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 and will attract GST, contrary to the previous exemption under the CST regime. The authority emphasized that under the GST regime, each supply is taxable, including subsequent supply of goods in transit, as part of a composite contract for works contract services with TANGEDCO. The ruling clarified that these supplies are liable to GST at the appropriate rates, in accordance with Section 7 of the CGST/TNGST Act 2017.

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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.

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