2021 (8) TMI 733 - AAR - GST

Supply of components to TANGEDCO by AHPL in transit now subject to GST, ruling clarifies

The ruling authority determined that components supplied by AHPL to TANGEDCO in a Sale-in-Transit transaction are considered a 'supply' under the GST Act ... Levy of GST - Components supplied by the Vendors in a Sale-in-Transit to AHPL - HELD THAT:- The applicant based on the contract for the work of RMU at Sholayar Power House, has procured the Components/Spares to be supplied by them to TANGEDCO and have supplied them to TANGEDCO, raised commercial Invoices for such supply with the applicable GST. The applicant has purchased the components which is a 'Supply' wherein the applicant is the recipient and thereupon has transferred the title to TANGEDCO, i.e., made the supply of the components to TANGEDCO as per the contract conditions. The goods were delivered at the project site by the vendors of the applicant. In the Pre-GST regime, such transactions, inter-state, were exempted subjected to certain conditions as per CST Act. In the GST regime, every limb of supply with/between a supplier and receiver is to be considered as a supply. In the case at hand, the applicant provides composite supply of Works Contract to TANGEDCO based on the agreement entered into by the applicant vide contract agreement dated 21.07.2015. To fulfill the scope of the contract, they supply the Components/spares for the Operation and Maintenance period, as per para 3.01.04/3.01.05 of the Lr. of TANGEDCO dated 30.01.2018 and the cost of such supplies are included in the contract price. Thus, the supply of Components/spares for the Operation and Maintenance period are part of the supplies of Works Contract entered into with TANGEDCO and therefore liable to GST at the appropriate rates. The Components, which were supplied in Sale-in-Transit transaction, without payment of tax under the erstwhile Central Sales Tax regime, by the Applicant, i.e., AHPL to its Customer (i.e., TANGEDCO) in Tamil Nadu is a 'Supply' as per Section 7 of the CGST/TNGST Act 2017 and will attract levy of Goods and Services Tax. Issues Involved:1. GST applicability on components supplied in a Sale-in-Transit to AHPL.2. GST applicability on components supplied by AHPL to TANGEDCO in Tamil Nadu.Issue-Wise Detailed Analysis:1. GST Applicability on Components Supplied in a Sale-in-Transit to AHPL:The applicant, AHPL, entered into a contract with TANGEDCO for renovation and modernization of a power project. They purchased components from various vendors and supplied them to TANGEDCO. The applicant sought clarity on whether GST is applicable on these components supplied in a Sale-in-Transit transaction.The ruling authority noted that under the erstwhile Central Sales Tax (CST) Act, such transactions were exempt from CST under Section 6(2) if certain conditions were met. However, under the GST regime, each supply is taxable, and the credit chain continues. The authority explained that as per Section 95 read with Section 97(2) of the GST Act, ruling can only be sought by the supplier of goods/services for supplies made/proposed to be made. Since the issue involves multiple supplies (from vendors to AHPL and AHPL to TANGEDCO), the question was not admitted for consideration on merits.2. GST Applicability on Components Supplied by AHPL to TANGEDCO:The applicant reframed their question to focus on the GST liability for components supplied by AHPL to TANGEDCO. The ruling authority admitted this question for consideration on merits.The applicant argued that under the GST regime, each supply is taxable, and there is no exemption for subsequent supply of goods in transit. They provided various documents, including purchase orders, invoices, and letters from TANGEDCO, to support their case. The authority examined these documents and noted that the applicant was required to supply components and spares as part of a composite contract for works contract services with TANGEDCO.The authority observed that under the GST Act, a works contract is treated as a supply of services. The supply of components and spares for operation and maintenance is part of the composite supply of works contract services. Therefore, these supplies are liable to GST at the appropriate rates. The authority concluded that the components supplied by AHPL to TANGEDCO in a Sale-in-Transit transaction are considered a 'supply' under Section 7 of the CGST/TNGST Act 2017 and will attract GST.Ruling:The components supplied by AHPL to TANGEDCO in a Sale-in-Transit transaction, which were previously exempt under the CST regime, are considered a 'supply' under the GST Act and will attract GST.