Works contract spanning two states requires proportionate tax liability discharge in each state under Section 12(3) IGST Act

M/s. L and T PES JV Versus Assistant Commissioner of State Tax, State of Telangana, Union of India, Kaleshwaram Irrigation Project Corporation Limited, Appellate Joint Commissioner (ST).

M/s. L and T PES JV Versus Assistant Commissioner of State Tax, State of Telangana, Union of India, Kaleshwaram Irrigation Project Corporation Limited, ... Issues Involved:

1. Determination of the applicable section under the IGST Act for the works executed by the petitioner JV - Section 12(2)(a) or Section 12(3).
2. Classification of the supply as inter-state or intra-state.
3. Maintainability of the refund application submitted by the petitioner.

Detailed Analysis:

Issue 1: Applicable Section under IGST Act

The primary issue was whether the work executed by the petitioner JV falls under Section 12(2)(a) or Section 12(3) of the IGST Act. The court noted that the petitioner's contract is a Works Contract as defined under Section 2(119) of the CGST & IGST Act. Section 12(3) of the IGST Act applies to services directly related to immovable property, including construction work. The court observed that the construction of the barrage is spread across two States, and the place of supply should be determined based on the proportion of work executed in each State, as per the explanation to Section 12(3). The respondent No. 6 had previously held that Section 12(3) applies, and this finding was not challenged. Therefore, the court concluded that Section 12(3) is applicable, not Section 12(2)(a), as contended by the respondents.

Issue 2: Inter-State vs. Intra-State Supply

The court examined whether the supply of services was inter-state or intra-state. According to Section 7(3) of the IGST Act, supply is inter-state if the location of the supplier and the place of supply are in different States. Conversely, under Section 8(2), supply is intra-state if both the supplier and place of supply are in the same State. The court determined that the nature of supply is intra-state, as the supply of services was proportionate to the works executed in each State by contractors registered in those States. Thus, the tax liability should be discharged individually in each State for the work executed therein.

Issue 3: Maintainability of Refund Application

The petitioner sought a refund for excess TDS credited to the State of Telangana. The court noted that the petitioner had raised separate invoices for work executed in both States, but the entire TDS was remitted to Telangana. The court found the Appellate Authority's reasons for rejecting the refund claim improper, as the entire TDS amount, including for work done in Maharashtra, was deposited with Telangana. The court highlighted the absence of material evidence from the petitioner regarding the discharge of tax liability in Maharashtra and the proportion of work executed by JV partners. It concluded that the petitioner should approach the adjudicating authority with relevant materials to substantiate their claim for a refund.

Conclusion:

The court disposed of the writ petitions, allowing the petitioner to approach the adjudicating authority with appropriate documentation to support their refund claim. The authority is directed to consider the evidence and pass orders accordingly, ensuring that the petitioner is granted a refund upon providing proof of tax liability discharge in Maharashtra. The court emphasized the necessity of proper documentation and evidence to resolve the issues raised in the petitions.