Nature of transaction with M/S APTRANSCO: Composite supply of goods & services, not Works Contract Services.

The case involved determining the nature of a transaction/contract with M/S APTRANSCO for the supply, installation, testing, and commissioning of Relay & Protection Panels with Substation Automation System. The applicant argued it was a works contract, while the jurisdictional officer viewed it as a composite supply of goods and services. The Authority for Advance Ruling (AAR) concluded that the transaction was a composite supply with the principal supply being goods, taxable at 18% GST under HSN code 8537. The transaction was not considered Works Contract Services and was not liable to GST under HSN Code 995461.

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Issues Involved:
1. Whether the transaction/contract to M/S APTRANSCO is in the nature of Works Contract Services and therefore liable to GST @ 18% under the HSN Code 995461Rs.
2. If not, whether the said transaction is a Supply of Goods, and if yes, at what rate of tax and under which HSN CodeRs.

Issue-Wise Detailed Analysis:

1. Whether the transaction/contract to M/S APTRANSCO is in the nature of Works Contract Services and therefore liable to GST @ 18% under the HSN Code 995461Rs.

The applicant, M/s. NR Energy Solutions India Pvt. Ltd., engaged in manufacturing and supplying electrical control panels and systems, entered into turnkey projects with M/S APTRANSCO for the supply, installation, testing, and commissioning of Relay & Protection Panels with Substation Automation System (SAS). The applicant contended that the contract is a "works contract" as defined under Section 2(119) of the CGST Act, 2017, involving the transfer of property in goods in the execution of the contract. They argued that the installed systems and panels become part of the immovable property (substation) and cannot be dismantled without damaging the substation, thus inheriting the characteristics of immovable property. The applicant cited various judicial pronouncements to support their claim that the contract is a works contract.

However, the jurisdictional officer contended that the project involves both supply of goods and services and is covered under "composite supply" rather than "works contract." They argued that the value of goods supplied constitutes more than 97.5% of the project value, and thus, the principal supply is goods, attracting GST at 28% under HSN code 85372000.

2. If not, whether the said transaction is a Supply of Goods, and if yes, at what rate of tax and under which HSN CodeRs.

The Authority for Advance Ruling (AAR) observed that the contracts involve clear bifurcation of supply of goods and services, which are naturally bundled and supplied in conjunction. The AAR referred to the definition of "Composite Supply" under Section 2(30) of the CGST Act, 2017, and concluded that the principal supply in this case is the supply of goods. The AAR noted that the goods supplied are essential for the substation's operation and are classified under HSN code 85372000, which attracts GST at 18%. Therefore, the entire transaction is treated as a composite supply with the principal supply being goods, and the applicable GST rate is 18% under HSN code 8537.

Conclusion:

Order:

1. The transaction/contract to M/S APTRANSCO is not in the nature of Works Contract Services and is not liable to GST @ 18% under HSN Code 995461.
2. The said transaction is a composite supply where the principal supply is the supply of goods.
3. The entire transaction is taxable at 18% GST under Heading 8537 of the GST Tariff.

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