9911796707
TMI Blog2019 (11) TMI 1365X X X X Extracts X X X X X X X X Extracts X X X X ..... 600040 (hereinafter called the Applicant or TPL) are engaged in the process, design, detailed engineering, procurement, shop fabrication & inspection, supply, storage, site fabrication, erection, inspection & commissioning of Integrated Cryogenic Engine & Stage Test Facility. They are registered under GST vide GSTIN 33AAACT4119L1ZF. They have preferred an application seeking Advance Ruling on. 1. Whether supply of Engineering, Procurement & Construction (EPC) contract for establishment of Integrated Cryogenic Engine & Stage Test facility (ICET) where in both goods and services are supplied can be construed to be a Composite Supply in terms of Section 2(30) of CGST Act, 2017? 2. If Yes, Whether the Principal Supply in such case can be said to be "Establishment of Fluids Servicing System (FSS)" can be taxable at 5% GST vide notification No. 45/2017 -Central Tax (Rate) dt 14th November, 2017? 3. If Principal Supply taxable at 5%, whether the entire transaction in the contract is taxed as per the rate applicable to Principal Supply? The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted the copy of Challan evidencing payment of application fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S.No. Description Amt (Rs. in Crs) Payment in INR equivalent to the extent of USD Total in INR % of contract price In USD In INR (Base date considered for conversion as on 02.11.2018 1. Materials underCEAS 832278000 832278000 11.63 2. Services underCEAS 529656000 529656000 7.40 3. Materials underSMS 354946000 354946000 4.96 4. Services under SMS 110868000 110868000 1.55 5. Materials under FFS 1774429000 21500000 1565630000 3340059000 46.68 6. Services under FFS 496459000 150000 10923000 507382000 7.09 7. Materials under S&FS 123332000 123332000 1.72 8. Services under S&FS 71845000 71845000 1.00 9. Materials underICDAS 1199965000 1199965000 16.77 10. Services under ICDAS 85638000 85638000 1.20 5579416000 21650000 1576553000 7155969000 100 ISRO will reimburse applicable taxes & duties at actual for the materials which are directly consigned to IPRC, Mahendragiri and for the services provided by them against documentary evidence. For the supplies covered under USD po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to 'harness space technology for national development while pursuing space science research and planetary exploration'. For the purpose of Notification No.45/2017-Central Tax (Rate) dt. 14th November, 2017, "Public funded research Institution" means a research institution in the case Which not less 50% of the recurring expenditure in met by the Central government or the Government or the Government of any state or the administration of any Union Territory. In the present, total funding to ISRO will be allocated through Union budget of Government of India, therefore, it is covered under Public funded research Institution. 2.7 As per the definition of "Composite Supply" the essential conditions for a supply to qualify as composite supply can be - (a). Two or more supplies of goods or services or both; (b) Taxable supplies should be naturally bundled; (c) The taxable supplies should be supplied in conjunction with each other; and (d) One taxable supply should be principal supply. In such a case, the supply which is the principal supply is treated as main supply and the entire transaction is taxed as per the principal supply. It is evident that, the Contract inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... main supply of good and are only incidental. The principal supply will be provision of Civil Electrical and Air conditioning system, Structural and Mechanicals system, Facility Fluid System, Safety and Fire protection system, Instrumentation, control and data acquisition system and not provision of works contract Service. And the principal supply or dominant intent is provision of goods which constitutes 82% in the contract; therefore entire contract shall be taxable @ 5% GST. In view of the both the above conditions are met by the Contract, Supplies undertaken in the contract covered under Sl.No. 1 of Notification No. 45/2017-C.T.(Rate) and the definition of Composite supply, Rate of GST applicable is @ 5% for the entire value of the contract. 2.9 In light of the above, the applicant has sought ruling on whether their supply to the ISRO under contract for establishment of ICET can be construed to be a Composite supply; on the applicability of Notification No. 45/2017 Central Tax (Rate) dated 14/11/2017 to the supply provided to ISRO; and the rate of GST applicable to the entire transaction. 3. The applicant was heard on 21.05.2019. The applicant appeared and stated that they hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the overall project management of the contract and the performance of ICET and directly accountable to IPRC for complete fulfillment of all the contractual obligations including those of the Co-Contractor, besides being responsible for execution of the systems under their own scope as per clause 1.2.3 of Volume 1 of the contract agreement. * The Scope of Contract as per clause 1.3 of the agreement are as follows: * Review of Front - End Engineering Design (FEED) work done by the Department * Risk analysis * Detail engineering, supply of materials, installation, testing and commissioning of following systems: a. Civil, Electrical and Air conditioning system b. Structural and mechanical system c. Facility fluid system i. Gaseous Hydrogen system; ii. Gaseous Helium system iii. Gaseous Nitrogen system iv. DM Water system v. Cooling water system vi. Jacket Vacuum system & Test-article vacuum pumping system d. Safety and Fire protection system e. Instrumentation, Control and data acquisition system o Transportation of materials delivered by the co-contractor or their subcontractor from Chennai seaport or Chennai / Thiruvananthapuram airport to sit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AS per Para 1.5.1.2 of Volume 1 of the contract, the contract price is on "Lump-sum Turn-KEY) basis for the functional scope of the contract. It is on firm & Fixed price basis. The payment schedule indicates Payment pro-rata to the percentage of materials and service both together and the entire amount stands paid on commissioning the established ICET and submission of the necessary documentary proof. From the listed summary, it is seen that the applicant supplies Goods and Services as required in the contract. It is to determine if the supply of goods and services by the applicant under contract to IPRC can be considered as a composite supply. 6.3 Section 2(30) of CGST Act, 2017 defines Composite Supply 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; In the case at hand, the applicant supplies civil electrical and Air conditioning system, structural and Mechanical system, Facility Fluid System, safety and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y' by means of civil works. It involves the transfer of ownership of these equipment, instruments, consumables, civil and electrical goods involved in the erection, construction and installation of these systems. The Integrated Cryogenic Engine & Stage Test Facility itself is an immovable structure erected at the site in Mahendragiri. Hon'ble Supreme Court in the case of Commissioner of C.Ex. Ahmedabad Vs. Solid & Correct engineering works [2010 (252) E.L.T. 481 (S.C.)] = 2010 (4) TMI 15 - SUPREME COURT, has stated "33. It is noteworthy that in none of the cases relied upon by the assesse referred to above was there any element of installation of the machine for a given period of time as is the position in the instant case. The machines in question were by their very nature intended to be fixed permanently to the structures which were embedded in the earth. The structures were also custom made for the fixing of such machines without which the same could not become functional. The machines thus becoming a part and parcel of the structures in which they were fitted were no longer moveable goods. It was in those peculiar circumstances that the installation and erection of m ..... 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