Appellate ruling: GST applies to works contract, no transitional credit for pre-GST purchases

The appellate authority confirmed that the appellant's activities constitute a works contract subject to GST for supplies made on or after the appointed date. The appellant was not entitled to claim transitional credit for excise and VAT paid on materials bought before the GST regime, as the pipes were not held as inputs or semi-finished goods on the appointed day. The denial of transitional credit did not exempt the appellant from GST liability for supplies made after the GST implementation.

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Issues Involved:
1. Whether the work executed and invoice raised for the pending event of testing and commissioning after the implementation of the Goods and Services Tax Act amounts to supply, specifically supply of works contract.
2. Entitlement of the appellant to enjoy proportionate credit worth 10% duty of excise and VAT paid on materials bought under the transition provisions to avoid double taxation.

Issue-wise Detailed Analysis:

1. Supply and Works Contract:
The appellant, engaged in the execution of works contracts, raised the query whether the work executed and the invoice to be raised for the pending event of testing and commissioning after the implementation of the GST Act amounts to supply, specifically a supply of works contract. The Advance Ruling Authority determined that the work of laying the underground pipeline network falls under the definition of "works contract" as per Section 2(119) of the CGST Act, 2017 and the GGST Act, 2017. Consequently, for the portion of the supply wherein the time of supply is on or after the appointed date, GST must be paid. This ruling was confirmed by the Appellate Authority, emphasizing that the appellant's activities constitute a works contract and are subject to GST for supplies made on or after the appointed date.

2. Entitlement to Transitional Credit:
The appellant sought to claim transitional credit worth 10% of the excise and VAT paid on materials bought before the GST regime to avoid double taxation. The Advance Ruling Authority ruled that the appellant is not entitled to avail input tax credit under Section 140(6) of the CGST Act, 2017 and the GGST Act, 2017. The appellant argued that only part ownership of the pipes was transferred before the GST implementation, and the project was still semi-finished. They contended that they should be allowed to claim part of the transition credit for the duties and taxes paid on the pipes.

The Appellate Authority examined Section 140(6) of the CGST Act, 2017, which allows a registered person to take credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day, subject to certain conditions. The Authority noted that the entire quantity of pipe was supplied to RMC before the appointed date, and the work of supply and laying of pipes was completed before the appointed date. Only the work of testing and commissioning was pending. Therefore, the appellant could not be said to be holding pipes in stock as inputs or inputs contained in semi-finished or finished goods on the appointed day.

The Authority further clarified that the provisions of Section 140 do not envisage entitlement to transitional input tax credit on a proportionate basis. Additionally, since the construction of the pipeline network becomes immovable property, it does not fall under the terms "semi-finished or finished goods" as defined under the Act. Consequently, the appellant is not entitled to avail input tax credit of Central Excise Duty and VAT paid on pipes.

Filing of Transitional Credit Form:
The appellant's request to file the transitional credit form beyond the stipulated time limit was also addressed. The Authority concluded that since the appellant is not entitled to avail input tax credit under Section 140, the question of filing the form does not arise. The appellant was required to file the form on a self-assessment basis, independent of the outcome of the proceedings before the advance ruling authority.

Alternate Plea on GST Liability:
The appellant's alternate plea that if transitional credit is denied, the work carried out and payments received after the GST implementation should not attract GST was also examined. The Authority observed that the denial of transitional credits was not based on the absence of supply but on the specific provisions of Section 140. The appellant’s activity was confirmed as a works contract, and as per Schedule II read with Section 7 of the CGST Act, 2017, works contracts are treated as a supply of services. Therefore, the appellant is required to discharge GST liability for supplies made on or after the appointed date.

Ruling:
(A) The appellant is not entitled to avail input tax credit under sub-sections (3) and (6) of Section 140 of the CGST Act, 2017 and the GGST Act, 2017.
(B) For the part of the supply made wherein the time of supply is on or after the appointed date, GST is required to be paid.

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