Mobilization advance received before GST implementation not subject to GST under Section 142(11)(c) transitional provisions

The AAR, Tamil Nadu ruled that GST is not payable on mobilization advance received before GST implementation. The applicant received advance against works contract services and paid service tax on 40% of the value under pre-GST regime. The AAR held that transitional provisions under Section 142(11)(c) were not applicable since no VAT was paid on the material component of the advance. The supply was deemed completed prior to GST implementation date to the extent covered by the mobilization advance. GST liability would arise only on supplies made post-GST implementation without deducting the pre-GST advance portion.

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Issues Involved:

1. Applicability of Transitional Provisions under Section 142(11)(c) of TNGST/CGST Act, 2017 for Mobilization Advance.
2. Liability to pay GST on installments of Mobilization Advance transitioned into the GST regime.
3. Eligibility to avail Input Tax Credit (ITC) on Service Tax paid during the Pre-GST period through TRAN-1 Return.

Issue-wise Detailed Analysis:

1. Applicability of Transitional Provisions under Section 142(11)(c) of TNGST/CGST Act, 2017 for Mobilization Advance:

The applicant, engaged in the construction business, received Mobilization Advance from CMC before the implementation of GST and paid Service Tax on it. Post-GST, the remaining installments transitioned into the GST regime. The applicant argued that Section 142(11)(c) should apply, allowing them to adjust these installments under GST. However, the ruling clarified that Section 142(11)(c) applies only when both VAT and Service Tax were paid on the supply before GST, which was not the case here as only Service Tax was paid. Therefore, Section 142(11)(c) was deemed not applicable.

2. Liability to pay GST on installments of Mobilization Advance transitioned into the GST regime:

The ruling examined whether GST should be paid on the RA Bills raised post-GST implementation, including the part of the Mobilization Advance adjusted in these bills. The applicant contended that GST should be paid on the gross value, inclusive of the adjusted advance, under Section 142(11)(c). However, the authority concluded that Section 142(11)(b) is more appropriate, which states that no GST is payable on services to the extent Service Tax was already levied under the Finance Act, 1994. Therefore, GST is not applicable on the Mobilization Advance received prior to GST implementation.

3. Eligibility to avail Input Tax Credit (ITC) on Service Tax paid during the Pre-GST period through TRAN-1 Return:

The applicant sought clarity on availing ITC for Service Tax paid during the Pre-GST period, transferred via TRAN-1 Return. The ruling noted that the question of ITC eligibility under transitional provisions is beyond the scope of Advance Ruling Authority as per Section 97(2) of the Act. Consequently, this issue was not addressed in the ruling.

Ruling:

1. The Transitional Provisions under Section 142(11)(c) are not applicable to the case at hand.
2. The Mobilization Advance received prior to GST implementation is not subject to GST as per Section 142(11)(b) of the GST Act 2017.
3. The eligibility to credit based on transitional provisions is not answered as it is beyond the scope of Advance Ruling Authority under Section 97(2) of the Act.

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