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TMI Blog2024 (7) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... for the 'Supervision Services', the question of inclusion of value of all other services for which TANGEDCO is not a privity to the contract, does not arise. Further, when the TANGEDCO is not a supplier in so far as it relates to shifting of infrastructure, the question of covering the same under 'composite supply' also does not arise. Whether value adopted by the Applicant for Deposit Contribution Works for the purpose of discharging applicable Goods Services Tax be restricted to the Establishment and Supervision Charges other charges if applicable that the Applicant charges for and receives in the case of the self-execution scheme? - HELD THAT:- MWNL is not a supplier of goods or services in relation to shifting of transmission lines and other assets which are required to be shifted during construction or widening of roads, the work, being undertaken by NHAI itself. Hence, there is no relationship between NHAI and MWNL which can be categorized as that of supplier and recipient except for the services of supervising the whole operation for which NHAI is paying consideration along with GST leviable thereon. The supplier' in the instant operation is the contracto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of discharging applicable Goods Services Tax be restricted to the Establishment and Supervision Charges other charges if applicable that the Applicant charges for and receives in the case of the self-execution scheme. 2.1 The Applicant submitted a copy of challan evidencing payment of application fees of Rs. 5,000/- each under sub-rule (1) of Rule 104 of CGST Rules 2017 and SGST Rules 2017. 2.2 The applicant has submitted under the 'Statement of Relevant Facts', that,- 1. The Applicant is a Government Company. The Government of Tamil Nadu vide G.O.(Ms.) No. 114 Energy Department dated 08.10.2008 accorded in principal approval for the re-organisation of TNEB by establishment of a holding Company, by the name TNEB Ltd., which is a State Government Company and two subsidiary companies, namely Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) dealing in Generation and Distribution of Power, the Applicant herein and Tamil Nadu Transmission Corporation Limited (TANTRANSCO) engaged in the process of Transmission of Power. 2. The Applicant is an 'Electricity Distribution Utility' under the Electricity Act, 2003. The applicant generates power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .4.2020 has ruled that the charges received by the Applicant towards DCW are taxable under the GST enactments. That Order was also thereafter confirmed by the Tamil Nadu State Appellate Authority for Advance Ruling in Appeal No. 01/2021/AAAR dated 30.3.2021. For the sake of completion, the Applicant also wishes to place on record the fact that the Applicant has also since challenged the aforesaid Appellate Order confirming the Order dated 20.4.2020 passed by this Authority by way of W.P. No. 14413 of 2022 before the Hon'ble Madras High Court. The said Writ Petition is pending as on date. 4. Under the Electricity Act, 2003 (referred to as the 'Central Act') the State Electricity Regulatory Commission (hereinafter referred to as SERC) is required to enact the Electricity Supply Code to provide for recovery of various charges including those for DCW. In pursuance of Section 50 of the Central Act read with Section 181 thereof and all other powers enabling in that behalf, the Tamil Nadu Electricity Regulatory Commission (hereinafter referred to as TNERC) has enacted and published the Tamil Nadu Electricity Supply Code (hereinafter referred to as the 'Code'). Amongst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hifting along with an estimate of charges for the shifting on the basis of model estimate approved by the Board of the Applicant. While, the estimate would cover all costs including the cost of assets as part of the Gross/Nett on the consumer side, it also importantly made it clear that for actual amount payable by the party in question to this Applicant is mostly towards Establishment and Supervision Charges. In occasional cases involving charging of other non-uniform charges like labour, transport, material, etc., the actual amount payable by the party in question will also include the other charges apart from Establishment and Supervision Charges. . The applicable GST on the same is also set out. d) If the party in question accepts the amount payable to the Applicant in terms of the estimate as aforesaid, it will have to pay the entire amount i.e., Establishment and Supervision Charges and other charges if applicable along with the applicable GST to the Applicant. In this regard, it is important for this Applicant to state that while it only receives Establishment and Supervision Charges (Occasionally other charges as aforesaid) from the contracting parties in question, this App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cases of self-execution. There is no contractual or other obligation for such Customers to pay any further amounts to this Applicant. Consequently, the value of taxable supply in the case of Deposit Contribution Works pertaining to Self-Execution schemes will only be the Establishment Supervision Charges 8s other charges if applicable. This is the consequence of Section 9 (Charging provision) read with Section 15 (value of taxable supply) of the Central Goods Services Tax Act, 2017 (GST Act) and Tamil Nadu Goods Services Tax act, 2017 (TNGST Act). 3. The authorities of the Centre and State-were addressed to report if there are any pending proceedings against the applicant on the issues raised by the applicant in the Advance Ruling application and for comments on the issues raised. 3.1 The State jurisdiction Officer viz. the Deputy Commissioner (ST), Large Tax Payers Unit - I, Chennai, vide their letter dated 20.06.2023 has stated as below,- i) The tax payer has requested that the value of the Deposit Contribution Works that must be adopted by the Applicant on the Self-Execution Schemes for the purposes of paying applicable taxes under the Central Goods and Services Tax Act, 2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (aa) [the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for case, deferred payment or other valuable consideration. Explanation .- For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgement, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another;] iv) In the instant case, Charges includes Supervision charges, Shut down charges, Modification / augmentation/ shifting / additions to the applicants transmission system. The transaction of facilitating the execution of deposit contribution works to the applicants transmission system at the specific request of the consumer is included under the scope of supply in terms of section 7 of TNGST Act, 2017 as the same fulfils all the essenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in cases of 'Self Execution' under DCW, the consumers are required to bear the entire costs of shifting of service/lines structure and equipment, which includes cost of equipment/materials, except 'Establishment and Supervision Charges' and 'Other Charges, if any charged by the applicant. 4.2 The AR further added that as on date, the question of taxability on DCW charges already stands settled, by way of an order No. 14/AAR/2020 dated 20.04.2020, consequent to an earlier application filed before this Advance ruling Authority. On an appeal being filed the applicant, the Appellate Authority for Advance Ruling in Appeal No. 01/2021/AAAR dated 30.03.2021 , also confirmed the same. Now, the applicant has filed a W.P. No. 14413 of 2022 with the Hon ble Madras High Court, which is pending without any stay, as on date. 4.3 Under these circumstances, the applicant seeks a ruling as to the valuation to be adopted for discharging the GST liability on these transactions especially in view of the fact that in such cases, the consumers may be required to bear additional cost on their own account, in respect of the materials involved in the shifting and installation of servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... structure, on 05.01.2024. 4.8 The AR explained in detail as to how the estimates are prepared by TANGEDCO in order to work out the 'Establishment and Supervision Charges' to be payable by the consumer. He further stated that the material/labour estimate which is to be borne by the consumer under the 'self-execution mode' is arrived at, in the first place, and based on the same, the Establishment and Supervision Charges' are worked out at a fixed percentage of 15%. 4.9 On perusal of the estimates furnished, the members observed that apart from the Establishment and Supervision Charges' which has been booked as capital expenditure by TANGEDCO vide DCW A/c. Code No. 47-601, the other part of the estimate cost involving material, labour, transportation, etc., have also been booked as capital expenditure by TANGEDCO vide DCW A/c. Code No. 14-695 14-696, whereby it amounted to capitalization of expenditure in the books of accounts of TANGEDCO. Accordingly, the members enquired as to whether the overall expenditure towards shifting is met initially by TANGEDCO and later reimbursed by the consumer. The AR stated that under the 'self-execution mode', the cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hifting of service/lines, structure and equipment. The Applicant acts in line with the said principle even for cases of DCW under Self-execution Scheme , in which case, the consumers have to incur all costs for shifting of service/lines/structure and equipment, including costs of equipment/materials, except Establishment and Supervision Charges and other charges, if applicable. 5.3 Further, the applicant states that the present application for Advance Ruling is only relating to the extent of GST liability that this Applicant will have to discharge on the charges received for DCW, i.e., only on the question of valuation involved. In this regard, it is learnt that as on date, the question of taxability on DCW charges already stands settled, by way of an order No. 14/AAR/2020 dated 20.04.2020, consequent to an earlier application filed before this Advance ruling Authority. On an appeal being filed the applicant, the Appellate Authority for Advance Ruling in Appeal No. 01/2021/AAAR dated 30.03.2021, also confirmed the same. Now, the applicant has filed a W.P. No. 14413 of 2022 with the Hon hie Madras High Court, which is pending without any stay, as on date. This question for Advance R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mers. The AR further stated that an Estimate/Advice is raised on the consumers specifying the amount payable to them, alongwith other conditions, samples of which they furnished along with their further submissions dated 5.01.2024. 5.7 Under the additional submissions furnished on 5.01.2024, the applicant stated the following:- i) The applicant received only Establishment and Supervision Charges apart from occasionally receiving other charges like Re-connection fee, disconnection charges, Service connection material charges etc., under Self-Execution Scheme in respect of the 'Deposit Contribution Works (DCW)'. It is only such charges actually received by this applicant which constitutes 'price actually paid' or 'payable' by the customers for the support services of supervision provided by this Applicant within the meaning of Section 15 (1) of the CGST/TNGST Acts, 2017. ii) Consequently, only the aforesaid charges constitute the value of supply and only on such charges, the applicant is liable to pay applicable GST. That this correct position of law is supported by the principles laid down by the Hon hie Supreme Court in the judgements of Purolator India Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nished by the applicant vide Memo.No.SE/EEDC/ED/AEE/GL/AE/GL/CA-2/Prop64/R. 141/2023, DT : 15-09-2023 , the contents read as below: under the powers delegated in TANGEDCO Proceedings B.P.(FB) No. 71 Dated 29.06.2011, DCW estimate for shifting of Existing IE SS V 100 KVA/22 KV Distribution Transformer along with HT/LT lines and poles to be shifted to the new location due to widening of road in the Rangampalayam to Erode road at the request of the Assistant Engineer, Highways, C M section-1, Erode under Self execution mode in respect of AE/O M/Muthampalayam Section of urban Erode Division amounting to an estimate cost of Rs. 8,93,660/- Gross (Rupees Eight lakhs ninety three thousand six hundred and sixty only) and Rs. 8,66,900/- Nett (Rupees Eight lakhs sixty six thousand and nine hundred only). The amount chargeable to the applicant is Rs. 1,12,740/- (Estt . Supervision charge with GST) (Rupees One lakhs twelve thousand seven hundred and forty only) is Administratively Approved and Technically sanctioned and Registered as below:- 695/S/075/23-24 Dated :15-09-2023 696/S/075/23-24 Dated :15-09-2023 Head of Accounts Estimate amount 1) TANGEDCO - Funds -Capital Expenditure - DCW A/c. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arges . 5.10 In this regard, we take note of the fact that Section 15 (2) (b) of the CGST Act, 2017, stipulates that the value of supply shall include - 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; . When enquired about this aspect, and the applicability of the same to the instant case, the authorized representative of TANGEDCO explained during the personal hearing held on 30.11.2023 that that though Section 15 (2) (b) of the CGST Act, 2017, specifies inclusion of the costs incurred by the recipients of supply, such costs are not within the scope of supply by the supplier (applicant), as the applicant in the instant case is neither required to charge the same on the consumers, nor liable to incur such charges. The AR further explained, that in cases of 'Self Execution' under DCW, the consumers are required to bear the entire costs of shifting of service/lines structure and equipment, which includes cost of equipment/materials, except 'Establishment and Supervision Charges' and 'Other Char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shifting the structure, which in turn paves the way to arrive at the 'Establishment and Supervision Charges'. 5.12 The comments dated 20.06.2023 received from Deputy Commissioner (ST), LTU, Chennai, states that execution of DCW falls within the scope of supply, as it is a supply of service in the form of facilitation, further there is a consideration as the construction activities carried out by the customer will ultimately be the property of the applicant. Also the applicant by facilitating the access to its transmission systems becomes the supplier of services and the activities are duly in the course of furtherance of business. Thus all the ingredients of Section 7(l)(a) are present to categorize the transaction as supply of services and that the valuation of supply includes all service and goods supplied to the recipient should be taken as the supply comes under composite supply and consideration. Hence the tax should be levied on the entire value on the amount for the Deposit Contribution Works. 5.13 In respect of the comments referred above, we observe that the execution of DCW (Deposit Contribution Works) certainly fall within the scope of supply, but it depends ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, etc.,), and not at the behest of TANGEDCO, TANGEDCO is not liable to pay for the expenses incurred in such shifting. c) TANGEDCO does not charge or get any such expenses reimbursed by the concerned party. d) In such cases, the works contract services supplied in course of dislocation/shifting arc being supplied to the service recipient (NHAI) by independent contractors. c) Such services are neither supplied by, nor the consideration for the same has been received by TANGEDCO, and hence there is no supply of services by TANGEDCO to the concerned party. f) The service actually being rendered by TANGEDCO in such cases of DCW works, under the 'self execution mode', is restricted to supervision of the shifting process for which charges, in lieu of the 'Establishment and supervision charges' only are charged and collected by them from the concerned party. g) Though the property (transmission lines and other such property) that is being subject to works contract service belong to TANGEDCO, the works contract service is not made at the behest of TANGEDCO and that they are a stranger to the contract, since the same is executed between the concerned party and a third p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are borne by the recipient of service and the appellant charges supervision fee only, the value of materials and cost of installation shall not be included in the value of supply for determination of taxable value under GST and the appellant shall be liable to pay GST only on the supervision charges. 5.16 It is to be noted here that in the very same case earlier, the Authority for Advance Ruling, Uttar Pradesh had also ruled on the same lines vide Ruling No. UP ADRG-23/2023 dated 21.04.2023 , where it was held that the applicant shall be liable to pay GST on supervision charge only where the entire cost is borne by the service recipient subject to the condition the customer/recipient of service should have GST invoice of material and same is to be submitted to the appellant after completion of the project. Addressing this issue in the appellate Order No. 09/AAAR/2023 dated 16.08.2023, the Appellate Authority for Advance Ruling, Uttar Pradesh had held in para 9.9 of the said Order, as follows,- We also find that the Authority for Advance Ruling has held that in case (2) where the entire cost is borne by the recipient of service, the value of taxable supply shall not include the mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g construction or widening of roads, the work, being undertaken by NHAI itself. Hence, there is no relationship between NHAI and MWNL which can be categorized as that of supplier and recipient except for the services of supervising the whole operation for which NHAI is paying consideration along with GST leviable thereon. The supplier' in the instant operation is the contractor who is undertaking the work of shifting transmission lines and not the MWNL who are just supplying services of supervision and not that of construction or replacement of transmission lines. 5.18 In this regard, we take note of the fact that the above discussed ruling was later declared void ab-initio through another ruling No. UP ADRG-24/2023 dated 02.05.2023 issue later, due to the fact that the applicant viz., NHAI is the receiver of goods/services provided by MWNL, and that as per Section 95 (a) of the CGST Act, 2017, an advance ruling is extendable only to supplier of goods/services. Inspite of the same, we are of the opinion that since the said ruling has been rendered void only on technical grounds, and as the facts and circumstances of the said case is identical to the instant case, the discussion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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