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TMI Blog2019 (9) TMI 877X X X X Extracts X X X X X X X X Extracts X X X X ..... on is specifically made to any 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 Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST Act. 2. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- * "Tejas Constructions & Infrastructure Private Limited (herein after referred as "contractor") is providing construction service to Shri Gajanan Sahakari Soot Girni Maryadit (herein after referred as "contractee"). * Work order was issued by contractee on 16/03/2013 with No. Gajanan/wo out no/238/2013 & the agreement for work was entered on 25.032013. The time limit for completion of work was 15 months from the date of agreement. However, the agreement was extended with further 6 months vide letter dated 11/09/2017 with. Ref no. 102/1718 (Work Order, Agreement & Extension Letter are attached herewith as Ann 1,2 & 3) * Contractee, desirous of constructing 25000 Spindle Spinning Mills Building Construction of Main Factory Building) has caused Drawing and Specifications describin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sues were clarified, under sr.no. 1 under clarification, it is clarified under serial no 1 .2, "It is further clarified that while calculating the value of the supply made by the component manufacturer, the value of moulds and dies provided by the OEM to the component manufacturer on FOC basis shall not be added to the value of such supply because the cost of moulds/dies was not to be incurred by the component manufacturer and thus, does not merit inclusion in the value of supply in terms of section 15(2)(b) of the Central Goods and Services Tax Act, 2017". Analysis: After perusing above provisions & on the basis of agreement, we are of the view that: 1. While issuing the certificate to issue the Invoice the Architect is deducting the value of material supplied after charging GST on the contract value as per the percentage of work completion. The value of material is not deducted from the contract value but after charging GST on the contract price. 2. As per section 15 of the CGST Act, 2017, the value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Gajanan Sahakari Soot Girni Maryadit Yeat (Pimpalner) is required to supply Cement, Mild Steel, Tor Steel and Structural Steel to M/S Tejas Construction and Infrastructure Pvt. Ltd. for the contract work at the rate prescribed. The materials supplied to M/s. Tejas Construction and Infrastructure Pvt. Ltd. by the contractee are essential components for supply of "Works Contract Service". Irrespective of whether the materials supplied if actually free of cost or not, the value necessarily needs to be added to determine the taxable base for the construction contractor. Also, the FOC supply of materials by the contractee to the contractor, appears to be liable to be treated as "supply without consideration", and thus, leviable to GST. In this regard, reliance is placed on Section 15(2)(b) of the CGST Act, 2017 which provides for inclusion of FOC supply in the transaction value, without any exception. The above relevant section is as follows: Section 15(2): The transaction value under sub-section (1) shall include - (a) ............... (b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both. We find that the concerned materials are essential components for supply of construction service by the applicant to the contractee. Section15 (2) (b) very clearly states that the supplier i.e the applicant in this case, is liable to pay in relation to such supply (supply of concerned materials by the contractee in this case) if the cost of the same has been incurred by the recipient of the supply (the contractee in this case) and the cost is not included in the price actually paid or payable for the goods or services or both. We find that the cost the materials supplied by the contractee is included in the value of the entire contract and GST is being paid on the entire value of contract and hence the applicant is discharging GST on the value of materials supplied by the contractee. In the subject case, the material is supplied by the contractee and therefore the question raised by the applicant as to whether they can charge GST on the same is irrelevant. The applicant, on this issue of sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply of Construction service i.e. Construction of Main Factory Building. As per section 15- any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both shall be included in the value of taxable supply. In this view of the matter, the amount certified by the architect for the invoice to be issued before deducting the value of Cement, Mild Steel, Tor Steel and Structural Steel shall be the value of supply for the purpose of Levy of tax as per section 15 of the Act. 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-03/2019-20/B-90 Mumbai, dt. 20/08/2019 For reasons as discussed in the body of the order, the questions are answered thus - Question 1:- Whether the contractor can charge GST on the value of material supplied by the recipient of service? Answer :-Not answered in view of discussions made above. Question 2:- What should be the m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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