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TMI Blog2019 (1) TMI 1367X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Authority for Advance Ruling. - A.R.Com/9/2018 - - - Dated:- 6-6-2018 - S/Shri V. Srinivas, Member (Central Tax) And J. Lakshminarayana, Member (State Tax) ORDER M/s. R. Vidyasagar Rao Constructions, Plot No. 98 99, Lumbini layout, near Euro School, Gachibowli, Hyderabad-36 (GSTIN No. 36AAGFR6627L12Q) has filed an application in Form GST ARA-01 under Section 97(1) of TGST Act, 2017 read with Rule 103 of CGST/TGST Rules, 2017 and sought advance ruling on the following issues: The combination of services of excavation of sand including loading with machinery at reach, formation of Ramps and maintenance of Roads, transportation charges for the tractors/ tippers of sand from reach to stockyard and loading cost of sand from stockyard to lorries, is whether Works Contract or Composite Supply and the rate of tax applicable on the consideration received there for. 2. The applicant submitted the application in Form GST ARA-01 and Statement containing the applicant's interpretation of law relevant facts and requested for advance ruling on classification of services rendered by them and rate of tax applicable. They have submitted a copy of Chall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e required to pay CGST 2.5% + SGST 2.5% = 5% as given in the CBEC Notification No. 31/2017, dated 13-10-2017 issued in G.O. Ms No. 253, Revenue (CT-II) department dated 23-11-2017. (g) The applicant is also under strong belief that the activities they are rendering to the contractee amounts to composite services in which the transportation part is predominant and therefore also the rate would be 5% GST (2.5% CGST+2.5% SGST). 4. The applicant submitted copy of the Contract Agreement No. 08-TSMDC/Damerakunta-III/Annaram.Sand/Legal/2017, dated 18th March, 2017 entered between Telangana State Mineral Development Corporation Ltd., a Company registered under Companies Act, 2013 and M/s. VidyaSagar Rao Constructions (i.e. the applicant). I. Opinion expressed by the member representing Central Tax: 1. A perusal of the said Agreement dated 18-3-2017 entered between Telangana State Mineral Development Corporation Limited, a Registered Company under the Companies Act, 2013 (TSMDC for brevity) and M/s. R. VidyaSagar Rao Construction, a registered partnership firm dealing with mining business and having its place of business at Yellareddyguda, Hyderabad (contractor/applicant fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of roads shall be borne by the contractor. 2. Thus it is very clear from the agreement entered between the contractor and the contractee, the main work to be rendered by the contractor involves excavation of sand at submergence areas of Annaram Barrage and transport the same quantity of sand to nearby stockyard and again loading of sand into lorries at stockyard. Laying of roads from stockyard to nearby connectivity roads for plying of lorries is incidental to transport of sand excavated from the submergence areas of Annaram Barrage to nearby stockyard. Hence the claim made by the applicant that the activity rendered by them falls under works contract is not tenable. 3. The service supplied by the applicant is a 'composite supply'. As per Clause (30) of Section 2 of the CGST Act, 'Composite supply' is defined as: composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply ; The three components ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on ships, vessels including bulk carriers and tankers) used in supplying the service has not been taken [Please refer to Explanation no. (iv)] (iii) Services of goods transport agency (GTA) in relation to transportation of goods (including used household goods for personal use). Explanation. - goods transport agency means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called. 2.5 Provided that credit of input tax charged on goods and services used in supplying the service has not been taken [Please refer to Explanation no. (iv)] (iv) Transport of goods in containers by rail by any person other than Indian Railways. 6 - (v) Goods transport services other than (i), (ii), (iii) and (iv) above. 9 - 6. The Tariff Heading 9965 (Goods transport services) specified against Sl. No. 9 covers five categories of services of goods transport. The claim of the applicant is that their composite supply falls under 'Transport of goods in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tender Document Reference: TSMDC/SAND/EXC/Damerakunta-III/Annaram/2016, dated 29-12-2016 Excavation of Sand 560000CBM of Block III, Damerakunta-III over an extent of 52.0 Ha from Submergence area of Annaram Barrege, Kaleswaram Project and transport the same to the nearby Stockyard and again loading of the same into the Lorries at Stockyard . Page 1. The Corporation upset price is ₹ 100/per CBM (Rs.30 for loading charges for machinery at Reach, ₹ 7.50 for formation of Ramps and maintenance of Roads, ₹ 32.50 for transportation charges for the tractors/ tippers of sand from reach to stockyard and ₹ 30 for loading cost of sand from Stockyard to lorries ... Page 8. At the cost of repetition, the upset price ratios are drawn hereunder as per the above tender document: Loading charges for machinery at reach: 30% Formation of ramps, formation and maintenance of roads: 7.50% Charges for transportation of sand through tractors/tippers from reach to stockyard: 32.50% Loading cost of sand from Stockyard to lorries: 30% Agreement Dated 18-3-2017: Contractee: TSMD Corporation - Contractor: R. Vidya Sagar Rao - Partnership firm) Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union territory or local authority, as the case may be 2. Secondly, he states the supply being composite supply it is Goods Transportation supply on vessel as per notification No. 11/2017, dated 28-6-2017 as per G.O.Ms No. 110, Revenue (CT-II) Department, dated 29-6-2017, which is as under : Sl. No. Chapter, Section or Heading Description of Service Rate (percent.) Condition (1) (2) (3) (4) (5) 9 Heading 9965 (Goods transport services) (i) Transport of goods by rail [other than services specified at item no. (iv)]. 2.5 Provided that credit of input tax charged in respect of goods in supplying the service is not utilised for paying central tax or integrated tax on the supply of the service (ii) Transport of goods in a vessel. 2.5 Provided that credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mong them in fact could be gathered from the tender document/agreement as per which the following are they: 1. ₹ 30 for loading charges for machinery at Reach, 2. ₹ 7.50 for formation of Ramps and maintenance of Roads, 3. ₹ 32.50 for transportation charges for the tractors/ tippers of sand from reach to stockyard 4. ₹ 30 for loading cost of sand from Stockyard to lorries = Summed up to ₹ 100/- CBM of work done. 5. As a matter of fact out of ₹ 100/- no amount is apportioned in the name of excavation as such and the same is to be ascertained out of ₹ 30/- referred for loading charges for machinery at reach i.e. source where from the sand acquired. Such fact makes it clear that out such ₹ 30/- only a portion whatsoever is to be apportioned excavating sand from the source and the rest such would remains to be for loading the sand so culled out to the machinery available for transportation. 6. Therefore the first part being the excavation and loading work in this contract. This activity to be started with laying ramps and roads to enable the containers in which the excavated sand is to be loaded reach the resource of sand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per his argument at the time of hearing the case that the entire contract is WCT is not tenable since the intention between the recipient and the provider is not to see the emergence of an immovable property i.e. ramps and roads either internal or external whatsoever but the intention is to see that the sand stagnated at one place be shifted to other place by means of transportation of the sand. So that laying the ramps and roads came into picture but not shifting the sand from one place to other brought such ramps and roads into picture, if the entire contractual obligations are overviewed. 15. In view of the above factual matrix, the above contract is a composite contract but not exclusively works contract service as defined under Section 2(119) and as per paragraph No. 6(a) of Schedule II to the Act. 16. Since the above contract is held to be composite contract, the request of the applicant what is the rate of tax on it is to examined as under: 17. In a composite supply the taxability under the scheme of the Act is on the basis of principle supply 18. Sub-section (30) of Section 2 of the TGST Act, 'Composite supply' is defined as: composite supply mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmined in the following manner, namely: - (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and (b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax. 25. A careful reading of the above Section and keeping in view of the above facts and circumstances of the case of the appellant the principle supply in this composite supply is identified as 'transportation of goods'. 26. As per Notification No. 11/2017, dated 28-06-2017 the following are the tax rates for rendering the above service. 27. The Sl. No. 9 of the Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 is extracted hereunder for ready reference: Sl. No. Chapter, Section or Heading Description of Service Rate (percent.) Condition (1) (2) (3) (4) (5) 9 Heading 9965 (Goods transport services) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e so, vessel include bulk carriers and tankers any goods used for transportation of other goods. Thus the meaning of vessel for the purpose of this entry stands as container which contains other goods which carries the goods from one place to other. 34. The difference between enumeration (ii) and (v) above in the above notification is the former carry the disentitlement of input tax credit and the latter carries no such disentitlement. 35. In view of the above discussion, and the service rendered by the applicant supply with the components of services viz, (i) Laying internal ramps and roads, (ii) excavation of sand at submergence areas of Annaram Barrage, (iii) transportation of such excavated sand to stockyard and (iv) loading of the sand into lorries at the stockyard; and laying and maintenance of external roads within the price of ₹ 74/- per CBM is a composite supply and the principal supply being transportation of sand 'scope of work' of the agreement between the applicant and TSMDC, the services rendered by the applicant are classifiable as Goods Transporting by Vessel and GST tariff and rate of tax applicable is 2.5% CGST + 2.5% SGST subject to condit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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