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TMI Blog2019 (4) TMI 806X X X X Extracts X X X X X X X X Extracts X X X X ..... services or both by the applicant pertaining to the said tender contract is no more available. ARA application filed by the applicant is infructuous and hence the questions raised in the application are not answered. - GST-ARA-77/2018-19/B-17 - - - Dated:- 29-1-2019 - Shri B. Timothy, Addl. Commissioner of Central Tax, (Member) And Shri B.V. Borhade, Joint Commissioner of State Tax, (Member) PROCEEDINGS (Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as the CGST Act and MGST Act ] by M/s. Technip UK Limited, seeking an advance ruling in respect of the following questions. (a) Whether the terms of the NIT, in particular its self-styled description as 'lump sum turnkey' contract, renders it as a 'works contract as understood under the GST law? (b) In the event the answer to (a) is in the affirmative, does it imply that each and every supply made to ONGC under the contract would be subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ple Notice Inviting Tender ( NIT ) issued by ONGC is enclosed with this application as ANNEXURE - 3. Further, the 'General Conditions of Contract (GCC') appended to the NIT is also enclosed herewith as ANNEXURE - 4. Bid Evaluation Criteria released by ONGC is enclosed as ANNEWRE - 5. 4. For ease of reference of this Hon'ble Authority, in the following paragraphs the Applicant is herein summarizing the relevant clauses and also reproducing appropriate clauses of the NIT and BEC in so far as it is relevant for this application. 5. Tenders issued by ONGC normally relates to erection, commissioning and installation of plant and machinery for ONGC. In terms of the NIT, bids are invited for overall responsibility of entire project. Further, as per the NIT and its accompanying. Annexures, the bidders are required to give an 'overall lump sum price' towards carrying out the obligations under the NIT. A detailed breakup of the price is also required by the ONGC. 6. It is also to point out that the NIT permits a consortium of members to bid as well. In this regard, the following may be noted: i) With respect to certain tenders, the Applicant would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e lump-sum-turnkey contract that will be executed by ONGC will be a works contract or not. 12. Schedule II to CGST Act, deems 'works contract as defined in Section 2(119) as a 'service'. We further understand that Notification No. 39/2017- Integrated Tax (Rate) dated 13.10.2017 'offshore works contract services' for oil and gas exploration and production attract a GST rate of 12 percent. As per this Notification, 'onshore works contract services' for oil and gas exploration and production attract a GST rate of 18 percent. Entry no 3(viii) and 3(ix) of the Notification are to this effect. 13. Besides the above, it is also relevant to point out that Notification No. 3/2017 Integrated Tax (Rate) dated 28.06.2017 may also be applicable in the present case. The said Notification provides for a concessional rate of GST i.e. 5% on specified goods supplied in relation to petroleum projects. Relevant entry of the said Notification is extracted below: S. No. Chapter/ Heading/ Subheading/ Tariff item Description of Goods Rate 1 Any Chapter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, can the members of the claim rate of tax in terms of Notification No. 39/2017 - Integrated Tax (Rate) dated 13.10.2017? (e) In the given facts of the instant application, can the member of the consortium 16. Supplying goods alone claim concessional rate of tax of 5% in terms of Notification No. 3/2017-Integrated Tax (Rate) dated 28.06.2017? 16. It is submitted that the instant application is maintainable. The present Applicant is an eligible applicant as it is desirous of obtaining registration under the CGST Act. The said application relates to a question specified in terms of clause (e) of Section 97 (2) of the MGST Act / CGST Act read with Section 20 of the IGST Act. The Applicant further submits that there is no bar under proviso to Section 98(2) of the MGST Act / CGST Act applicable to the instant application as the question involved in the application is neither pending nor decided in any proceedings in the case of an applicant under any of the provisions of this Act. It is therefore prayed that the instant application may be decided on merits APPLICANT'S INTERPRETATION OF LAW 1. The Applicant submits that it is not clear on the applicable rate of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the event the answer to (a) is in the affirmative, does it imply that each and every supply made to ONGC under the contract would be subject to rate of tax as applicable to a 'works contract'? (c) In the event the answer to (a) is in the affirmative; (A) Will the position change if the members of the consortium raise distinct invoices and ONGC also pays directly to the members? (B) Can it be Said that in such circumstances the individual invoices will not be affected by the overall description as a 'works contract'? (d) In the event the answer to (a) is in the affirmative and only one single rate of tax applies to the entire contract, can the members of the claim rate of tax in terms of Notification No.39/2017 - Integrated Tax (Rate) dated 13.10.2017? (e) In the given facts of the instant application, can the member of the consortium supplying goods alone claim concessional rate of tax of 5% in terms of Notification No.3/2017-Integrated Tax (Rate) dated 28.06.2017? 2. In point No.15 of the application regarding statement of relevant facts having a bearing on the question(s) raised, the applicant has stated the following are as under: M/s. Techni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acterisation of the NIT in consideration. The precise issue is whether in the facts of the NIT described above and taking into account its relevant clauses the NIT (when it is eventually executed into a contract) render it into.(i) a 'works contract under GST law taking into consideration the supplies of both the members of the consortium conjointly, or (ii) the made by the respective members would be treated as distinct supplies for GST purposes. The reasons for this confusion are discussed below. As per Section 2(119) of CGST Act, 2017; works contract is defined as: works contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable properly wherein transfer of property in goods (whether as goods or in some other form is involved in the execution of such contract The above definition may be relevant to determine whether the lump-sum-turn-key contract that will be executed by ONGC will be a works contract or not. Schedule 11 to CGST Act, deems 'works contract' as defined in Section 2(119) as a & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed address at One St Paul's Churchyard, London, ECAM SAP-UK and address for correspondence at Unit No.602, Wing-A, and Unit Nos.601 602, Wing-B-1, Boomerang, Chandivli Farm Road, Near Chandivli Farm Road, Near Chandivli Studio, Andheri (East) Mumbai 400072; Maharashtra, India. Therefore, the applicant does not appear to have any fixed establishment in India. As per Section 95(C) of CGST Act, 2017, M/s. Technip UK Limited does not satisfy the scope of the term 'Applicant' as they are neither registered with the department nor they have expressed any desire to take registration. Therefore, the application merits rejection on this account only. Further, the basic issue to be decided in the application is to (a) Whether the terms of the NIT, particular its self-styled description as lump sum turn key' contract, renders it as a 'works contract' as understood under the GST law? (b) In the event the answer to (a) is in the affirmative, does it imply that each and every supply made to ONGC under the contract would be subject to rate of tax as applicable to a works contract ? (c) In the event the answer to (a) is in the affirmative; (A) Will the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness, one of which is a principal supply. Thus, the composite supply has to be provided by a taxable person. As per clause 107 of Section 2 CGST Act, 2017, taxable person means a person who is registered or liable to be registered under Section 22 or Section 24. Further, as per clause 84 of Section of the CGST Act, 2017, person includes - a) An individual; b) A Hindu Undivided family; c) A company; d) A firm; e) A limited Liability Partnership; f) An association of persons or a body of individuals, whether incorporated or not, in India or outside India; g) Any corporation established by or under any Central Act, State Act or Provincial Act or a Government company as defined in clause 45 of Section 2 of the Companies Act, 2013 918 of 2013); h) Any body corporate incorporated by or under the laws of a country outside India; i) A co-operative society registered under any law relating to co-operative societies; j) A local authority; k) Central Government or a State Government; l) Society as defined under the Societies Registration Act, 1860 (21 of 1860) m) Trust; and n) Every artificial juridical person, not falling withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice Support Base, located in Kakinada, India. iv) Equipment testing, System integration Testing (SIT), pre-commissioning, commissioning, and start-up support are also contained in the scope of Work. v) Quantity for each item can be found in Pricing Format document provided by COMPANY. Further, as already stated above, to be able to consider a contract as Works Contract as defined under clause 119 of Section 2 of CGST Act, 2017, the contract has to be in respect of any immovable property involving transfer of goods in its execution. The term immovable property has not been defined under the CGST Act, 2017 and the Rules made thereunder. However, reference can be had to Section 3(26) of General Clauses Act, 1897, which defines immovable property as follows: immovable property shall include land, benefits to arise out of land, and things attached the earth, or permanently fastened to anything attached to the earth. As per Section 3 of the Transfer of Property Act, 1882, attached to the earth means (a) rooted in the earth, as in the case of trees and shrubs: (b) imbedded in the earth, as in the case of walls or buildings: or (c) attached to what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r alia, all forms of supply of goods or services or both such as sale, transfer, barter, exchange etc. made or agreed to be made for a consideration by a person in the course or furtherance, of business. Further, as per Section 8(1) of CGST Act, read with Section 5(1) of GST Act, 2017, there shall be levied a tax on intra-state for inter-state) supplies of goods or services or both at specified rates. Therefore, if on providing relevant information the contract is found to be a Works Contract and the subject consortium found to be meriting as 'Association of Persons', (involving transfer of goods as well) then it will be treated as a supply of services in terms of Schedule - I to CGST Act, 2017, even if the members of the consortium raise distinct invoices and ONGC also pays directly to the member, the supply shall be that of Works Contract alone and tax shall be levied on supply of Works Contract. Individual members' invoices, however, may make supply of goods and services independently of the contract, however, they shall be required to differentiate in their invoices, whether the supply is towards the fulfilment of the subject work contract and they should also p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to rate of tax as applicable to a works contract ? The answer is, This question stems from question (a). Therefore, if on providing relevant information the contract is found to be a Works Contract and the subject consortium is found to be meriting as 'Association of Persons' then, the supplies made under the contract shall attract the rate applicable to Works Contract Supply since the Works Contract, which is a composite supply, is to be treated as a supply of services in terms of Schedule II to the CGST Act, 2017. Therefore, this office prays Hon ble Authority to direct the applicant to provide additional relevant details of the scope of work and the contractual framework of the members of the consortium detailing its composition and contractual arrangements amongst the participating members of the consortium, the existence of some common management, the arrangement of sharing profit, the composition of the consortium, roles of the applicant and members of the consortium in the course of the supply etc.: as stated in para 4 above, (C) In the event the answer to (a) is in the affirmative; (A) Will the position change if the members of the consortium raise distinct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lfilment of the Criteria and conditions laid down in the said notification. The position shall not change even if the members of the consortium raise distinct invoices, the supply shall remain that of Works Contract and the rate of tax in terms of notification no. 39/2017- Integrated Tax (Rate) dated 13.10.2017 will apply. Therefore, this office prays Hon'ble. Authority to direct the applicant to provide additional relevant details of the scope of work and the contractual framework of the members of the consortium detailing its composition and contractual arrangements amongst the participating members of the consortium, the existence of some common management, the arrangement of sharing profit, the composition of the consortium, roles of the applicant and members of the consortium in the course of the supply etc. as stated in para 4 above. (e) In the given facts of the instant application, can the member of the consortium supplying goods alone claim concessional rate of tax of 5% in terms of Notification No.3/2017 Integrated Tax (Rate) dated 28.06.2017? The answer is, If on providing relevant information the Contract if found to be a Work Contract, member of the Consortiu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicant on 23.01.2019. Applicant submitted that, this is in reference to hearing dated 09 January 2019 before your good self in the captioned matter. During the hearing, we were directed to submit the due dates of invitation to tender and the date of award of the tender. In response to this query, we would like to state that the bid was submitted by us on 19 February 2018. As regards the second part of the query, we are enclosing as Annexure - 1 the printout of ONGC website in respect of this tender which clearly indicates that the Contract was awarded on 01 October 2018. This is clearly after the filing of the present application before this Hon'ble Authority on 18 September 2018. In our respectful submission, since the award of contact is subsequent to our application, as on the date of filing of the application it was indeed a proposed transaction. In this respect would like to point out the decision of the Hon'ble Delhi High Court in the case of Netapp B.V. v. Authority for Advance Ruling (2013) 357 ITR 102 (Del) = 2012 (8) TMI 739 - DELHI HIGH COURT it has been held that the admissibility of the application is to be examined on the basis of the cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mumbai East Commissionerate appeared and submitted written submissions. The application was admitted and called for final hearing on 09.01.2019, Sh. Tarun Jain, Advocate along with Ms. Divya Mahajan, C.A., appeared and argued as per submissions. In the course of hearing Applicant was asked to submit date and events of the contract including final award of the contract. Jurisdictional Officer did not appear. The additional information called during the course of hearing, was made available by the applicant on 23.01.2019. Both the parties were heard. 05. OBSERVATIONS We have gone through the facts of the case and written submission given by both the parties. The issue put before us is in respect of a proposed transaction which would be on the lines thus- The Applicant is an unregistered person under the provisions of the GST Act. The present application has filed before us to seek clarity on the applicable rate of tax on the transaction proposed to be executed by them in relation to tenders issued by the Oil and Natural Gas Corporation of India Ltd. (ONGC) for executing erection, commissioning and installation work on turnkey basis for petroleum operations. Applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n matters or on questions specified in sub-section (2) of section 97 or sub-section (1) of section 100, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant; From a perusal of the provisions relating to Advance Ruling, it is seen that Advance Ruling means a decision provided by this authority to an applicant on specified questions and matters in relation to the supply of goods or services or both or being undertaken or proposed to be undertaken by the applicant. Thus the broad objective for setting up this mechanism is to- i). provide certainty in tax liability in advance, in relation to an activity proposed to be undertaken by the applicant; ii) attract Foreign Direct Investment (FDI); iii) reduce litigation; iv) pronounce ruling expeditiously in transparent and inexpensive manner; An Advance Ruling, thus helps the applicant in determining the liability to pay GST. It also brings certainty in determining the tax liability with no litigation as the ruling is binding on the Government authorities the applicant. On the contrary we find in the present case that the tender contract is awarded to a cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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