Ruling: Greenfield Street Lighting not Works Contract; Capital subsidy included in GST value

The activities of supply, installation, operation, and maintenance of the Greenfield Public Street Lighting System were ruled not classifiable as Works Contract Services. Consequently, the applicability of GST under Entry 3(vi) of Notification No. 11/2017-CT(Rate) was not considered. The capital subsidy received/receivable for the transaction was deemed liable to be included in the Transaction Value for GST calculation. The ruling is valid unless declared void under the GST Act, with a provision for appeal to the Odisha State Appellate Authority for advance ruling within 30 days.

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Issues Involved:
1. Classification of the activities of supply, installation, operation, and maintenance of Greenfield Public Street Lighting System (GPSLS) as a supply of Works Contract Services.
2. Applicability of GST under Entry 3(vi) of Notification No. 11/2017-CT(Rate) dated 28 June 2017 for the supply and installation activities along with operation and maintenance activities.
3. Inclusion of the capital subsidy received/receivable in the Transaction Value for the purpose of calculation of GST payable in terms of Section 15 of the CGST Act, 2017.

Issue-wise Detailed Analysis:

1. Classification of Activities as Works Contract Services:
The applicant sought to classify the activities of supply, installation, operation, and maintenance of GPSLS as a supply of Works Contract Services. The applicant argued that the GPSLS qualifies as an immovable property and thus meets the conditions for works contract services under Section 2(119) of the CGST Act, 2017. The applicant cited various judicial pronouncements to support their claim.

Findings:
The authority examined the agreement and found that the contract value was bifurcated into supply of goods and supply of services. The major part of the contract (98.43%) was for the supply of goods, with the remaining for operation and maintenance fees. As the supplies were naturally bundled and in conjunction, it was deemed a composite supply under Section 2(30) of the CGST Act, 2017. The principal supply was identified as the supply of goods, not services. Therefore, the activities did not qualify as a supply of works contract services.

2. Applicability of GST under Entry 3(vi) of Notification No. 11/2017-CT(Rate):
This issue was contingent on the first issue. Since the activities were not classified as works contract services, the applicability of GST under Entry 3(vi) of Notification No. 11/2017-CT(Rate) was not considered.

Findings:
As the answer to the first question was negative, the provisions of Notification No. 11/2017-CT(Rate) did not apply. The principal supply being the supply of goods, GST would be paid at the appropriate rate for goods.

3. Inclusion of Capital Subsidy in Transaction Value for GST Calculation:
The applicant contended that the capital subsidy received from the Authority and ULBs should not be included in the Transaction Value for GST calculation, as it was an extension of the State Government.

Findings:
The authority referred to Section 15(2)(e) of the CGST Act, which includes subsidies directly linked to the price, excluding those provided by the Central or State Governments, in the value of supply. The capital subsidy in this case was deemed a consideration for the supply of goods, not a typical subsidy. Therefore, it was liable to be included in the Transaction Value for GST calculation.

Ruling:
1. The activities of supply, installation, operation, and maintenance of GPSLS are not classifiable as a supply of Works Contract Services.
2. Since the first question was answered in the negative, there was no need to address the applicability of GST under Entry 3(vi) of Notification No. 11/2017-CT(Rate).
3. The capital subsidy received/receivable for the subject transaction is liable to be included in the Transaction Value for GST calculation.

Validity and Appeal:
The ruling is valid subject to the provisions under Section 103(2) until declared void under Section 104(1) of the GST Act. The applicant or jurisdictional officer may appeal to the Odisha State Appellate Authority for advance ruling within 30 days from the date of receipt of the advance ruling.

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