2018 (6) TMI 559

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....Out of each milestone, a certain portion of the payment is withheld by RMC as retention. Based on the schedule of payments, the applicant had to raise an invoice, out of which the Government would retain some part as retention and release the balance amount. Upon final completion and testing of the network of the pipeline, the balance dues of the applicant are released marking the completion of the project. 2. The applicant was holding registration under Gujarat Value Added Tax Act and was holding a permission to pay tax on a lump sum basis under the erstwhile provisions of the Gujarat Value Added Tax Act. The nature of the work of the tender being a works contract, the applicant used to discharge its liability as per the rates specified in the Gujarat Value Added Tax Act without claiming any benefit of the input tax credit on any items purchased (big or small) and used in the work as specified in the tender. 3. The applicant submitted that they had bought pipes for the project of RMC. At the time of purchase, the applicant had paid Central Excise and VAT. Thereafter the applicant had undertaken excavation work whereby trenches are dug in order to lay the pipes. Once the desi....

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.... are fixed ensure that the applicant never has an option to run away from the project midway. They submitted that in their opinion, the milestone which is yet to be achieved under the GST regime is an extension and inextricably linked with the other two milestones which have been completed. They referred to Section 7 of the Central Goods and Services Tax Act, 2017 (herein after referred to as the 'CGST Act, 2017') and Gujarat Goods and Services Tax Act, 2017 (herein after referred to as the 'GGST Act, 2017') and submitted that the scope of the word 'supply' under the GST Act and the definition provided, in their opinion, makes it hard to define the nature of the work as supply as before the advent of GST, the structure of network is erected but the payment for the pipes cost is yet to be realized to the extent of balance payment being withheld. 7. The applicant submitted that without prejudice to the above, if at all the pending milestone is considered as a supply exigible to tax, it must be declared as a works contract because in pith and substance, the activity is nothing more but continuation of the creation of the immovable property i.e. network of pipelines. They referred t....

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....eration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract;" 11.2 Thus, a contract for any immovable property wherein transfer of property in goods is involved in the execution of such contract fall within the definition of 'works contract'. 11.3 In the present case, the applicant had undertaken excavation work whereby trenches are dug and pipes are laid after desired level of depth of soil is dug and a network of pipes is made by joining the pipes either by lamination or welding so that a permanent structure of pipeline network is formed. After the work of laying of pipeline and joining them is over, the trenches are refilled with soil and the pipeline network so formed remains underground. Once the said network of pipes is created, the pipes cannot be dismantled or removed as such. In order to dismantle it, the entire pipe network has to be demolished and there is hardly any salvage. 11.4 We observe that the underground pipeline network created by joining the pipes either by lamination or welding cannot be dismantled without substantial damage and thus can....

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....re covered by the aforesaid provisions and the applicant is required to discharge Goods and Services Tax liability accordingly. Provisions have been made under sub-section (11) of Section 142 of the CGST Act, 2017 and the GGST Act, 2017 to ensure that the tax is not levied under the existing laws (Chapter V of the Finance Act, 1994 and Gujarat Value Added Tax Act, 2005) as well as under the GST Laws. 13.1 As regards the admissibility of input tax credit on pipes used in pipeline network, the applicant has referred to sub-section (6) of Section 140 of the CGST Act, 2017 and the GGST Act, 2017, which reads as follows :- "(6) A registered person, who was either paying tax at a fixed rate or paying a fixed amount in lieu of the tax payable under the existing law shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to the following conditions, namely :- (i) such inputs or goods are used or intended to be used for making taxable supplies under this Act; (ii) the said registered person is not pa....