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TMI Blog2024 (7) TMI 1062X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017. UPPTCL is not a supplier of goods and services as per provisions of section 2 (105) of CGST Act, 2017 as the work is being undertaken by the customer itself. There is no relationship between the customer and UPPTCL which can be categorized as that of supplier and recipient except for the services of the supervising the whole work - The work contract services supplied in the course of construction/ dislocation/shifting are neither supplied by nor the consideration for the same has been received by UPPTCL hence there is no supply of works contract services by the UPPTCL. Thus, where the value of materials and cost of execution of work for installation of electric lines are borne by the recipient of service and the applicant charges supervision fees 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 applicant shall be liable to pay GST only on the supervision charges. GST will be applicable on only supervision charges. - SHRI AMIT KUMAR AND SHRI HARILAL PRAJAPATI, MEMBER Represented by : Shri Prakhar Gupta , FC A ORDER UNDER SECTION 98 (4) OF THE CGST ACT, 2017 UNDER SECTION 98 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f CGST Act and liability to pay GST, hence is admissible under Section 97 (2) (a) of the CGST Act 2017. Further, as per declaration given by the applicant in Form ARA-01, the issue raised by the applicant is neither pending nor decided in any proceedings under any of the provisions of the Act, against the applicant. 6. The applicant has submitted statement of relevant facts as under:- A. In addition to the primary activity of providing services of transmission of electricity, the UPPTCL is also undertaking development of electricity infrastructure as requested by consumers/intending agencies ('consumer') for distribution of electricity, as 'deposit works'. Such deposit work is either in the form of making additions to the existing distribution system or augmenting/modifying/ shifting the existing system to a new location. B. In terms of Section 40 of the Electricity Act, 2003 ('Electricity Act') and Clause 4 of the Electricity Supply Code, 2005 ('ES Code'), the exclusive right to carry out deposit works remains with the UPPTCL, as per the technical standards of operation and maintenance of distribution/transmission lines specified by the Central Elec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r GST where all such cost are born by the recipient of service and the applicant charge only supervision charges. A. Under this method, the responsibility to undertake the work is on the consumer through the contractors, under supervision of UPPTCL. The consumer is required to pay supervision charges to the UPPTCL computed at a fixed percentage on total cost estimate. Since supervision charges are recovered by applicant from the consumer under this mode, the same shall, inter-alia, constitute value of supplies as per the GST Act. The further question, however, is whether the cost of works is also includible in value of such supplies. To answer this question, reference needs to be made to certain provisions of the electricity law. B. As per Section 40 of the Electricity Act, it shall be the duty of the transmission licensee to build, maintain and operate an efficient, coordinated and economical inter-state transmission system or intra-state transmission system, as the case may be. Further, the applicant has exclusive right and responsibility to undertake deposit works of the transmission system. In terms of the Electricity Act, the responsibility to develop, maintain and operate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply. As defined in Rule 35 of the CGST Rules, Open Market Value means the full value of money excluding taxes under GST laws, payable by a person to obtain such supply at the time when such supply being valued is made, provided such supply is between unrelated persons and price is the sole consideration for such supply. In order to determine the Open Market Value in the present case, the value of the same supply when made by another person, at the same time as this, is to be considered. Thus, though under the said mode of deposit works, cost is borne by the consumer and not paid to UPPTCL, the ultimate responsibility to build, operate, control and maintain the transmission system always vests with the applicant in terms of the provisions of the Electricity Act and the ES Code G. It may be noted that the supply undertaken by the UPPTCL is peculiar to the consumer's case, where deposit work is carried out as per its specifications. The deposit works is as per the requirement as specified by the consumer. There is no such similarly placed, standardized supply, which can be taken as a parameter for determining the value of supply in the present case. Thus, clause (a) of Rule 27 sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded by Shri Prakhar Gupta, CA, the authorized representative of the applicant during which he reiterated the submissions made in the application of advance ruling. DISCUSSION AND FINDING 10. At the outset, we would like to make it clear that the provisions of both the CGST Act and the UPGST 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 provision under the UPGST Act. Further for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / UPGST Act would be mentioned as being under the 'CGST Act'. 11. We have gone through the Form GST ARA-01 filed by the applicant and observed that the applicant has ticked following issues on which advance ruling required- (1) determination of the liability to pay tax on any goods or services or both At the outset, we find that the issue raised in the application is squarely covered under Section 97 (2) of the CGST Act 2017. We therefore, admit the application for consideration on merits. 12. The applicant being an electricity transmission company has an exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mer through the contractors, under supervision of UPPTCL. The consumer is required to pay supervision charges to the UPPTCL computed at a fixed percentage on total cost estimate. Since supervision charges are recovered by applicant from the consumer under this mode, the same shall, inter-alia, constitute value of supplies as per the GST Act. The further question, however, is whether the cost of works is also includible in value of such supplies. To answer this question, reference needs to be made to certain provisions of the electricity law.- i. In this method, the works contract service supplied in course of electric line installation are neither supplied by nor the consideration for same has been received by applicant. The contract for works contract services is executed between the concerned party and a third-party work contractor. Therefore, the applicant is a stranger to this contract. In a case where the third-party work contractor remains unpaid for the services supplied by him, he can sue only the concerned party not the applicant. There is no obligation to pay on the part of applicant. Hence, the case shall not be covered under section 15 (2) (b) of the CGST Act 2017. ii. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 15 (2) (b) of CGST Act, 2017 are not applicable in this case. x. In this case the consideration for works contract services is fully paid by concerned party and there is no shared / part payment by the same. In such cases it is not feasible for having two considerations for a single supply. xi. Accordingly, we are of the view that in the facts and circumstances, where the value of materials and cost of execution of work for installation of electric lines are borne by the recipient of service and the applicant charges supervision fees 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 applicant shall be liable to pay GST only on the supervision charges. In view of the above discussions, we pass the ruling as follows: RULING Question : Whether in the given fact and circumstances, value of material and cost of execution work for installation of lines will be included in the value of supply for determination of taxable value under GST where all such cost are born by the recipient of service and the applicant charge only supervision charges. Answer : Reply in Negative. GST will ..... X X X X Extracts X X X X X X X X Extracts X X X X
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