NHAI's transmission line shifting work under MVVNL supervision not taxable under GST Act Section 7 due to lack of consideration element

The AAR, UP ruled that NHAI's work in shifting transmission lines for road widening under MVVNL supervision does not constitute supply under GST Act Section 7, as no consideration element exists. MVVNL only provides supervision services with GST charged separately, while NHAI bears all material and labor costs through contractors who pay GST and claim ITC. Since no assets transfer to NHAI and ownership remains with MVVNL, demanding GST on the full project cost would result in double taxation. The activity is ancillary to NHAI's primary road construction work, making GST inapplicable on the shifting operation itself.

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Issues Involved:
1. Whether the work done by the applicant (NHAI) in shifting the transmission lines for the widening of road under the supervision of MVVNL comes under the definition of supply as per section 15(2)(b) of C.G.S.T. Act, 2017Rs.
2. Whether GST is to be paid to MVVNL on the full amount of work done for shifting the transmission lines by NHAIRs.
3. If NHAI pays GST on the entire value of work done to its contractors and also to MVVNL, how will this not constitute double taxationRs.

Detailed Analysis:

Issue 1: Definition of Supply
The core question is whether the shifting of transmission lines by NHAI under MVVNL's supervision constitutes a "supply" under section 15(2)(b) of the CGST Act, 2017.

- Applicant's Argument: NHAI argued that the work done does not constitute a supply because there is no consideration involved between NHAI and MVVNL. The ownership and operational control of the transmission lines remain with MVVNL, and NHAI only pays for supervision charges.

- Authority's Finding: The authority observed that there is no transfer of ownership or consideration involved in the shifting of transmission lines. The activity is ancillary to NHAI's primary work of road widening, and MVVNL is only providing supervision services. Therefore, this activity does not meet the criteria of "supply" as defined in Section 7 of the GST Act, 2017.

Issue 2: GST on Full Amount of Work Done
The question here is whether GST is payable to MVVNL on the entire value of the work done for shifting the transmission lines by NHAI.

- Applicant's Argument: NHAI contended that GST should only be levied on the supervision charges paid to MVVNL, not on the entire cost of shifting the transmission lines. They cited a similar ruling by the Rajasthan Authority of Advance Ruling and practices followed by the Power Grid Corporation of India Ltd.

- Authority's Finding: The authority concluded that GST is only applicable on the supervision charges levied by MVVNL. The cost of shifting the transmission lines, which includes materials and labor, is borne by NHAI and its contractors, who are already paying GST on these transactions. Hence, demanding GST on the entire project cost from MVVNL would result in double taxation.

Issue 3: Double Taxation
The concern is whether paying GST to both the contractors and MVVNL on the same transaction constitutes double taxation.

- Applicant's Argument: NHAI argued that paying GST twice would be a heavy burden and result in double taxation, which is against the provisions of law and natural justice.

- Authority's Finding: The authority agreed with the applicant's argument, stating that since the project cost is borne by NHAI through its contractors, who are already paying GST, demanding GST from MVVNL on the same amount would indeed constitute double taxation. The authority emphasized that MVVNL is only providing supervision services and should only charge GST on those services.

Conclusion:
1. Definition of Supply: The work done by NHAI in shifting the transmission lines does not come under the definition of supply as per section 15(2)(b) of the CGST Act, 2017.
2. GST on Full Amount: GST is not to be paid to MVVNL on the full amount of work done for shifting the transmission lines. GST is only leviable on the supervision charges.
3. Double Taxation: Paying GST to both the contractors and MVVNL on the same transaction would constitute double taxation, which is not permissible.

Order:
1. The work done by NHAI in shifting the transmission lines does not constitute a supply under section 15(2)(b) of the CGST Act, 2017.
2. GST is only leviable on the supervision charges charged by MVVNL.
3. The issue of double taxation is addressed by the above findings.

This ruling is valid within the jurisdiction of the Authority for Advance Ruling, Uttar Pradesh, and subject to the provisions under Section 103(2) of the CGST Act, 2017 until declared void under Section 104(1) of the Act.

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