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of <h1>Classification of FGD Plant Setup & Maintenance Services for GST</h1> <h3>In Re: M/s. Shapoorji Pallonji and Company Pvt. Ltd.,</h3> In Re: M/s. Shapoorji Pallonji and Company Pvt. Ltd., - TMI Issues Involved:1. Whether the combined service of setting up of Wet Limestone FGD plant and operation & maintenance be considered as a composite supply.2. If considered a composite supply, whether it is a composite supply of works contract as per Section 2(30) and Section 2(119) of CGST Act, 2017, and what would be the principal supply.3. Whether the supply falls under entry no.3(iv)(e) of Notification No.11/2017-Central Tax (Rate) dated 28.06.2017.4. Applicable GST rate and SAC/HSN.Issue-wise Detailed Analysis:1. Whether the combined service of setting up of Wet Limestone FGD plant and operation & maintenance be considered as a composite supply:The applicant contended that their services of setting up the FGD plant and operation & maintenance of the said plant together constitute a composite supply, with the principal supply being the setting up of the FGD plant. They argued that the combined supply is naturally bundled and supplied in conjunction with each other in the ordinary course of business. The applicant cited Section 2(30) of the CGST Act, 2017, which defines 'Composite Supply' as a supply consisting of two or more taxable supplies of goods or services or both, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.The Authority, however, observed that the tender documents and the agreement clearly demarcate the activities of setting up the FGD plant and its operation & maintenance as separate supplies. The job order specifies separate payment schedules and performance guarantees for each activity, indicating that they are not naturally bundled. The Authority concluded that the combined service does not constitute a composite supply as the two services are not supplied in conjunction with each other but one after the other.2. If considered a composite supply, whether it is a composite supply of works contract as per Section 2(30) and Section 2(119) of CGST Act, 2017, and what would be the principal supply:Since the first issue was answered in the negative, this question became redundant. The Authority did not consider the combined service as a composite supply, and hence, it was not necessary to determine if it was a composite supply of works contract or to identify the principal supply.3. Whether the supply falls under entry no.3(iv)(e) of Notification No.11/2017-Central Tax (Rate) dated 28.06.2017:The Authority examined whether the setting up of the FGD plant qualifies as a composite supply of works contract and falls under entry no.3(iv)(e) of the Notification No.11/2017-Central Tax (Rate) dated 28.06.2017. The setting up of the FGD plant involves civil works, equipment foundation works, duct works, and installation works, which result in an immovable property. The FGD plant is meant for the control of emission of hazardous gases, making it a pollution control device. The Authority concluded that the setting up of the FGD plant qualifies as a composite supply of works contract and falls under entry no.3(iv)(e) of the said notification, attracting GST at the rate of 12%.4. Applicable GST rate and SAC/HSN:The Authority ruled that the setting up of the FGD plant merits classification under SAC 995429 and attracts GST at the rate of 12%, in terms of entry No.3(iv)(e) of the Notification No.11/2017-Central Tax (Rate) dated 28.06.2017. The operation & maintenance of the FGD plant, being a separate supply, falls under 'Business Support Service' classified under SAC 9985, specifically SAC 998599 as 'Other Support Services not elsewhere classified,' attracting GST at the rate of 18%, in terms of entry No.23(iii) of the Notification No.11/2017-Central Tax (Rate) dated 28.06.2017.Ruling:a) The combined service of setting up of Wet Limestone FGD plant and operation & maintenance of the said plant cannot be considered as a composite supply.b) The question of it being a composite supply of works contract is redundant.c) The supply is not considered a composite supply, making the related question redundant.d) The setting up of the FGD plant merits classification under SAC 995429 and attracts GST at the rate of 12%. The operation & maintenance of the FGD plant merit classification under SAC 9985, as 'Business Support' service, attracting GST at the rate of 18%.
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