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TMI Blog2024 (7) TMI 980X X X X Extracts X X X X X X X X Extracts X X X X ..... d cither in the application or in the additional submission averring that the supply, installation testing commissioning of 11 KV medium voltage covered conductor (MVCC) with its accessories, is not an immovable property. The contract entered into by the applicant with PGVCL is also not a divisible contract, notwithstanding the fact that the turnkey contract, constitutes two different contract, entered on the same day, the performance of which is interconnected, interdependent wherein the obligations cast in part-II clearly slate that his performance in part-I is interconnected to his performance in part-II vice versa. Whether GST is payable on advance received and whether the notification no. 66/2017-CT dated 15.11.2017 is applicable for turnkey contract? - HELD THAT:- CGST Act, 2017 clearly states that a works contract in terms of schedule II, is to be treated as supply of service. Now, N/N. 66/2017-CT dated 15.11.2017, relied upon by the applicant states that a registered person, shall pay the central tax on the outward supply of goods at the time of supply as specified in section 12 (2) (a) of CGST Act, 2017 including in the situations attracting the provisions of section 14 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... divisible contract ...? 7. Personal hearing was granted on 24.4.2024 wherein Shri Mehar Tej Alamuri, Manager, appeared on behalf of the applicant. He further reiterated that it is a divisible contract; that invoices arc separate for goods and services; that he will produce invoices of goods supplied since the supply has already started. 8. Vide additional submission dated 24.4.2024, the applicant submitted copies of supply erection invoices against contract bearing number GVCL/PROJECT/RDSS/INFRA/MVCC/VUAI/PI/87/1023 and P2/88/1024 dated 08-06-2023 to substantiate their averment that the aforesaid contract is a divisible contract and the GST on advance received against supply can be deferred at the time of advance received against supply. Revenue's Submission: 9. Deputy Commissioner, Division-VI, CGST Ahmedabad North Commissionerate vide letter No. CGST-06/04-01/ DIV-VI/ Tech/ 2023 submitted its comments as follows: On going through the works contract agreement undertaken between the employer and taxpayer it appears that the employer has engaged the services of the contractor for successful erection and installation of 11 KVA Medium Voltage Conductor along with its supply. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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; Section 12 Time of Supply of Goods (1) The liability to pay tax on goods shall arise at the time of supply, as determined in accordance with the provisions of this section. (2) The time of supply of goods shall be the earlier of the following dates, namely:- (a) the date of issue of invoice by the supplier or the last date on which he is required, under [****] Section 31, to issue the invoice with respect to the supply; or (b) the dale on which the supplier receives the payment with respect to the supply: Provided that where the supplier of taxable goods receives an amount up to one thousand rupees in excess of the amount indicated in the lax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice in respect of such excess amount. Explanation 1.- For the purposes of clauses (a) and (b), supply shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment. Explanation 2.- For the purposes of clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he composition levy under section 10 of the said Act as the class of persons who shall pay the central tax on the outward supply of goods at the time of supply as specified in clause (a) of sub-section (2) of section 12 of the said Act including in the situations attracting the provisions of section 14 of the said Act, and shall accordingly furnish the details and returns as mentioned in Chapter IX of the said Act and the rules made thereunder and the period prescribed for the payment of tax by such class of registered persons shall be such as specified in the said Act. 13. At the outset, the entire documents regarding acceptance of tender (RFP)-At dated 8.6.2023, relating to Appointment of full turnkey contract for supply, installation, testing and commissioning of 11 KV Medium Voltage covered conductor (MVCC) with its accessories in Morbi and Part of Kacchchh district (Anjar circle) in PGVCL under Revamped Reforms,-Based on results-linked , distribution sector scheme (Package-1) is not enclosed with the application. The applicant has only provided some documents which is not complete set. From the papers that are enclosed, relevant portions arc culled out and reproduced below, fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visible contract. 16. Of the portions of the contract that was made available, the relevant portions are already reproduced above. A bare reading reveals that the applicant has entered into a turnkey contract for supply installation testing commissioning of 11 KV medium voltage covered conductor (MVCC) with its accessories in Morbi part of Kachchch district (Anjar Circle) in PGVCL under revamped-reforms based results-linked, distribution sector scheme. Under a single agreement, with PGVCL, the applicant has entered into [i] contract agreement part-I for supply of plant wherein the total price including GST is Rs. 130.38 crores and [ii] contract agreement part-II, for supply of installation services wherein the total price including GST is Rs. 18.53 crores. 17. Article 5 of the aforementioned part-I part-II contracts, reproduced supra clearly state that both part-I and II contract(s) have been made on the same date; that in terms of article 5 of the part-I, it is mentioned that contract agreement part-II is entered for providing/supplying installation services, related to incidental to successful installation of the plant supplied under contract part-I; notwithstanding the award of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contract is also clear from Article 5 that defines satisfactory performance of the contract agreement in part-I as the time when the goods so supplied are installed and finally commissioned in terms of the contract agreement part-II. The two promises supply of the goods and the supply of services-are not separately enforceable in the present context. The recipient has not contracted for ex-factory supply of materials, but for the composite supply, namely works contract service tor supply, installation, testing and commissioning of 11 KV medium voltage covered conductor (MVCC) with its accessories. A bifurcation of the turnkey contract into two further contracts as part-I and part-II, would not change the classification. The contract, being a turnkey contract, both of which are interlinked interdependent to performance as is evident from article 5, supra, leads us to the conclusion that the turnkey contract entered by the applicant with the PGVCL,, is a works contract as defined u/s 2(1 19) supra. Further, there is nothing on record cither in the application or in the additional submission averring that the supply, installation testing commissioning of 11 KV medium voltage covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (b) refers to transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract. The expression in some other form in the bracket is of utmost significance as by this expression the ordinary understanding of the term goods has been enlarged by bringing within its fold goods in a form other than goods. Goods in some other form would thus mean goods which have ceased to be chattels or movables or merchandise and become attached or embedded to earth. In other words, goods which have by incorporation become part of immovable property are deemed as goods. The definition of tax on the sale or purchase of goods includes a tax on the transfer of property in the goods as goods or which have lost its form as goods and have acquired some other form involved in the execution of a works contract. 40. On the basis of the aforesaid elucidation, it has been deduced that a transfer of property in goods under Clause (29A)(b) of Article 366 is deemed to be a sale of goods involved in the execution of a works contract by the person making the transfer and the purchase of those goods by the person to whom such transfer is made. One thing is signific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lows:- 6. Composite supply The following composite supplies shall he treated as a supply of services, namely:- (a) works contract as defined in clause (119) of section 2; and (b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration. [emphasis added] 24. CGST Act, 2017, thus clearly states that a works contract in terms of schedule II, is to be treated as supply of service. Now, notification No. 66/2017-CT dated 15.11.2017, relied upon by the applicant states that a registered person, shall pay the central tax on the outward supply of goods at the time of supply as specified in section 12 (2) (a) of CGST Act, 2017 including in the situations attracting the provisions of section 14 of the said Act. Section 12 (2), ibid, provides that the time of supply of goods shall be the earlier of the following dates, namely (a) the date of issue of invoice by the supplier or the last date on which he is required, under section 31, to issue the invoice w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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