2018 (9) TMI 1106 - AAR - GST

GST Case: 'Car Parking System' Installation - Immovable Property or Works Contract?

In Re: Precision Automation and Robotics India Limited

The case involved determining whether the supply and installation of a 'car parking system' qualifies as immovable property and as a 'works contract' ... Works contract - immovable property or not? - supply and installation of ‘car parking system’ - Whether the activity of supply and installation of ‘car parking system’ would qualify as immovable property and thereby ‘works contract’ as defined in Section 2(119) of the CGST Act? Held that:- The ‘car parking system’ is not supplied as chattel qua chattel. It is not brought as an identifiable set of goods. Dismantling one whole, to be assembled later, for the sake of convenience or transportation is one category where there is simple assembling without no further activity critical to the assembling - The other category is that various items are carried to be assembled and which require various steps of activities to be performed on these items and only after which it is possible that they can be assembled. Even without going into the activities that go into the making, we can infer that the impugned activity is such that the car parking system cannot be said to be supplied unless substantial work is carried out at the site where the same is to be installed. Rather whatever structure or item is brought to the site wouldn’t serve any purpose unless the same is fitted, commissioned and made working. And for this, several activities are needed to be carried out at the site. The site would, of course, be an immovable property such as a building. Or it could be a standalone structure for car parking. Whatever be it, the system is to be aligned to the immovable structure by way of support system. It is not the case that in case it is desired to do away with it, one can remove the system and put it into place AS IT IS at another location. The removal would always involve a total dismantling which cannot be without loss or damage. Bombay High Court in the case of M/S. BHARTI AIRTEL LTD. (EARLIER KNOWN AS BHARTI TELE-VENTURES LTD.) VERSUS THE COMMISSIONER OF CENTRAL EXCISE [2014 (9) TMI 38 - BOMBAY HIGH COURT], in relattion to tower parts, green shelter, printers and office chairs, have held that the product cannot be shifted without damage. Apart from that various items and components are embedded in the earth. The product,therefore, is immovable. Thus, it is concluded that The impugned car parking system, be it installed on a vacant plot of land or in a building, does not result into supply as chattel. In fact, before installation, there can be no goods as such which could be called a ‘car parking system’ - The system requires substantial work to be done at the site to be called a ‘car parking system’ - Once made operational the ‘car parking system’ obtains a state of permanency. It is not such as can be easily removed from the existing place and put into place at some other location - The definition of “works contract” under the GST Act is in relation to immovable property. Thus, the transaction of supply and installation of a ‘car parking system’ would qualify as immovable property and thereby ‘works contract’ as defined in Section 2(119) of the CGST Act. Ruling: The transaction of supply and installation of a ‘car parking system’ would qualify as immovable property and thereby ‘works contract’ as defined in Section 2(119) of the CGST Act. Issues Involved:1. Whether the activity of supply and installation of 'car parking system' qualifies as immovable property.2. Whether the activity qualifies as a 'works contract' as defined in Section 2(119) of the CGST Act.Issue-wise Detailed Analysis:1. Whether the activity of supply and installation of 'car parking system' qualifies as immovable property:The applicant, Precision Automation and Robotics India Limited, is engaged in the design, manufacturing, procurement, erection, and installation of various types of car parking systems. The car parking systems include stacker type, puzzle type, multi-level, RCC type tower, structure type tower, level type, and chess type parking systems. The installation involves several components manufactured by the company and bought-out items. The process includes preparing drawings, creating specific foundations, erecting steel/RCC structures, installing various parts and safety features, and undertaking testing.The applicant argued that the car parking system becomes an integral part of the building or land where it is installed, thus qualifying as immovable property. They cited several judicial precedents, including:- Otis Elevator Company (India) Limited: Elevators and escalators become part of immovable property once installed.- Quality Steel Tubes (P) Ltd. v/s. Collector of Central Excise: Goods attached to the earth and thus become immovable do not satisfy the test of being goods within the meaning of the Act.- Nahalchand Laloochand P. Ltd vs Panchali Co-operative Housing Society Ltd.: Car parking systems are part of the common area and cannot be sold separately.The applicant emphasized that the car parking system cannot be moved 'as is' and requires dismantling, which involves loss or damage, supporting the argument that it is immovable property.The authority referred to the definition of 'immovable property' under the General Clauses Act, 1987, and Black's Law Dictionary, which includes land, benefits arising out of land, and things attached to the earth or permanently fastened to anything attached to the earth. The authority also cited the Supreme Court's decision in T.T.G. Industries Ltd. v. CCE, which held that machinery erected and installed on a concrete platform becomes immovable property as it cannot be moved without dismantling.The authority concluded that the car parking system, once installed, becomes a part of the building or land, thus qualifying as immovable property.2. Whether the activity qualifies as a 'works contract' as defined in Section 2(119) of the CGST Act:The definition of 'works contract' under Section 2(119) of the CGST Act includes contracts for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration, or commissioning of any immovable property wherein transfer of property in goods is involved.The applicant argued that the supply and installation of the car parking system involve transfer of property in goods and result in immovable property, thus qualifying as a works contract.The authority agreed with the applicant's interpretation, stating that the activities involved in the installation of the car parking system, such as creating foundations, erecting structures, and installing various parts, result in immovable property. Therefore, the activity qualifies as a works contract under Section 2(119) of the CGST Act.The authority did not discuss whether the transaction is a 'composite supply' as defined in Section 2(30) of the CGST Act, as the question was limited to the definition of 'works contract.'Order:The authority concluded that the activity of supply and installation of the 'car parking system' qualifies as immovable property and thereby as a 'works contract' as defined in Section 2(119) of the CGST Act. The question was answered in the affirmative.