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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 ..... plicant, as is seen from the terms of the contracts, is a composite contract consisting of supply of services and also supply of goods in the form of materials, spares, consumables, etc., there is clearly a tax liability @ 9% each of CGST and SGST till 21.07.2017 and further @ 6% each of CGST and SGST with effect from 22.07.2017 - it is very clear that the services provided by the applicant are not pure services and rather involve supply of materials and consumables, the supply which is in the nature of composite supply and works contract, is not exempt from levy of GST as per N/N. 12/2017 and is therefore clearly taxable at the rates. With effect from 25.01.2018, the applicant can avail the benefit of the above said Exemption N/N. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LIMITED, the applicant, seeking an advance ruling in respect of the applicability of GST on: 1) Determination of GST leviable on operation and maintenance work order given by municipal corporations. 2) Admissibility of ITC (input Credit tax) of purchases against such work order. 3) Determination of responsibility of municipal authority of discharging such GST Liability payable to contractor. 4) Applicability of GST on Service Contract where labour job Contribute 95% to 98 of Contract Value 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 submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plementation 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. However, the Municipal Corporation has disregarded levying of GST on the said work saying it is exempt under section 243 (W). During the course of discussion with the Municipal Corporation the appellant has submitted the local authority copy of relevant portion of the GST Act, 2017 and also the amended portion, however the local authority have rejected the claims made by appellant. As per discussion with NMMC all such 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ulwe STP against Letter of Acceptance vide Ref. No. CIDCO/CE/(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 as under: As per Annexure - 16 Scope of Work clause no. 2 and section 4 page no. 469 Contract Price clause 32. page no. 491 Taxes Reimbursement of Tax clause no. 70.2 71.1 page no. 448 As per the above work Order of Operation Maintenance of Sewerage Treatment and Disposal Plant, the major portion of work being labor oriented i.e. 95%) of Sewerage Treatment Disposal Plant and balance 5% consumables are Adhesives, Oil Lubricants. The Appellate had prepared 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 notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption Notification No-2/2018 Central Tax (Rate) dated 25.01.2018 this service is exempted with effect from 25.01.2018 provided 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. Comments:- The applicant is eligible for availing ITC (input Credit Tax) under the CGST Act, 2017 read with the CGST, Rules 2017. Question - 3 Determination of responsibility of municipal authority of discharging such GST Liability payable to the contractor. Comments:- As regards the claim of the Municipal authorities that the services under reference are covered by Article 243W of the Constitution and hence exempt from GST does not 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has filed fresh application on 05.02.2018. The final hearing was held on 21.02.2018 when Sh. Sidddharth Kheria, (C.A.) along with Sh. Roshan Mene, Accountant appeared and submitted copy of Notification 2/2018 dated 25th January 2018. Officer Sh. R. M. Gangreddiwar, Asstt. Commissioner, Belapur - Division-I alongwith Ms. S.V. Tambe, Inspector attended and furnished a written submission. 05. OBSERVATIONS We have gone through the facts of the case, documents on records and submissions made by the Applicant. The primary issue put before us is whether the Applicant is exempted from payment of GST on Operation and Maintenance contracts/ work orders entered into by them with Navi Mumbai Municipal (NMMC), Panvel Municipal Corporation (PMG), Municipal Council, Pandharpur (MCP) and 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 Contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section Rule 243 (W) of the Constitution of India. Similar work orders have been purportedly received by them from other Local Bodies. They have further cited another work order vide agreement dated 21.08.2017, with NMMC, in respect of Solid Waste Processing Plant (Compost plant) at Site Turbhe SWM dumping yard site, against Letter of Acceptance vide Ref. No. NMMC/CE/1572/2017 dated 19.08.2017 for Tender vide Ref. No. NMMC/CITY ENGINEER (77/2016-17 detailing terms of work for Operation Maintenance. Wherein they have stated that the Scope of Work and Contract Price (Provisional Sums) are mentioned at page no. 232 and page no. 313, respectively. Here they have submitted that as per the said work order, the major portion of work is labor oriented i.e. 98% and balance 2% consumables. In this case 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 rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or to INSTALL HIGH EFFICIENCY LIGHTING SYSTEMS.. As per Para 15.3.1(b) it is the responsibility of the operator to INSTALL CAPACITORS TO REDUCE POWER. As per Para 15.3.1(c) REPAIRING AND REPLACING OLD AND WORN OUT PIPES AND BLOWERS AND COMPRESSORS is the responsibility of the operator. As per Para 15.3.1(c), REPAIRING AND REPLACING OLD AND WORN OUT PIPES AND BLOWERS AND COMPRESSORS is also the responsibility of the operator. As per Para 15.4(b to h), REPLACING DAMAGED PIPES, FITTINGS,VALVES, BEARING, MECHANICAL SEALS, O RING, GASKETS,PUMP IMPELLERS, ETC, by the operator is stated. As per Para 16.2 :- For the work of extension/modification to the sewerage network, improvement to civil structures, etc., the NMMC shall reimburse on the prevailing schedule of rates or the actual cost of procurement 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Mumbai, Agreement dated 30.11.2017 against Letter of Acceptance No. CIDCO/CE(NM)/2014/243 dated 25.07.2014. Under the GENERAL CONDITIONS OF THIS CONTRACT it is mentioned as follows: the definition of contractor as Contractor means the person whose tender has been accepted... As per para 4.1 (b), the contractor shall not be required to obtain consent for the purchase of materials which are in accordance with the standards specified in the contract. As per Para 8.1, THE CONTRACTOR SHALL PROVIDE ALL SUPERINTENDENCE, LABOUR, MATERIALS, PLANT , CONTRACTOR'S EQUIPMENTS AND ALL OTHER THINGS WHETHER OF A TEMPORARY OR PERMANENT NATURE... As per Para 12.1, THE Contractor shall be deemed to have satisfied himself as to the correctness and sufficiency of the Tender and of the rates and prices stated in the Bill of Quantities, 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 complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to supply pf spares, material, etc, are clearly contradicting the applicant's contention that the major portion of their works is labor oriented i.e. 95% and balance 5% are consumables are Adhesives, Grease, Oil and lubricants. They have not mentioned the fact of having to supply materials other than consumables, vide the NMMC contracts. Since the contracts clearly require the applicant to supply materials and spares, in addition to consumable, it is seen that the applicant, in this ARA has not mentioned the complete facts of the matter which would clearly specify as to what is the correct proportion of services and actual quantity of materials to be used or supplied by the applicant. Hence keeping in mind the provisions of the two contracts mentioned above (since details of other 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, it is very clear that the services provided by the applicant are not pure services and rather involve supply of materials and consumables, the supply which is in the nature of composite supply and works contract, is not exempt from levy of GST as per Notification No, 12/2017 and is therefore clearly taxable at the rates discussed above. However with effect from 25.01.2018 it is seen that a new Sr.No. 3A has been incorporated in Notification No. 12/2017 vide Notification No. 2/2018-Central Tax which is reproduced as under:- Sl.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent.) Condition 3A Chapter 99 Composite supply of goods and services in which the value of supply of goods constitutes not more than 25% of the value of the said composite supply provided to the Central Government, State Government or Union Territory or local authority or a Governmental authority or a Government Entity by way of any activity in relation to any function entrusted to a Panchayat under Article 243 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e services rendered they also supply to the Local Bodies, spares, materials and consumables such as oil, lubricant etc. Hence their services cannot be termed as pure services attracting exemption as per sr.No .3 of under Noti. No. -12/2017 and the applicant would have to pay the GST on the services provided by them to such Local Bodies. This would answer their query regarding liability to pay GST on composite supply of services/ goods under work orders received from various local bodies. It appears that this ARA has been filed not because the applicant had doubts regarding levy of GST but because the Local bodies have refused to pay them the said GST. With respect to their query' regarding availability of input tax credit on purchases against such work order, Section 16 of the CGST Act, 2017, states that Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier. Subject to the terms and conditions mentioned in Sections 16 to 22 of the CGST Act and Rules 36 to 45 of the CGST Rules, 2017, we are of the opinion that the applicant is Credit for purchases made against the said work orders entered into by them. 05. In view of the extensive deliberations as held hereinabove, we pass an order as follows: ORDER (under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) NO. GST-ARA-04/2017-18/B-28 Mumbai, dt. 05.05.2018 For reasons as discussed in the body of the order, the questions are answered thus - Question -1 - Determination of GST leviable on operation and maintenance work order given by such Municipal Corporation. Answer :- Under GST Act, 2017, their services attracted CGST SGST @ 9% each with effect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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