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TMI Blog2023 (7) TMI 705X X X X Extracts X X X X X X X X Extracts X X X X ..... hat services like supervision are also charged by PSTCL for shifting/raising of power transmission lines. While going through the copy of contract/ agreement with NHAI, it is found that after finalization of route plan a detailed estimate for composite work (containing detail of material, labour cost and supervision charges) is prepared and the party is told to deposit the amount of estimate alongwith applicable GST @18%. The GST is deposited with the GST department after raising a tax invoice of advance. The material (i.e. conductor, tower material, cement, steel, nut bolts etc.) is used from the stores of PSTCL, already purchased by PSTCL in bulk through tendering process on which the applicable GST has already been paid. For labour part also a sub contract is done through tendering process. The term works contract has been restricted to contract for building construction, fabrication etc of any immovable property but there should be a transfer of property in goods involved in the execution of such contract. Since in the case of contributory work undertaken by the applicant the ownership of the transmission lines/ towers still lies with the applicant, the supply of goods and serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the erected transmission lines and other activities as may be required for completion of the project - the total cost of material, labour and supervision charges are to be paid by the third party to PSTCL and the goods i.e. asset is not transferred to third party and remains the property of PSTCL. Therefore the taxability of the supply made in this case also shall be similar. Whether ITC is available to the applicant on the material and services used in above works (either the work done by PSTCL itself or on turnkey basis) as the property remains under the ownership of PSTCL? - HELD THAT:- The applicant is undertaking Contribution Work i.e. creating infrastructure for electricity transmission on the request of NHAI/ Third party and recovering the same from the NHAI/ Third party. In terms of section 16(1) of the CGST Act, 2017 every registered person would be eligible to take the input tax credit on the receipt of goods or services which are intended to be used in the course or for the furtherance of business - in the present case, the transmission lines have been laid by which the electricity would be transferred. In terms of the aforesaid provision, the goods/services used in shif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which amount i.e; material, labour and supervision charges or only on supervision charges? iii) Whether the PSTCL can claim Input Tax Credit on material and services used in above works (either the work done by PSTCL itself or on turnkey basis) as the property remains under the ownership of PSTCL? At the outset, we would like to make it clear that the provisions of both the CGST Act and the PGST 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 provisions under the PGST Act. 2. STATEMENT OF RELEVANT FACTS - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- M/s Punjab State Transmission Corporation Limited, Shakti Sadan, The Mall, Patiala (PSTCL) is engaged in the business of transmission of electricity (GST Registration No. 03AAFCP4714J1ZK) which is exempt under GST Act, vide Notification No. 12/2017 dated 28th June, 2017 (Tariff heading 9969). Apart from above activity, PSTCL executes deposit and contribution works on behalf of third parties. i) Deposit Work: In case of deposit work, total cost of materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which requested PSTCL to execute the work on behalf of them. ii) Contribution Work: In case of contribution work, total cost of material, labour and supervision charges are to paid by the third party to PSTCL. However, goods (i.e. asset) is not transferred to third party and asset shall remain the property of the PSTCL. In both the above cases, the amount is recovered fully from the third party. With regard to first and second question asked by the applicant, it is submitted that transmission or distribution of electricity by an electricity transmission or distribution utility is nil rated vide Notification No. 12/2017-CT(R) dated 28.06.2017, SI No.25. But other ancillary services such as meter rent, application fee for releasing connection of electricity, Testing fee for meters/transformers, capacitors etc, labour charges from customers for shifting of meters or shifting of service Lines, charges for duplicate bill; provided by DISCOMS to consumers are taxable under GST. The supply of electricity and supply of transmission and distribution of electricity service can be said to be naturally bundled as the supply of electricity is given physical effect by way of transmission or dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistered tax payer partly for utilisation in taxable supplies and partly for exempt supplies, then the ITC will be restricted to an amount which attributable for taxable supplies (including zero rated supplies). 4. PERSONAL HEARING: Personal hearing in the matter was held on 03.02.2022. Sh. Harminder Singh, Accounts Officer of the applicant appeared on behalf of the applicant and on being enquired whether any proceedings on the issue are pending before any authority, he stated that no such proceedings are pending before any authority. Further he was asked by the Members for some documents/information which he promised to supply on next date of hearing which was granted on 11.02.2022. Sh. Harminder Singh, Accounts officer again appeared on 11.02.2022 and submitted a reply as under:- Brief Procedure for execution of Contribution work by PSTCL: The PSTCL executes contribution work as per the following stages:- i) Concerned party (NHAI in this case) submits the request letter. Copy was submitted as Annexure A. ii) As per request letter, technical feasibility, the concerned party is asked to deposit the survey charges plus processing fees. iii) After clearance of Technical feasibility, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of NHAI (Contribution work) for widening of road, at what rate and on which amount i.e; material, labour and supervision charges or only on supervision charges? (ii) Under which provision section GST is to be charged on construction and installation of sub-station / transmission lines on behalf of big industries / other third parties for power supply (contribution works)., at what rate and on which amount i.e; material, labour and supervision charges or only on supervision charges? (iii) Whether the PSTCL can claim Input Tax Credit on material and services used in above works (either the work done by PSTCL itself or on turnkey basis) as the property remains under the ownership of PSTCL? 5.2 We find that the Government of Punjab unbundled Punjab State Electricity Board (PSEB), a statutory body formed on 01.02.1959 responsible for generation, transmission and distribution of electricity in the state of Punjab, vide Notification No 1/9/08-EB(PR)196, dated- 16.04.2010 into two corporations namely Punjab State Power Corporation Limited (PSPCL) and Punjab State Transmission Corporation Limited (PSTCL). Thereafter, PSTCL (the Applicant) is a State Transmission Utility (STU), entrusted wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to execute the work on behalf of them. II). Contribution Work: In case of contribution work, total cost of material, labour and supervision charges are to paid by the third party to the applicant. However, goods (i.e; asset) is not transferred to third party and asset shall remain the property of the applicant. We observe that although the applicant is said to be executing both deposit and contribution works on behalf of third parties, the questions sought are only in relation to contribution work and hence only the same are being discussed. 5.6 With regard to the first query, i.e the shifting of Transmission Lines on request of NHAI for widening of road, we find that the work to be executed by the applicant includes construction of new towers, erection, sagging and dismantling of existing towers. Since these transmission lines are the property of PSTCL and require the modification on the need of NHAI, the overall cost of Highway diversification along with cost of shifting, dismantling and raising of transmission lines are borne by NHAI. We further observe that services like supervision are also charged by PSTCL for shifting/raising of power transmission lines. 5.7 While going t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility on a composite or a mixed supply shall be determined in the following manner, namely (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and (b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax On perusal of the said section we find that Clause (a) specifies the tax applicability for a composite supply whereas clause (b) specifies the tax applicability for a mixed supply 5.10 In order to determine, the nature of supply provided by the applicant, (whether composite or mixed), it becomes imperative to go through the respective definitions as mentioned in the Act. Composite supply has been defined under Section 2(30) of the CGST Act which reads as under: - 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 conjunction with each other in the ordinary course of business, one of which is a principal supply; Mixed supply has been defined u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for shifting of meters for shifting of service lines and charges for duplicate bill provided by DISCOMS to consumers are taxable. The relevant part of the said circular is reproduced below: - S.No Issue Clarification 4 (1) Whether the activities carried by DISCOMS against recovery of charges from consumers under State Electricity Act are exempt from GST? (2) Whether the guarantee provided by State Government to state owned companies . against guarantee commission, is taxable under GST? (1) Service by way of transmission or distribution of electricity by an electricity transmission or distribution utility is exempt from GST under notification No. 12/2017-C.T. (R), SI. No. 25. The other services such as, - i. Application fee for releasing connection of electricity; ii. Rental Charges against metering equipment; iii. Testing fee for meters/transformers, capacitors etc.; iv. Labour charges from customers for shifting of meters or shifting of service lines; v. charges for duplicate bill; provided by DISCOMS to consumer are taxable Hence in view of above, we observe that the Contribution Work undertaken by appellant is not an integral part of supply of services of transmission or distr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayable for the said supply of goods and/or services where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. The value of supply shall include amount that the applicant is liable to pay but which has been incurred by the recipient, by reason of, or in connection with the new infrastructure created. 5.15 In the present case, since the whole cost i.e. total cost of material, labour and supervision charges incurred by the applicant are recovered from the NHAI, the same shall be the transaction value. This is irrespective of the fact that being a transmission licensee, the ownership of the transmission system requiring modification/ augmentation/shifting/additions remains with the applicant even though the cost/charges are borne by NHAI. Thus according to Section 15(2)(b) of CGST Act, 2017, the cost of such asset/infrastructure incurred by the third party is to be included in the value of supply for the purpose of levy of GST. When the applicant incurred such cost, then GST would automatically be leviable on total transaction value without any recourse to Section 15(2)(b) of CGST Act, 2017. Therefore, value shall be the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions for taking the input tax credit.- (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. In terms of section 16(1) of the CGST Act, 2017 every registered person would be eligible to take the input tax credit on the receipt of goods or services which are intended to be used in the course or for the furtherance of business. 5.20 We find that in the present case, the transmission lines have been laid by which the electricity would be transferred. In terms of the aforesaid provision, the goods/services used in shifting, laying and setting up wires/towers for transmission of electricity for the furtherance of business and the input tax credit is admissible on the same in the purview of Section 16(1) cited supra. 5.21 We would also like to refer to Section 17 of the CGST Act 2017 which deals with Apportionment of credit and blocked cr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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