants work, which is awarded to them by the various Municipal Corporations/Councils/ Local Authority, as mentioned above. For the year under consideration FY 2017-18 they have been awarded work order of Operation & Maintenance contract by various Municipal Corporations, details of which have been submitted by them. As per their submissions the Operation & Maintenance Service of Sewerage Treatment and Disposal Plant was exempt from service tax under Notification no. 25/2012 dated 20.06.2012 entry no. 12 as per Annexure - 3, of the Erstwhile Finance Act, 1994. They have further submitted that all such Contracts related to Operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase too they have stated that, on the implementation of GST, 2017 the said Operation & Maintenance work was taxed as per notification no. 11/2017 dated 28.06.2017 and notification no. 20/2017 dated 22.08.2017 and NMMC has disregarded levying of GST on the said work saying it is exempt under section Rule 243 (W) mentioned above. The third work order cited by them pertains to work order received from CIDCO for Operation & Maintenance of Sewerage Treatment and Disposal Plant at Site Ulwe STP against Letter of Acceptance vide Ref. No. CIDCO/CF/(NM) /2014 /243 dated 25.07.2014 for Tender vide Ref. No. 02 /CIDCO/SE(ULWE)/EE(UL-II)/2013-14 detailing terms of work for Operation & Maintenance. Here also they have submitted that as per this work order of Operation & Maintenance of Sewerage Treatment and Disposal Plant, the major portion of work is labor oriented i.e. 95% and balance 5% consists of consumables I.e. Adhesives, Oil & Lubricants. The department has contended that it can be seen from the submission of the applicant that they use some consumables such as oil, lubricant etc. As such their services cannot be termed as pure services attracting exemption under Not No. 12/2017 and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the operator, whichever is lower. NMMC reserves the right to either procure those items of stores or fix a rate contract against which the operator can procure such stores. * As per Para 20.2, the operator shall procure all spare parts required for the maintenance of the equipment, excluding those supplied by the NMMC. * As per Para 20.5, the operator shall provide adequate engineering equipment, inventories. PLANT AND MACHINERY and all other things, WHETHER OF A TEMPORARY OR PERMANENT NATURE, required for carrying out the operations under the contract. * As per Para 25.3, 'For non-replacement Of damaged and missing manhole covers or frames there would be a penalty levied (this implies that the operator i,e, the applicant is also responsible for replacement of manhole covers. * As per Para 27.1, 'THE CONTRACE PRICE SHALL COVER..... SPARES AND CONSUMABLES and include taxes'. * As per the taking over process by NMMC, para 43.2 (b) says that the operator shall hand over all documents and supplies for which they have received payments. Under the DETAILED SCOPE OF WORK-OPERATION AND MAINTENANCE OF STP it is mentioned as follows. * As per Clause iii, All neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uantities, all of which shall, except insofar as it is otherwise provided in the Contract, cover all his obligations under the contract (including those in respect of the supply of goods, materials, plant or services or of contingencies for which there is a provisional sum) and all matters and things necessary for the proper execution and completion of the Works. * As per para 37.3, "If, at the time......., the materials or Plant are not ready for inspection or testing ........,the Engineer determines that the materials of Plant are defective ..... * As per para 40.4, ' The contractor shall be paid at the Contract rates full amount for Works executed at site, and in addition, certain amount certified by the Engineer for the value of such material(which material thereupon become the property of the Corporation) and ............. * As per para 58.1:- "Provisional Sum" means a sum included in the Contract and so designated in the Bill of Quantities for the execution of any part of the Works or for the supply of goods, material Plant or services, or for contingencies, which sum may be used in whole or in part,...... * As per para 58.2:- ...,the Engineer shall have the autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contracts are not forthcoming), it is not difficult to come to a conclusion that the applicant has entered into a contract with the local bodies for both, supply of goods and also supply of materials and therefore there is no question of the same being considered as pure services sontracts. Notification No. 11/' 2017-Central Tax (Rate) dated 28th June, 2017 had notified levy of central tax, on the intra-State supply and as per Sr. No. 3, Heading 9954, (iii) of the said Notification, "construction services other than those mentioned at (i) and (ii)" of the said Sr. No. 3, Heading 9954 were leviable to tax @ 9%. This Notification was amended by Notification No. 20/2017-Central tax (Rate) dated 22.07.2017, wherein the tax rate was reduced to 6%. Notification No. 20/2017 amended the description mentioned at Sr. No. 3 Heading 9954 (iii) from "construction services other than those mentioned at (i) and (ii)" TO "composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied to the Government, a local authority or a Governmental authority by way of construction, erection, commissioning, installation, completion, fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or in relation to any function entrusted to a Municipality under Article 243W of the Constitution NIL NIL Here, it is seen that the type of services rendered by the applicant has been exempted with effect from 25.01.2018 subject to fulfilment of certain conditions, Exemption Notification No. 2/2018 Central Tax (Rate) dated 25.01.2018, provided the value of supply of goods does not exceed 25% of value of composite supply. Thus we see that with effect from 25.01.2018, the applicant can avail the benefit of the above said Exemption Notification No.2/ 2018 Central Tax (Rate) dated 25.01.2018 only if the value of supply of goods does not exceed 25% of value of composite supply. A fact to be noted from the submissions made by the Applicant, is that they themselves were aware that, on implementation of GST, 2017 the said supply of Operation & Maintenance work was taxable as per notification no. 11/2017 dated 28.06.2017 and notification no. 20/2017 dated 22.08.2017. However, the Municipal Corporation has disregarded levying of GST on the said work saying it is exempt and have rejected the claims ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the electronic credit ledger of such person." (2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,-- (a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed; (b) he has received the goods or services or both. Explanation. -For the purposes of this clause, it shall be detuned that the registered person has received the goods Where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents title to goods otherwise; (c) subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and (d) he has furnished the return under section 39: Provided that where the goods against an invoice are received in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect from 22.08.20171 Post 25.01.2018, their services would be exempt only subject to fulfilment of conditions that the value of supply of goods does not exceed 25% of value of composite supply. Question-2- Admissibility of ITC (input Credit tax) of purchases against such work order. Answer:- The applicant is eligible for availing ITC (input Credit Tax) of purchases against such work order under the GST Act/ Rules subject to the terms and conditions mentioned in section 16 to 22 of the GST ACT and rules 36 to 45 of the GST Rules, 2017. Question - 3 Determination of responsibility of municipal authority of discharging such GST Liability payable to the contractor. Answer:- The liability to pay GST is on the supplier, being a legal liability and no comments are offered in respect of recovery or otherwise from the recipient. Question - 4 Further, we seek guidance from GST Council/ Appropriate authority towards applicability of GST on Service Contract where labour job Contribute 95% to 98% if Contract Value and 2-3% as Oil and Lubricant and pertains to consumable Purchase to operate the Existing Plant. Answer:- Under GST Act, 2017, their services attracted CGST& SGST @ 9% each wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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