2019 (12) TMI 1244 - AAAR - GST

GST liability confirmed on unadjusted mobilization advance in Kolkata Metro contract

In Re: M/s. Siemens Ltd.

The Tribunal upheld the WBAAR's ruling that the unadjusted mobilization advance was subject to GST liability as of 01.07.2017. The appellant's appeal ... Valuation - works contract - lump-sum amount stood credited to its account on that date as mobilisation advance - whether the unadjusted part of the advance received by the appellant can be considered for taxation under the GST Act on 01.07.2017 itself. - design, supply, installation, testing and commissioning of the power supply and distribution system, third rail system and SCADA system for the entire line and depot of the Kolkata East-West Metro Rail Project - time of supply of services - challenge to AAR decision. HELD THAT:- Even by the wildest imagination, the observations made by Tribunals in the pre-GST regime cannot be made applicable in this case. Moreover, in the transitional provisions of the GST Act, no such provision has been included whereby, the advance outstanding as on 01.07.2017 can be allowed to be subjected to GST only as and when the bills are raised against supply of goods and services. Immediately upon introduction of GST Act, that is with effect from the 1st day of July, 2017, the erstwhile Finance Act, 1994 and the notifications issued there under ceased to exist. In the instant matter the only applicable law is the GST Act, 2017. Accordingly, the time of supply of services is to be guided by section 13(2) of the GST Act - Hence, the remaining unadjusted amount of ₹ 13,80.74,549/- as on 01.07.2017 has to be construed as if it was credited into the account of the appellant on the date of 01.07.2017 only, which will attract GST on such amount on that date itself. Hence, there are no force in the argument of the appellant that section 13 (2) of the GST Act, 2017 will not be applicable in the instant case. In respect of the goods and services provided by the appellant to KMRCL post introduction of GST, the amount of ₹ 13,80,74,549/- can only be considered as advance paid as on 01.07.2017, and in the absence of any exemption of mobilization advance from tax under GST regime, the entire amount of ₹ 13,80,74,549/- becomes taxable on the said date. There are no infirmity in the ruling pronounced by the WBAAR - appeal dismissed. Issues:1. Appellant's appeal against Advance Ruling Order on GST levied on mobilization advance.2. Interpretation of provisions under GST Act regarding taxation on unadjusted lump-sum amount.3. Applicability of transitional provisions in GST Act to determine tax liability.4. Consideration of mobilization advance as deposit or advance for GST purposes.5. Impact of Tribunal decisions on the case.Analysis:1. The appeal was filed by M/s. Siemens Ltd. against an Advance Ruling Order on whether GST should be charged on the gross amount of an invoice or the net amount after adjusting a mobilization advance. The contract with Kolkata Metro Rail Corporation involved supply and installation services. The Advance Ruling deemed the appellant to have supplied works contract service to KMRCL based on the mobilization advance credited to its account, requiring GST to be levied accordingly.2. The appellant argued that GST should not apply to the mobilization advance received before GST implementation, citing transitional provisions under section 142(10) of the GST Act. They contended that the advance should not be considered as 'consideration' for GST purposes until utilized as such. The WBAAR's ruling was based on the view that the mobilization advance constituted consideration for services provided.3. The WBAAR's decision was challenged by the appellant on grounds including the nature of the advance, applicability of GST retrospectively, and the treatment of the advance under the GST Act. The appellant highlighted the distinction between advance and deposit, emphasizing that the unadjusted lump-sum amount should not be subject to GST until utilized for service provision.4. The appellant referenced Tribunal decisions on mobilization advance resembling earnest money and argued that the nature of the advance did not change post-GST implementation. However, the WBAAR upheld the GST liability on the unadjusted advance as of 01.07.2017, based on the provisions of the GST Act and the time of supply rules.5. The Tribunal rejected the appellant's arguments, emphasizing that the unadjusted advance became taxable under the GST Act from 01.07.2017. The WBAAR's ruling was upheld, stating that the unadjusted amount was taxable as of that date. The appeal was dismissed, affirming the GST liability on the mobilization advance.