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TMI Blog2021 (4) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... d installation of waste-water pretreatment plant qualifies as Composite supply of Works Contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017. The service of setup of ZLD plant is supplied to the KPCL which is Government Entity. Thus all the conditions of Entry No.3(iii) of the Notification No.11/2017 - Central Tax (Rate) dated 28.06.2017 as amended by the Notification No.20/2017- Central Tax (Rate) dated 22.08.2017 and Notification No. 31/2017 - Central Tax (Rate) dated 13.10.2017 are satisfied. Hence the services of setting up of ZLD plant supplied to KPCL by the applicant are classified under SAC 9954 and liable to tax at the rate of 6% under the CGST Act, 2017 and similarly taxable at the rate of 6% under the KGST Act, 2017. Whether the O M of said ZLD plant for a period of 5 years qualifies to be a composite supply of works contract or not? - HELD THAT:- The O M service is inclusive of supply of spares as well as maintenance service, which are taxable supplies. Supply of spares arises consequent to maintenance and hence the said supply is ancillary to the supply of service of maintenance of the ZLD plant. Thus these taxable suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a period of 5 years. The applicant has to carry out the work as detailed in the letter of award issued by the KPCL. In view of the above, the applicant had sought Advance Ruling in respect of the following question: Whether the service of supply, erection, commissioning and installation of waste-water pre-treatment plant followed by operation and maintenance of such plant attracts rate 12% of GST in terms of notification No. 11/2017 Central Tax (rate) Dated 28/ 06/2017? APPLICANT S INTERPRETATION OF LAW 4. The applicant contends that the supply, erection, commissioning and installation of ZLD plant on turnkey basis including provision of O M services for a period of 5 years qualifies to be Composite supply of works contract under Sl. No. 3 (iii) of Notification No. 11/2017-Central Tax (Rate) dated June 28, 2017 and would attract GST @ 12%. The relevant extract of the Notification is provided hereunder for reference: Sl. No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of services Rate (per cent.) Condition 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch supplies of goods / services are naturally bundled; c. Such supplies of goods / services are made in conjunction with each other; and d. One of the supplies of goods / services is principal / predominant 7. The applicant submitted that in the instant case they are supplying the goods for erection of ZLD plant along with the services of installation, erection, commissioning of the said plant including operation and maintenance plant for 5 years after handing over ZLD plant to KPCL. Thus, they are supplying combination of both goods and services for erection of ZLD plant and satisfy the first condition. 8. The applicant further submitted that the phrase naturally bundled is not defined under the GST law or rules framed thereunder. Accordingly, a reference can be made to principles of the erstwhile Service Tax law where a similar concept of naturally bundled services prevailed. As per the Education Guide issued by Central Board of Indirect Taxes and Customs ( CBIC ) If various elements of a bundled service are naturally bundled in the ordinary course of business, it shall be treated as provision of a single service which gives such bundle its essential chara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that though the parties had entered into separate agreements for the supply of materials and the rendering of services of erection and installation, the same were integrally connected and interdependent. Accordingly, it held that the entire activity of setting up a solar power plant was a composite supply in terms of Section 2 (30) of the CGST Act. b) In the case of Giriraj Renewables Pvt. Ltd. 2018 (17) GSTL 156 (App. AAR-GST), the Karnataka AAAR held that the supply of components of solar power plant and services of design, erection, installation etc. are naturally bundled and hence, the same can be treated as a composite supply . Similar view was also taken in the following cases; c) In Re: Premier Solar Systems (P) Limited, 2019 (23) GSTL 234 (AAR-GST). d) In Re: NR Energy Solutions India Pvt. Ltd. 2019 (26) GSTL 280 (AAR-GST) e) Further, reliance is placed on the settled principle of law that A contract must be read as a whole . In M.O.H. Uduman and Ors. v. M.O.H. Aslum, AIR 1991 SC 1020, the Apex Court held that it is settled canon of construction that a contract of partnership must be read as a whole and the intention of the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, repair, maintenance or commissioning of any immovable property. The term immovable property is not defined under the CGST Act, hence reference shall be made to allied laws dealing with immovable property. Section 3 (26) of the General Clauses Act, 1897 defines immovable property to include land, benefits arising out of land, and things attached to the earth, or permanently fastened to anything attached to the earth. Further, Section 3 of the Transfer of Property Act, 1882 defines the term attached to the earth to mean: a. Rooted in the earth, as in the case of trees and shrubs; b. Embedded in the earth, as in the case of walls or buildings; and c. Attached to what is so embedded for permanent beneficial enjoyment of that to which it is attached. Further applicant places reliance on the some of the judgements to determine the tests for classifying any property as immovable property. I. In the case of Quality Steel Tubes (P) Limited v. CCE, UP, 1994 (12) TMI 75 SC, the assessee carried out work of setting-up of tube mill in several phases. The tube mill consisted of several machines and components which after installation got embedded to earth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e supply of works contract ... by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of ... water treatment and such service of works contract is deemed as supply of service and bears the relevant SAC of 9954 as per Entry 6(a) of Schedule II of the CGST Act. 13. The applicant submitted that SI. No. 3(iii) of the Rate Notification specifies the Composite Supply of Works Contract Service to a Government Entity attract GST @ 12% on such supply. Clause (x) of the Rate Notification defines Government Entity means an authority or a board or any other body including a society, trust, corporation which is: (i) set up by an Act of Parliament or State Legislature; or (ii) established by any Government , with 90% or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government, Union Territory or a local authority . Thus, applicant submitted that the KPCL is a wholly owned subsidiary of Government of Karnataka established for the functions of transmission of power in the entire State of Karnataka and also construction of stati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply, erection, commissioning and installation of a waste-water treatment plant (ZLD plant) to KPCL along with the operation and maintenance of said plant for 5 years. 19. The applicant is supplying both goods as well as services for the erection, commissioning and installation of ZLD plant. Further applicant was also awarded O M services for a period of 5 years. In the instant case, the core issue before us to decide is whether supply of erection, commissioning and installation of ZLD plant along with O M services for a period of 5 years qualifies to be Composite supply of works contract or not, under Sl. No. 3(iii) of Notification No. 11/2017-Central Tax (Rate) dated June 28, 2017 as amended by the notification 20/2017 Central Tax (Rate) dated 22/08/2017 and notification No. 24/2017 Central Tax ( Rate) dated 21/09/2017 and would attract GST @ 12%. The relevant extract of the Notification is as under: Sl. No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of services Rate (per cent.) Condition 3. Heading 9954 (Cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 . 22. It could be inferred from the above definition of the works contract that any contract for erection, installation, commissioning, repair and maintenance of immovable property wherein transfer of property in goods ( whether as goods or in some other form ) is involved in the execution of such contract qualifies as works contract transaction as per entry No.6 (a) of the Schedule II. In the instant case applicant has undertaken erection, installation, commissioning of the ZLD plant which is permanently fastened to earth and hence the ZLD plant becomes immovable property. Construction, supply of relevant goods, assembly, commissioning of such immovable structure qualifies as a works contract transaction. 23. Notification 31/2017 Central Tax (rate) dated 13/10/2017, vide clause (x), defines Government Entity to mean an authority or a board or any other body including a society, trust, corporation which is: (i) set up b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing up of ZLD plant (includes erection, commissioning installation) and also for O M for 5 years after handing over ZLD plant to KPCL; they are involved in supply of both goods as well as services, which are taxable and hence they satisfy the condition of supply of two or more taxable supplies. b) The KPCL through contract entrusted the responsibility of procuring materials required for set up of ZLD plant for which they are involved in supply of materials along with provision of erection, installation, civil works and O M of the said plant. The applicant, quoting the Education Guide issued by CBIC wherein the concept of naturally bundled services is narrated, claims that their activity involves several taxable supplies of goods services which are naturally bundled in the ordinary course of business and hence the second condition is fulfilled. c) The KPCL has awarded the contract for the setup of ZLD plant and O M services of ZLD plant for 5 years with the intention to take the services of applicant in a package. Though separate consideration for setup of ZLD plant and O M service is mentioned in the LOA it doesn t change the nature of supply from being a composite ..... X X X X Extracts X X X X X X X X Extracts X X X X
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