2019 (4) TMI 1622 - AAR - GST

Dispute over LED street light services classification: GST rate set at 12% for principal supply

In Re: M/s. Ujjwal Pune Limited

The case involved a dispute regarding the classification of services provided under a contract with a municipal corporation for the installation and ... Classification of supply - Works contract services or composite contract - supply of goods and services of installation - Whether Supply involved in the Contract shall qualify as Composite supply of works Contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017? - HELD THAT:- The contract would involve more than two taxable supplies such as supply of LED Dimmable Street lights and fixtures, installation, commissioning, operation etc. The impugned supplies of goods and services are supplied in conjunction with each other in the ordinary course of business. Thus the transaction in question satisfy the ingredient of composite supply as defined under section 2(30) of the GST Act with supply of LED Dimmable Street lights/ fixtures as principle supply - the supply of Dimmable Street lights/fixtures constitute principle supply. In the subject case it is seen that, even though the contract covers both, supply of goods and service, the bid and subsequent tender is for installation of Energy Efficient dimmable LED Street lights along with pet feeder basis SCADA system in Pune on a design, build, finance, operate, maintain & transfer basis for a period of 12 (twelve) years. Hence the predominant and principal factor is to supply and install LED and fixtures on the existing street light poles and then to perform the activity of day to day management of the same by operating and maintaining such equipment to achieve energy savings - As is evident applicant would be providing bouquet of goods and services and if we remove one of the supply i.e. supply of the Dimmable Street lights/fixtures, the Other supply would be severely affected or may become meaningless. Without such installation of LEDs/ fixtures, there can be no day to day management in the form Of operation and maintenance. Hence in view of the above discussions, we reiterate that the principal supply by the claimant would be a supply of goods. In the present case there is supply of both, goods and services made in conjunction with each other in the ordinary course of business - the supply of services/goods in the present case is naturally bundled, with the supply of services goods being incidental to the supply of goods and therefore such contract are to be considered as a composite supply of service where the principal supply is of goods and the supply of services is incidental/ancillary to such supply of goods. Thus the activity of supply will not be covered under Sl.no. 3(vi)(a) of Notification No. 11/2017 - Central Tax (Rate) dt.28th June 2017 amended by Notification No.24/2017-Central Tax (Rate) dt 21.09.2017 and further amended by notification no. 31/2017 Central Tax (Rate) dt 13.10.2017 and notification no. 17/2018 dt.26.07.2018 because the said Notification as amended cover supply of services and does not cover supply of goods. Rate of GST - HELD THAT:- Theirs is a composite supply where the principal supply is of goods and therefore the applicant will have to discharge their GST liability at a rate which will be the tariff rate for the goods, in this case LEDs and fixtures - ‘LED Lights or Fixtures including LED Lamps’ are covered under the Sub-Heading 9405 40 90 of the GST Tariff, 2017 which are taxable @ 12%. Issues Involved:1. Whether the nature of services provided under the contract is covered under Sl.no. 3(vi)(a) of notification no. 11/2017 - Central Tax (Rate) dt. 28th June 2017 as amended.2. The applicable rate of GST for the project.Issue-wise Detailed Analysis:1. Nature of Services under Sl.no. 3(vi)(a) of Notification No. 11/2017:The applicant, Ujjwal Pune Limited (UPL), sought clarification on whether their services provided under a contract with Pune Municipal Corporation (PMC) fall under Sl.no. 3(vi)(a) of notification no. 11/2017 - Central Tax (Rate) dt. 28th June 2017, as amended. The contract involved the installation and operation of energy-efficient dimmable LED street lights with a SCADA system on a design, build, finance, operate, maintain, and transfer basis for 12 years.To determine if the services qualify under the specified notification, the following conditions were analyzed:- Local Authority: PMC qualifies as a local authority under Section 2(69) of the CGST Act.- Composite Supply of Works Contract: As per Section 2(119) of the CGST Act, a works contract involves building, construction, installation, etc., of immovable property. The LED fixtures and SCADA system were considered immovable property since they are attached to electric poles, which are attached to the earth. The removal of these fixtures would lead to damage and loss of commercial value.- Civil Structure or Original Works: The scope of work included the installation of equipment like LED fixtures and SCADA system, which falls under 'original works' as per the explanation to Section 2(zs) of Notification 12/2017.- Non-commercial Use: The project aimed at energy savings and efficiency, with no profit motive, aligning with the definition of non-commercial use as per Section 2(17) of the CGST Act and the explanation given in notification no. 17/2018 - Central Tax (Rate).However, the authority concluded that the LED fixtures and SCADA system do not qualify as immovable property since they can be removed without damaging the electric poles. Therefore, the contract does not constitute a works contract under Section 2(119) of the CGST Act. The principal supply was identified as the supply of goods (LED fixtures), with services being ancillary.2. Applicable Rate of GST:Since the supply was deemed a composite supply where the principal supply is of goods (LED fixtures), the applicable GST rate is determined based on the tariff classification of the goods. LED lights or fixtures, including LED lamps, fall under Sub-Heading 9405 40 90 of the GST Tariff, 2017, which is taxable at 12% (6% CGST and 6% SGST).Order:1. The nature of services provided under the contract is not covered under Sl.no. 3(vi)(a) of notification no. 11/2017 - Central Tax (Rate) dt. 28th June 2017, as amended.2. The applicable GST rate for the project is 12% (6% CGST and 6% SGST).