2018 (7) TMI 1691 - AAR - GST

Transportation charges in works contract subject to GST as ruled by authority under Section 2(119)

In Re: Dinesh Kumar Agrawal

The authority ruled that transportation charges received by the applicant are liable to GST as part of a works contract under Section 2(119) of the GST ... Levy of GST - Classification - composite supply - EPC Contract - standalone contract for transportation of Equipment for which separate consideration is received - procurement and supply of goods, transportation of goods from vendor, assembly and erection and commissioning - appellant is not a goods transport agency (GTA) as he is not issuing any consignment note - Whether transportation charges received by the applicant are liable to GST, especially when the applicant is not a goods transport agency (GTA)? - N/N. 12/2017 Central Tax (Rate) dated 28/06/2017. Held that:- From the co-joint reading of the clauses of the agreement, it can be safely concluded that the contract is a single contract. As such this agreement for Engineering Procurement and construction of Solar Power plant constitute composite supply in the nature of Works Contract. Thus impugned Supplies constitute Works Contract - It has been categorically observed that the attachment of the plant to the foundation at which it rests does not fall in the third category attached to what is imbedded for the permanent beneficial enjoyment of that to which it is attached], for the reason that an attachment to fall in the third category it must be for permanent beneficial enjoyment of that to which the plant is attached. The intent of the person at the time of erecting and operationalizing a structure/plant is to be seen and if the intent is to establish it as an immovable property at the time of setting it up, then it is to be treated as an immovable property even if later on due some exigency it is required to be dismantled or removed. Ruling:- The question is answered in the affirmative and same is liable to tax as a works contract as per provisions of section 2(119) of the GST Act. Issues Involved:1. Classification and taxability of standalone transportation contracts.2. Classification and taxability of composite supply involving transportation and insurance.3. Classification and taxability of composite supply involving loading, transportation, unloading, and in-transit insurance.4. Classification and taxability of supply of services under Service Contract (Split Contract).5. Classification and taxability of supply of services under EPC Contract.Issue-Wise Detailed Analysis:1. Classification and Taxability of Standalone Transportation Contracts:The applicant sought clarification on whether standalone transportation contracts fall under Service code 9965 and if they are exempt under Entry No. 18 of Notification No. 12/2017-Central Tax (Rate). The authority observed that the applicant is not a Goods Transport Agent (GTA) since no consignment note is issued, and thus, the standalone transportation service is exempt from GST.2. Classification and Taxability of Composite Supply Involving Transportation and Insurance:The applicant inquired whether the composite supply of transportation and insurance is classified under Service code 9965 and exempt under Entry No. 18 of Notification No. 12/2017-Central Tax (Rate). The authority noted that if the transportation service is not provided by a GTA and no consignment note is issued, the composite supply involving transportation and insurance would be exempt from GST.3. Classification and Taxability of Composite Supply Involving Loading, Transportation, Unloading, and In-Transit Insurance:The applicant asked if the composite supply of loading, transportation, unloading, and in-transit insurance merits classification under Service code 9965 and is exempt under Entry No. 18 of Notification No. 12/2017-Central Tax (Rate). The ruling clarified that such composite supply, if not provided by a GTA, would be exempt from GST, provided no consignment note is issued.4. Classification and Taxability of Supply of Services Under Service Contract (Split Contract):The applicant sought clarification on whether the supply of services under a Service Contract, including loading, transportation, unloading, and in-transit insurance, merits classification under Service code 9965 and is exempt under Entry No. 18 of Notification No. 12/2017-Central Tax (Rate). The authority noted that the contract should be considered as a whole, and if the service is not provided by a GTA and no consignment note is issued, it would be exempt from GST.5. Classification and Taxability of Supply of Services Under EPC Contract:The applicant questioned whether the supply of services under an EPC Contract, including loading, transportation, unloading, and in-transit insurance, merits classification under Service code 9965 and is exempt under Entry No. 18 of Notification No. 12/2017-Central Tax (Rate). The authority concluded that the EPC contract constitutes a composite supply in the nature of a works contract as defined under Section 2(119) of the GST Act. The contract involves civil works and the installation of solar power plants, which are considered immovable property. Therefore, the transportation charges received are liable to GST as part of the works contract.Conclusion:The authority ruled that the transportation charges received by the applicant are liable to GST as a works contract under Section 2(119) of the GST Act, given that the EPC contract involves the creation of immovable property. The ruling emphasized that the entire contract must be considered to determine the nature of the supply, and individual components cannot be isolated for separate tax treatment.