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TMI Blog2018 (12) TMI 649X X X X Extracts X X X X X X X X Extracts X X X X ..... t on back to back basis issues invoices and charges separate consideration for transportation services to PGCIL. It is this transportation charges/freight recovered by the applicant from PGCIL which is the subject matter of present application. It can be safely concluded that the agreement for setting up Tower Package TW05 for +800KV transmission Line Project is a single indivisible contract. As the contract consists of two or more taxable supplies of goods and services and their combination, is a composite supply as defined u/s 2(30) of the GST Act - the first contract and the second contract is one single individual contract. Whether this composite supplies constitute works contract as defined u/s 2(119) of the GST Act? - Held that:- The subject contracts are for commissioning of immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of said contracts. The contract before us thus are clearly covered by the definition of works contract as per section 2(119) of GST Act - The contract before us thus are clearly covered by the definition of works contract as per section 2(119) of GST Act - further, composi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ESTION(S) ON WHICH ADVANCE RULING IS REQUIRED. 1. This Application is being filed by EMCO Ltd.( the Applicant /the Company ), having Goods and Services Tax ( GST ) Registration No.27AAACE2764Q1Z6. The Applicant is engaged in the business of manufacturing and selling various products and solutions as required in Power Transmission and Distribution Sector. The Company has two divisions namely (i) Transformer division and (ii) Project division. The Transformer division manufactures widest range of transformers which are used in the power industry. The Project division has two Strategic business units (i) Sub-station SBU (ii) Manufacturing Tower and Transmission Line SBU. Sub-station SBU focuses on turnkey projects in the Transmission Distribution area strengthening the substation and distribution network and Transmission Line SBU offers a wider portfolio of products and solutions for Transmission and Distribution of Power. 2. The Applicant, as part of its activities under the Project division has entered into following contracts with Power Grid Corporation of India Limited (hereinafter referred to as PGCIL ) as under: (i) Supply of Towers and Transmission line Produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e question / issue placed for determination before Your Honor has to be appreciated in light of the following position of law and its applicability to the activity by the Applicant, discussed hereunder. 3. POSITION OF LAW AND SUBMISSIONS OF THE APPLICANT At the outset, the Applicant would like to refer to Notification 12/2017-Central Tax (Rate) dated 28th June 2017 which exempts various services from the levy of GST. EXEMPTION NOTIFICATION 12/2017-CENTRAL TAX (RATE) 28 TH JUNE. 2017 3.1. Entry no. 18 of the Notification No. 12/2017 dated 28 th June 2017 exempts services by way of transportation of goods by road except inter alia by a GTA. The relevant extract of the entry is reproduced below: S.No. Chapter, Section or Heading Description of Service Rate (per cent.) Condition 18 9965 Services by way of transportation of goods- (a) by road except the services of- (i) a goods transportation agency; (ii) a courier agency; (b) by inland waterways. NIL NIL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as a supply of that particular supply which attracts the highest rate of tax, 3.8. Upon reading of the above provisions, it can be seen that in cases where two or more taxable supplies of goods or services or both are naturally bundled in the course or furtherance of business the supply would qualify as Composite supply. Further, as per Section 8 of CGST Act, the Composite supply would be treated as a supply of Principal supply for the purposes of CGST Act and would be taxed accordingly. 3.9. A Principal supply would mean the predominant element of supply involved in the Composite supply. The Composite supply can, therefore, be broadly divided into two parts (i) Principal Supply i.e. predominant element (ii) other ancillary supplies. 3.10. As observed from above, a supply would qualify as a Composite supply only in cases where such supply consists of two or more taxable supplies. Therefore, it is crucial to analyze the term Taxable supply as defined under Section 2(108) of CGST Act. The same is reproduced hereunder: taxable supply means a supply of goods or services or both which is leviable to tax under this Act; 3.11 Further, the guidance note r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to as the Second Contract ) for the subject package which includes performance of all the services inter alia including inland transportation, insurance, delivery, , unloading, handling, Storage, erection (of all equipment and material) including associated Civil works, detailed survey including route alignment, profiling, tower spotting, optimization of tower locations, soil resistivity measurement and geotechnical investigation (including special foundation locations viz. pile/well foundation locations, whenever applicable and covered under BPS), Check survey, classification of foundation for different type of tower and casting of foundation for tower as per POWERGRID s foundations drawing, tack welding of bolts and nuts including supply and application of zinc rich plant, fixing of insulator strings, stringing of conductors and earth wires/OPGW along with all necessary line accessories; Stringing Power line crossing section under Live Line Condition (wherever applicable); painting of towers supply and erection of span markers, obstruction lights (wherever applicable) for aviation requirements (as required), testing and commissioning of all equipment and materials sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,90,567/-(Rupees Eighty Crores Forty Three Lacs Ninety Thousand Five Hundred Sixty Seven only), or such other sums as may be determined in accordance with the terms and conditions of the Contract. The break-up the Contract Price is as under: Sr.No. Price Component Amount (INR) 1. Transportation, Insurance and other incidental Services 5,95,56,644 2. Installation Charges 78,48,33,923 Total Service Contract Price 80,43,90,567 5. PRAYER In the light of the above background and facts, a Ruling is sought from the Hon ble Authority on the following: Whether GST is leviable on invoice raised by Applicant towards freight and other incidental expenses outsourced by the Applicant? If GST is payable, applicable rate of tax on the said transportation service? 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- 1. Issue for determination- 1.1 The question/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sists of two or more taxable supplies. Therefore, it is crucial to analyze the term Taxable supply as defined under Section 2(108) of CGST Act. The same is reproduced hereunder: taxable supply means a supply of goods or services or both which is leviable to tax under this Act. M/s. Power Grid Corporation of India Ltd (A Govt. of India Enterprise) proclaimed a tender and M/s. Emco Ltd filed tender and finely got the tender of work of tower project Pugalpur Transmission Line Part-V associated with HVDC Bipole link between Western Region (Raigarh, Chhattisgarh) and Southern Region (Pugalpur, Tamilnadu) - North Trichur (Kerala) and made with contract for supply and also service on 08.06.2017. The contract is supply of material, supply of accessories and installation commissioning, etc. Another contract is service contract which includes performance of all services inter alia including inland transportation, insurance, delivery, unloading, handling, storage, etc. Citation:- 1. Advance Ruling No. KAR ADRG 03/2018 Dated: 21st March, 2018 Skill tech Engineers Contractors Pvt Ltd. = 2018 (6) TMI 111 - AUTHORITY FOR ADVANCE RULINGS, KARNATAKA 2. Judgement of Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) (ii) Services contract (referred to as Service contract / Second Contract ); In this case applicant s submission is that it has entered into two separate contracts one for supply of goods and other for supply of services. As regards supply of services applicants has stated that goods that are sold ex-factory basis and thereafter they were transported to the project site for which separate consideration has been decided. As per second contract entered into with PGCIL in respect of various services to be undertaken upto successful commissioning of the project which includes planning, transportation of goods, loading and unloading etc for which seprate invoices and consideration has been stipulated. For the purpose of transportation of goods applicant avails the services of Goods Transport Agency Who transports the goods. Applicant also pays tax under reverse charge basis. Further applicant on back to back basis issues invoices and charges separate consideration for transportation services to PGCIL. It is this transportation charges/freight recovered by the applicant from PGCIL which is the subject matter of present application. Applicants submits that they do not is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -shackles etc.; (ii) Supply of all types of tower accessories like phase plate, circuit plate (where ever applicable), number plate, danger plate, anti-climbing device, Bird guard(where ever applicable); (iii) Supply of Earthwire. (iv) Supply of Tower Earthing. The scope of work under this Notification of Award (NOA) shall also include all such items which are not specifically mentioned in the Bidding Documents and/or your bid but are necessary for successful completion of your scope under the Contract for the construction of Tower Package TW05. +800kV HVDC Raigarh- Pugalur Transmission Line Part-V associated with HVDC Bipole link between Western region (Raigarh, Chhattisgarh) and Southern region (Pugalur, Tamil Nadu)- North Trichur (Kerala) unless otherwise specifically excluded in the Bidding Documents or in this NOA. 2.2 The Notification for Award of Contract for performance of all other activities, as set forth in the Bidding Documents, viz. inland transportation, insurance, delivery, unloading, handling, storage, erection of all equipment and material) including associated civil works, detailed survey including route alignment, profiling, tower spo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anding the break-up of the Contract Price, the Contract shall, at all times, be construed as a single source responsibility Contract and any breach in any part of the Contract shall be treated as a breach of the entire Contract. Second contract is for the supply of services - THIS CONTRACT AGREEMENT No. CC-CS/651-SR1/TW-3573/3/G10/CAII/7293 (also referred to as Services Contract/ the Second Contract ) is made on the - 8th June 2017 This Services contract for Tower Package Two5for + 800RV/HVDC Raigarh- Pugalur Transmission Line Part-V associated with HYDC Bipole link between Western region (Raigarh, Chhattisgarh) and Southern region (Pugalur, Tamil Nadu - North Trichur (Kerala)Contract Agreement No. CC-CS/651-SRVIW-3573/3/G10/CA-II/7293 Scope of work ----- WHEREAS the Employer desires to engage the Contractor for providing all the services inter-alia including inland transportation, insurance, delivery, unloading, handling, storage, erection (of all equipment and material) including associated civil works, detailed survey including route alignment, profiling, tower spotting, optimization of tower locations, soil resistivity measurement geotechnical investi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts to achieve successful completion and taking over of the works under the package by the Employer as per the requirements stipulated in the Bidding Documents. It is expressly understood and agreed by you that any default or breach under the First Contract shall automatically be deemed as a default or breach of this Second Contract also and vice-versa, and any such default or breach or occurrence giving us a right to terminate the First Contract either in full or in part, and/or recover damages there under shall give us an absolute right to terminate this Contract, at your risk, cost and responsibility, either in full or in parts and/or recover damages under this Second Contract as well. However, such default or breach or occurrence in the first Contract , shall not automatically relieve you of any of your obligations under this First Contract. It is also expressly understood and agreed by you that the equipment/ materials supplied by you under this Second Contract , when installed commissioned by the contractor under this Second Contract shall give satisfactory performance in accordance with the provisions of the Contract. From the conjoined and harmonious rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract; As averted above, the contract executed between the parties is for complete execution of the Tower package Tower Package Tw05 for + 800RV/HVDC Raigarh- Pugalur Transmission Line Part-V associated with HVDC Bipole link between Western region (Raigarh, Chhattisgarh) and Southern region (Pugalur, Tamil Nadu) North Trichur (Kerala). As such we do not find any difficulty to arrive at conclusion that the subject contracts are for commissioning of immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of said contracts. The contract before us thus are clearly covered by the definition of works contract as per section 2(119) of GST Act. We further find that composite supplies in the nature works of contract as defined u/s 2(119) is declared as supply of services as per section 7r/w entry 6(a) Of Schedule Il of the GST Act. In view of above discussion we find that the impugned supply of transportation service is not supply of standalone service but integ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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