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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 ..... ontract'? (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? 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 provision under the MGST Act. Further to the earlier, henceforth for the purposes of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Applicant and another member, and there will be a joint bid. ii) In the above scenario, the members of the consortium will separately supply the goods and services i.e. one member will supply the goods and other member will supply the service. iii) In terms of the NIT, the members of the consortium are required to (i) make separate supplies to the ONCC and (ii) can raise invoices upon ONGC directly for their respective supplies. iv) These invoices will be separately and directly paid by the ONGC to the respective member of the consortium. 7. In the aforesaid background a question has arisen as to the applicable rate of GST to be charged on the respective invoices of the members of the consortium which would be raised upon ONGC. The question has arisen inter alia in view of the characterization 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 supplies made by the respective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Natural Gas Corporation or Oil India Limited on nomination basis, or (2) Petroleum operations undertaken under specified contracts, or (3) Petroleum operations undertaken under specified contracts under the New Exploration Licensing Policy, or (4) Petroleum operations undertaken under specified contracts under the Marginal Field Policy (MFP), or (5) Coal bed methane operations undertaken under specified contracts under the Coal Bed Methane Policy 5% 14. The Applicant is desirous of knowing whether such contract shall be considered as a works contract for the purpose of GST and accordingly the rate of tax applicable on such work contract shall apply on each and every invoice raised by them. Alternatively, whether the members of the consortium supplying goods alone can claim concessional rate of tax of 5% in terms of Notification No. 3/2017-lntegrated Tax (Rate) dated 28.06.2017. 15. It is in the aforesaid background, that the instant application is being filed for a ruling from this Hon'ble Authority so as to ascertain the rate of tax applicable for supplies under the terms of the said proposed contract. It is requested that this Hon'ble Authority may issue its ruling (/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) Of the Schedule II to the MGST Act/ CGST Act. * The liability of composite supply has to be determined in terms of Section 8(a) of the MGST Act/ CGST Act. * Works Contract is accordingly considered a 'supply of service in terms of this entry 6(a) of the Schedule II to the MGST Act/CGST Act. * Notification No. 39/2017 - Integrated Tax (Rate) dated 13.10.2017 specifies the rate of tax on supply of works contract service. 3. At the outset the Applicant requests this Hon'ble Authority to confirm if the aforesaid understanding of the Applicant reflects correct appreciation of legal position. 4. In view of the aforesaid, it is prayed that this Hon'ble Authority be pleased to issue the ruling clarifying the legal position generally as also opine upon the specific questions raised by the Applicant as set out above. 5. It is further prayed that this Hon'ble Authority also be pleased to; (a) Grant personal hearing to the Applicant along with an authorized representative. (b) Permit the Applicant to file further/additional submissions in these proceedings; and (c) Pass such other order this Hon'ble Authority may feel appropriate in the factual circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of tax on the transaction proposed to be executed 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. Further, in this regard, the applicant has submitted a sample Notice Inviting Tender (NIT) issued by ONGC (Annexure-3), the 'General Conditions of Contract ("GCC') (Annexure-4) appended to the NIT and Bid Evaluation Criteria (Annexure-5) released by ONGC The 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 break-up of the prices is also required by the ONGC. 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 like to participate not individually but as part of consortium. This consortium would com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) and 3(ix) of the Notification are to this effect. Besides the above, it is also relevant to point 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. The applicant is desirous of knowing whether such contract shall be considered as a works contract for the purpose of GST and accordingly the rate of tax applicable on such work contract shall apply on each and every invoice raised by them. Alternatively, whether the members of the consortium supplying goods alone can claim concessional rate of tax of 5% in terms of Notification No.3/2017-Integrated Tax (Rate) dated 28.06.2017. 3. In point No.16 of the application regarding statement containing the applicant's interpretation of law and/or facts, as the case may be, the applicant's view point and submissions on issues on which the advance ruling is sought, the applicant has stated the following are as under: 1. The applicant submits that it is not clear on the applicable rate of tax in respect of the supplies which will be made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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? In this regard, based on the statements of facts forwarded, the para-wise comments to the queries raised by M/s Technip UK Ltd., are as follows; i) 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 property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract Therefore, it can be seen that a contract wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of the contract for the above specified activities/purposes (i.e. building, construction, fabrication etc.) of any immovable property. Thus, the contract has to in respect of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the said contract would be a Composite Supply, or otherwise, it would be important to decide whether the Consortium would fall under the category of Association of Persons and taxable person as such. However, in order to decide the status of Consortium as an Association of Persons or otherwise, it shall be important to understand the 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. However, nothing in respect of these has been provided by the applicant. Also, as per the annexures, provided by the applicant, the Scope of Work Summary paragraph states that the scope of Work is the Engineering, Procurement, Construction, Installation and Commissioning (EPCIC), of the KG DWN 98-2 Development Subsea Facilities, comprising of: "i) Subsea Production System (SPS), including Subsea Production Tree Systems (Oil and Gas production trees), Water Injection Tree: System, Infield Manifold System (oil and gas production manifolds), Subsea Riser Base Manifold System (gas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1882) or permanently fastened 10 anything attached to the earth. However, from the annexures, including sample Notice Inviting Tender (NIT) and General Clauses and Conditions (GCC) provided; the exact description about the above work i.e. SPS, SURF, LOFS etc is not found and therefore, it cannot be concluded as to whether the above described work (as per the scope of Work Summary provided) is that of immovable property or not. The same is not coming out of the scope of Work. Therefore, the Hon'ble authority may like to direct the applicant to provide detailed description of scope of work so as to enable to determine whether the contract is that of immovable property or otherwise. In view of the above, this office requests the Hon'ble authority to direct the applicant to provide additional details regarding the scope of work as above so as to offer comments on whether (a) the said 'Lump Sum Turn Key' Contract would render it as a 'works contract' under the provisions of CGST Act, 2017.. (b) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Notification No:39/2017 subject to the fulfilment 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. (e) if on providing relevant information the Contract if found to be a Work Contract, member of the Consortium, supplying goods alone, cannot claim concessional rate of tax of 5% in terms of Notification No. 3/2017- Integrated Tax(Rate) dated 28.06.2017 since the supply of such goods would be the part of supplying Works Contract which is a service and the notification No. 3/2017 - Integrated Tax (Rate) applies for the supply of goods alone and the rate as applicable to Works Contract supply shall apply. PRAYER Considering the facts discussed in foregoing paragraphs, the question framed by the applicant in Point No. 14, (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? The answer is thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 provide a mechanism for tracking the quantification of such supplies towards the fulfilment of the subject work contract. The said supplies under the work contract should clearly be distinguishable from any other individual supplies, 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 conso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work 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 to arrive at proper conclusion. Further, M/s. Technip UK Limited (the applicant) has registered address at One St Paul's Churchyard, London, EC4M 8AP-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, M/s. Technip UK Limited does not appear to have any "fixed establishment" in India. As per Section 95(c) of CGST Act, 2017, M/s UK Limited does not satisfy the scope of the term 'Applicant' as they are neither registered with the department nor they have expressed any to take registration. Therefore, the application merits rejection on this account only. The answers of all the questions raised by the applicant depend on the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for integrated development of KG-DWN_98/2 (Cluster-2) Project in East Coast of India took a leap forward with the award of a major work package, viz. SPS+SURF (Subsea Production System + Subsea Umbilical, Risers & amp; Flow lines) to Consortium of BHGE, McDermott and L& T hydrocarbon on 01.10.2018 with awarded cost of Rs. 11,740.86 Crores (USD 1694.45 Million). This tender is one of the biggest integrated (SPS+SURF) tenders awarded globally in recent years. ONGC took a strategic of integrating hitherto separate work packages of SPS and SURF into a single integrated (SPS+SURF) work package tender. This will help to eliminate major interface issues among SFS and SURF packages, resulting in time and cost optimization to the company. This innovative approach by ONGC has been widely appreciated by global major contractors of SPS and SURF. Cluster-2 development will have water depths ranging from 350m to 1,400m and is one of the most capital intensive and technologically challenging projects in East Coast of India. Total peak gas production rate from Cluster-2 is envisaged to be about 16MMSCMD and peak oil production rate of 80,000 BPD. ONGC envisages commencement of first gas product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or making joint bid. Further, members of the consortium will separately supply goods and services. Members of the consortium will raise invoice separately on ONGC and ONGC will pay them separately. On this factual matric applicant has raised many questions as above. During the course of hearing the members of the Bench informed the applicant to submit details as to date and event of the contract including the status of the contract as on the date. In response, Shri. Taru Jain, Adv., for the applicant submitted a written reply on 23.01.2019. As per the written reply, bid was submitted by the applicant to ONGC on 19.02.2018. The impugned contract was awarded by ONGC to the successful bidder i.e. consortium of BHGE McDermott and L & T Hydrocarbon on 01.10.2018. Thus, undisputedly the contract was awarded subsequent to the present ARA. In view of the same, the applicant submits that their application is as per the provisions of Section 95 of the Act and they are desirous of obtaining a ruling on the questions raised by them and on matters specified in subsection (2) of section 97 of the GST Act. From the information made available to this authority vide their second written submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the order, the questions are answered thus - Question: (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 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 Notificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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