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TMI Blog2022 (11) TMI 784X X X X Extracts X X X X X X X X Extracts X X X X ..... fer or property in goods. Whether a supply is a works contract or not is dependent on whether the plant or device or property is a movable or immovable property? - HELD THAT:- Under the General Clauses Act 1897 the term immovable property has been defined under Section 3(26) as immovable property shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth - According to definition of works contract under GST regime, the supply of goods and services are done by the supplier simultaneously which is for immovable property. Hence in works contract supply of goods and services together is compulsory. The activities to be undertaken by the applicant in respect of Operation Maintenance of Mansi Wakai dam is a single supply and cannot be treated as distinct supplies, the given work is a contract for improvement of the pumping system under the Mansi Wakai project, wherein transfer of property in goods in the form of new pumping machinery and mechanical/electrical equipment shall be involved in the execution of such contract. It is understood that the properties for which improvement works has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both. A. SUBMISSION AND INTERPRETATION OF THE APPLICANT: 1. Brief facts of the case : a.) The applicant i.e. M/s Secure Meter Limited, E-Class, Pratap Nagar Industrial Area, Udaipur is engaged in providing the compressive water services and currently is in the process for bidding for tender floated by the PHED, a unit of Government of Rajasthan for Operation and Maintenance of Mansi Wakai dam Stage-I, complete system including mechanical, electrical, instrumentation installation works switchyards/GSS and maintenance of Dam, pumping machinery, pipe line tunnel from Mansi Wakai Dam to Nandeshwar filter plant project on ESCO and O M contract. b.) The terms and scope of the contract combines ESCO Model and O M contract. That the activities under ESCO model and O M contract are so closely linked in a manner that they form a single indivisible supply. The driving factors are:- - A single tender shall be floated for Operation and Maintenance of Dam, pumping machinery, pipe line tunnel on ESCO Cum O M Contract where the preamble of scope specifies that the contract combines ESCO model and O M work. - The nature of contract is such that initial activities under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year. The contractor shall be responsible for Patrolling, operation and maintenance of the pipelines, repairing of leakages of pipelines, replacement of burst pipes, repairing of appurtenances of pipelines like air valves, scour valves air vessels system, intermediate OHSR (for vacuum filling system), pressure gauges, joints etc. k.) SWITCHYARD: He shall be responsible for Maintenance, Overhaul, periodic filtration of transformers oil, repairing of electric fault in the switchyard. L) MAINTENANCE OF DAM: Gates: - Operation and Maintenance (including routine preventive maintenance) of all plant and machinery installed Electrical Mechanical installation and equipment for Spillway Radial Gate Rope Drum Hoist. Crest Stop log gate Gantry Crane Hoist: - Operation and Maintenance (including routine preventive maintenance) of all plant and machinery installed Electrical Mechanical installation and equipment for Crest Stop log gate Gantry Crane Hoist. It is understood based on the scope of work detailed above that ESCO model requires improvement of the whole water supply system involving pump houses, pumping stations, transmission lines, switchyards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the precedents, it is understood that the properties for which improvement works has been assigned like pump houses, DAM, campus etc. cannot be moved from one site to another. All the components of the pumping system are erected at the prescribed location and permanently attached to the earth and they cannot be dismantled and reassembled as such dismantling may cause substantial damage to the system and its components. Thus, based on above facts and concept we find that the contract shall be a single supply and cannot be treated as distinct supplies. Since all the conditions of composite supply are satisfied, it is a composite supply. Now, under Notification No 12/2017-CT (Rate) dated 28.06.2018, under entry number 3 A, an exemption from GST has been provided for composite supplies which is reproduced as under: - SI.No. Chapter, section, Heading, Group or Service Code (Tariff) Description of Services Rate (Per cent.) Condition 3A Chapter 99 Composite supply of goods and services in which the value of supply of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial and commercial purposes is responsibility of Municipality. It is pertinent to note that given activity of ESCO plant redevelopment is in relation to clean drinking water facility to the citizens. Thus, it is easily ascertained that the applicant is engaged in a Work Contract (Composite supply) to a Governmental Authority. Thus, according to applicant the property of improvement is an immovable property and thus the given work should be treated as works contract and accordingly the exemption as defined in entry 3 A of Nt. 12/2017-CT (rate) can be claimed. B. QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT:- 1. Whether the activity of operation and maintenance is to be considered as Supply of goods or a Supply of Services under CGST / RGST Act 2017? Accordingly, whether the transaction can be sub-classified as a Pure Supply of Service or Pure Supply of Goods or Composite supply of goods and services being a Works contract? 2. Whether the applicant is entitled to the benefit of exemption under entry 3 A of Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017, as amended? If not, what is applicable rate of tax? C. PERSONAL HEARING In the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is mixed supply and therefore the highest rate of tax of particular supply involved in mixed supply will be applicable. Question 2 Whether the applicant is entitled to the benefit of exemption under entry 3A of Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017, as amended? If not, what is applicable rate of tax? Reply :- The specific work is covered under mixed supply and not as a composite supply. Therefore the benefit of entry no. 3A of notification no. 12/2017 Central Tax Rate is not available to him. The mixed supply of service is to be taxed at rate of highest rate of goods or services included in supply. E. FINDINGS, ANALYSIS CONCLUSION: 1. We have perused the records on file and gone through the facts of the case and the submissions made by the applicant as well as the department. We have also considered the issues involved, on which advance ruling is sought by the applicant, and relevant facts. 2. Based on the written submission made by the applicant i.e. M/s Secure Meter Limited, we find that applicant is in the process for bidding for tender floated by the PHED, a unit of Government of Rajasthan for Operation and Maintenance of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her valuable consideration. 6. Works Contract in itself is a composite supply in which construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning etc are involved along with transfer or property in goods. 7. Now whether a supply is a works contract or not is dependent on whether the plant or device or property is a movable or immovable property. To decide whether a property is movable or immovable, the given terms have not been defined under the Act and hence the reliance needs to be placed on other laws and judicial precedents. 8. Under the General Clauses Act 1897 the term immovable property has been defined under Section 3(26) as immovable property shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth: 9. As per the definition the term permanently fastened or attached to earth can be treated as immovable property. Any attachment with earth which is temporary in nature or can be shifted from part of earth to another without causing substantial damage to it cannot be treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to Municipality under Article 243W of the Constitution, then no GST is applicable. 14. The activities entrusted to the Municipality under Article 243W of the Constitution of India and listed under Twelfth Schedule are enumerated as under;- [Article 243-W],- 1. Urban planning including town planning. 2. Regulation of land use and construction of buildings. 3. Planning for economic and social development. 4. Roads and bridges. 5. Water supply for domestic, industrial and commercial purposes. 6. Public health, sanitation conservancy and solid waste management. 7. Fire services. 8. Urban forestry, protection of the environment and promotion of ecological aspects. 9. Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded. 10. Slum improvement and up gradation. 11. Urban poverty alleviation. 12. Provision of urban amenities and facilities such as parks, gardens, playgrounds. 13. Promotion of cultural, educational and aesthetic aspects. 14. Burials and burial grounds; cremations, cremation grounds and electric crematoriums. 15. Cattle ponds; prevention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be involved in the execution of such contract. It is understood that the properties for which improvement works has been assigned like pump houses, DAM, campus etc. cannot be moved from one site to another. All the components of the pumping system are erected at the prescribed location and permanently attached to the earth and they cannot be dismantled and reassembled as such dismantling may cause substantial damage to the system and its components. The activities to be undertaken by the applicant in respect of Operation Maintenance is for an immovable property i.e. Mansi Wakai dam and thus the given work is held as works contract. Further, since all the conditions of composite supply are satisfied, therefore it is a composite supply of works contract. Further, in the present case, as per break-up of material cost under the Operation Maintenance of Mansi wakal water project provided by the applicant, the value of supply of goods is 11.50% i.e. below 25% out of total value of supply. Hence, the applicant is eligible for exemption under entry No. 3 A of Notification No. 12/2017-CT (R) dated 28.06.2017. 19. The activity of Operation Maintenance of Mansi Wakai dam Stage-I, c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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