2019 (4) TMI 806 - AAR - GST

Contract award to different consortium renders applicant's questions infructuous; GST implications unaddressed.

The application was dismissed as infructuous since the contract was awarded to a different consortium, rendering the applicant's questions unanswered. The ... Works contract - composite supply - supply - association of persons - advance ruling admissibility - fixed establishment - infructuous applicationAdvance ruling admissibility - fixed establishment - Whether the applicant satisfies the statutory scope of 'applicant' for seeking an advance ruling under the GST Act - HELD THAT: - The Authority examined whether M/s Technip UK Limited falls within the definition of 'applicant' under Chapter XVII of the CGST Act. The material on record shows the applicant has its registered address outside India, does not have a fixed establishment in India and is unregistered under the GST Act. The contract in question was awarded to a consortium other than the applicant and the applicant is not a member of the successful consortium. Given these facts, the Authority concluded that the applicant does not satisfy the scope of 'applicant' envisaged for advance rulings and that the statutory purpose of the advance-ruling mechanism - to provide certainty to the person proposing to undertake a supply - would not be served in the present circumstances.The application is not maintainable because the applicant does not meet the statutory criteria of 'applicant' (no fixed establishment/registration and no prospective supply by the applicant under the awarded contract).Infructuous application - works contract - composite supply - supply - association of persons - Whether the questions on characterization of the NIT as a works contract and on applicable rates should be answered by the Authority - HELD THAT: - The Authority found that the substantive questions posed (whether the NIT/contract would qualify as a 'works contract', whether supplies by consortium members would be treated as distinct supplies, and entitlement to notifications specifying rates) depend on factual determinations about the contractual arrangements and on the applicant's status vis-a -vis the awarded contract. As the contract was awarded to a different consortium and the applicant is not a party thereto, the proposed supply by the applicant is no longer a live or prospective transaction. In that factual setting the Authority concluded that answering the questions would not achieve the statutory objective of providing advance certainty to the applicant and would be inappropriate.The application is rendered infructuous and the substantive questions raised are not answered by the Authority.Final Conclusion: The Authority holds that the ARA application is infructuous and not maintainable because the applicant does not satisfy the statutory scope of 'applicant' and the contract in question was awarded to a different consortium; accordingly the questions on characterization as a works contract and consequent tax-rate implications are not answered. Issues Involved:1. Whether the terms of the NIT, in particular its self-styled description as 'lump sum turnkey' contract, render it as a 'works contract' under GST lawRs.2. If the answer to (1) is affirmative, does it imply that each and every supply made under the contract would be subject to the rate of tax applicable to a 'works contract'Rs.3. If the answer to (1) is affirmative, will the position change if the consortium members raise distinct invoices and ONGC pays directly to the membersRs.4. Can it be said that in such circumstances the individual invoices will not be affected by the overall description as a 'works contract'Rs.5. If the answer to (1) is affirmative and only one single rate of tax applies to the entire contract, can the members claim the rate of tax in terms of Notification No. 39/2017 - Integrated Tax (Rate) dated 13.10.2017Rs.6. Can the member of the consortium supplying goods alone claim a concessional rate of tax of 5% in terms of Notification No. 3/2017-Integrated Tax (Rate) dated 28.06.2017Rs.Detailed Analysis:Issue 1: Whether the terms of the NIT render it as a 'works contract' under GST lawRs.The applicant sought clarity on whether the NIT's description as a 'lump sum turnkey' contract qualifies it as a 'works contract' under GST law. 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 involving the transfer of property in goods. The applicant argued that the contract involves separate supplies of goods and services by consortium members, raising distinct invoices directly paid by ONGC.Issue 2: If the answer to (1) is affirmative, does it imply that each and every supply made under the contract would be subject to the rate of tax applicable to a 'works contract'Rs.The applicant contended that if the contract is deemed a 'works contract', then each supply under the contract should be taxed as such. The concerned officer emphasized that 'works contract' is a composite supply treated as a supply of services under Schedule II of the CGST Act, and the rate of tax applicable to the entire contract would be based on the 'works contract' classification.Issue 3: If the answer to (1) is affirmative, will the position change if the consortium members raise distinct invoices and ONGC pays directly to the membersRs.The applicant queried whether distinct invoicing by consortium members and direct payments by ONGC would affect the 'works contract' classification. The concerned officer noted that even with distinct invoices, the supply would remain a 'works contract' if it involves the transfer of goods and services in execution of the contract. The supply would be treated as a composite supply of services.Issue 4: Can it be said that in such circumstances the individual invoices will not be affected by the overall description as a 'works contract'Rs.The concerned officer argued that individual invoices would still be part of the 'works contract' and would not change the overall classification. The supply of goods and services would still be considered a composite supply, and the tax rate applicable to 'works contract' would apply.Issue 5: If the answer to (1) is affirmative and only one single rate of tax applies to the entire contract, can the members claim the rate of tax in terms of Notification No. 39/2017 - Integrated Tax (Rate) dated 13.10.2017Rs.The applicant sought to know if a single tax rate under Notification No. 39/2017 would apply to the entire contract. The concerned officer clarified that if the contract is a 'works contract', the tax rate specified in Notification No. 39/2017 would apply to the entire contract, regardless of distinct invoicing by consortium members.Issue 6: Can the member of the consortium supplying goods alone claim a concessional rate of tax of 5% in terms of Notification No. 3/2017-Integrated Tax (Rate) dated 28.06.2017Rs.The applicant inquired if a consortium member supplying only goods could claim a concessional tax rate of 5% under Notification No. 3/2017. The concerned officer stated that if the contract is classified as a 'works contract', the concessional rate for goods alone would not apply. The entire contract would be taxed as a 'works contract' supply of services.Conclusion:The application was deemed infructuous as the contract was awarded to a different consortium, and the applicant was not a member of the successful consortium. Therefore, the questions raised were not answered, and the application was dismissed.