TaxTMI 
TaxTMI 
2019 (4) TMI 806
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....to rate of tax as applicable to a 'works contract'? (c) In the event the answer to (a) is in the affirmative; (A) Will the position change if the members of the consortium raise distinct invoices and ONGC also pays directly to the members? (B) Can it be said that in such circumstances the individual invoices will not be affected by the overall description as a 'works contract'? (d) In the event the answer to (a) is in the affirmative and only one single rate of tax applies to the entire contract, can the members of the claim rate of tax in terms of Notification No. 39/2017 - Integrated Tax (Rate) dated 13.10.2017? (e) In the given facts of the instant application, can the member of the consortium supplying goods alone claim concessional rate of tax of 5% in terms of Notification No. 3/2017-Integrated Tax (Rate) dated 28.06.2017? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST ....
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....icipate not individually but as part of a consortium. This consortium would comprise of the Applicant and another member, and there will be a joint bid. ii) In the above scenario, the members of the consortium will separately supply the goods and services i.e. one member will supply the goods and other member will supply the service. iii) In terms of the NIT, the members of the consortium are required to (i) make separate supplies to the ONCC and (ii) can raise invoices upon ONGC directly for their respective supplies. iv) These invoices will be separately and directly paid by the ONGC to the respective member of the consortium. 7. In the aforesaid background a question has arisen as to the applicable rate of GST to be charged on the respective invoices of the members of the consortium which would be raised upon ONGC. The question has arisen inter alia in view of the characterization of the NIT in consideration. The precise issue is whether in the facts of the NIT described above and taking into account its relevant clauses the NIT (when it is eventually executed into a contract) render it into (i) a 'works contract under GST law taking into consid....
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....ations undertaken under petroleum exploration licenses or mining leases, granted by the Government of India or any State Government to the Oil and Natural Gas Corporation or Oil India Limited on nomination basis, or (2) Petroleum operations undertaken under specified contracts, or (3) Petroleum operations undertaken under specified contracts under the New Exploration Licensing Policy, or (4) Petroleum operations undertaken under specified contracts under the Marginal Field Policy (MFP), or (5) Coal bed methane operations undertaken under specified contracts under the Coal Bed Methane Policy 5% 14. The Applicant is desirous of knowing whether such contract shall be considered as a works contract for the purpose of GST and accordingly the rate of tax applicable on such work contract shall apply on each and every invoice raised by them. Alternatively, whether the members of the consortium supplying goods alone can claim concessional rate of tax of 5% in terms of Notification No. 3/2017-lntegrated Tax (Rate) dated 28.06.2017. 15. It is in the aforesaid background, that the instant application is being filed for a ruling from this Hon'ble Authority so as to ascertai....
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....bove. 2. The Applicant understands the following; • An agreement which qualifies as a works contract in terms of Section 2(119) Of the MGST Act / CGST Act is necessarily a 'composite Supply in terms of entry 6(a) Of the Schedule II to the MGST Act/ CGST Act. • The liability of composite supply has to be determined in terms of Section 8(a) of the MGST Act/ CGST Act. • Works Contract is accordingly considered a 'supply of service in terms of this entry 6(a) of the Schedule II to the MGST Act/CGST Act. • Notification No. 39/2017 - Integrated Tax (Rate) dated 13.10.2017 specifies the rate of tax on supply of works contract service. 3. At the outset the Applicant requests this Hon'ble Authority to confirm if the aforesaid understanding of the Applicant reflects correct appreciation of legal position. 4. In view of the aforesaid, it is prayed that this Hon'ble Authority be pleased to issue the ruling clarifying the legal position generally as also opine upon the specific questions raised by the Applicant as set out above. 5. It is further prayed that this Hon'ble Authority also be pleased to; (a)....
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....Paul's Churchyard, London, EC4M 8AP-UK and address for correspondence at Unit No.602, Wing-A, and Unit Nos.601 & 602, WingB-1, Boomerang, Chandivli Farm Road, Near Chandivli Farm Road, Near Chandivli Studio, Andheri (East) Mumbai 400072, Maharashtra, India. The Applicant Company seek to clarity on the applicable rate of tax on the transaction proposed to be executed in relation to tenders issued by the oil and Natural Gas Corporation of India Ltd. ('ONGC') for executing erection, commissioning and installation work on turnkey basis for petroleum operations. Further, in this regard, the applicant has submitted a sample Notice Inviting Tender (NIT) issued by ONGC (Annexure-3), the 'General Conditions of Contract ("GCC') (Annexure-4) appended to the NIT and Bid Evaluation Criteria (Annexure-5) released by ONGC The Tenders issued by ONGC normally relates to erection, commissioning, and installation of plant and machinery for ONGC. In terms of the NIT, bids are invited for overall responsibility of entire project. Further, as per the NIT and its accompanying Annexures, the bidders are required to give an overall lump-sum price' towards carrying out the obligations unde....
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....tification No.39/2017- Integrated Tax (Rate) dated 13.10.2017, 'offshore works contract services' for oil and gas exploration and production attract a GST rate of 12 percent. As per this Notification, 'Onshore works contract services' for oil and gas exploration and production attract a GST rate of 18 percent. Entry No.3 (viii) and 3(ix) of the Notification are to this effect. Besides the above, it is also relevant to point that Notification No.3/2017-Integrated Tax (Rate) dated 28.06.2017 may also be applicable in the present case. The said Notification provides for a concessional rate of GST i.e. 5% on specified goods supplied in relation to petroleum projects. The applicant is desirous of knowing whether such contract shall be considered as a works contract for the purpose of GST and accordingly the rate of tax applicable on such work contract shall apply on each and every invoice raised by them. Alternatively, whether the members of the consortium supplying goods alone can claim concessional rate of tax of 5% in terms of Notification No.3/2017-Integrated Tax (Rate) dated 28.06.2017. 3. In point No.16 of the application regarding statement containing the....
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....rs of the consortium raise distinct invoices and ONGC also pays directly to the members? (B) Can it be said that in such circumstances the individual invoices will not be affected by the overall description as a 'works contract'? (d) In the event the answer to (a) is in the affirmative and only one single rate of tax applies to the entire contract, can the members of the claim rate of tax in terms of Notification No.39/2017 - Integrated Tax (Rate) dated 13.10.2017? (e) In the given facts of the instant application, can the member of the consortium supplying goods alone claim concessional rate of tax of 5% in terms of Notification No.3/2017-Integrated Tax (Rate) dated 28.06.2017? In this regard, based on the statements of facts forwarded, the para-wise comments to the queries raised by M/s Technip UK Ltd., are as follows; i) As per Section 2(119) of CGST Act, 2017, works contract is defined as: "works contract" means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in....
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....ust; and n) Every artificial juridical person, not falling within any of the above The applicant, in their application has stated that they would like to participate not individually but as a part of consortium. This consortium would comprise of the applicant an another, member, and there would be a joint bid. Thus, from the above, the consortium may fall under the category of person as per Section 2(84) of CGST Act, 2017 as an "association of persons" and may be taxable as such. Therefore, to be able to determine, whether the supply under the said contract would be a Composite Supply, or otherwise, it would be important to decide whether the Consortium would fall under the category of Association of Persons and taxable person as such. However, in order to decide the status of Consortium as an Association of Persons or otherwise, it shall be important to understand the contractual arrangements amongst the participating members of the consortium, the existence of some common management, the arrangement of sharing profit, the composition of the consortium, roles of the applicant and members of the consortium in the course of the supply etc. However, nothing in respect ....
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....n the earth, as in the case of walls or buildings: or (c) attached to what is so embedded for the permanent beneficial enjoyment of that to which it is attached: Therefore, to be able to conclude whether the contract is a Works Contract or otherwise, it is important to determine whether the activities as per the contract would be related to immovable property or not which itself depends upon the meaning as defined under Section 3(26) of the General Clauses Act, 1897 to include things attached to the earth (as per the meaning assigned under Section 3 of the Transfer of Property Act, 1882) or permanently fastened 10 anything attached to the earth. However, from the annexures, including sample Notice Inviting Tender (NIT) and General Clauses and Conditions (GCC) provided; the exact description about the above work i.e. SPS, SURF, LOFS etc is not found and therefore, it cannot be concluded as to whether the above described work (as per the scope of Work Summary provided) is that of immovable property or not. The same is not coming out of the scope of Work. Therefore, the Hon'ble authority may like to direct the applicant to provide detailed description of scope of wo....
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....invoices, whether the supply is towards the fulfilment of the subject work contract and they should also provide a mechanism for tracking the quantification of such supplies towards the fulfilment of the subject work contract. The said supplies under the work contract should clearly be distinguishable from any other individual supplies: (d) This question also stems from question a). Therefore, if on providing relevant information the Contract if found to be a Work Contract and the subject consortium found to meriting as 'Association of Persons', only then members of Consortium (AOP) will be eligible for benefit of Notification No:39/2017 subject to the fulfilment of the Criteria and conditions laid down in the said notification. The position shall not change even if the members of the consortium raise distinct invoices, the supply shall remain that of Works Contract and the rate of tax in terms of notification no. 39/2017 - Integrated Tax (Rate) dated 13.10.2017 will apply. (e) if on providing relevant information the Contract if found to be a Work Contract, member of the Consortium, supplying goods alone, cannot claim concessional rate of tax of 5% in terms of Notifi....
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....) is in the affirmative; (A) Will the position change if the members of the consortium raise distinct invoices and ONGC also pays directly to the members? (B) Can it be said that in such circumstances the individual invoices will not be affected by the overall description as a 'works contract'? The answer is, this question stems from question a). Therefore, if on providing relevant information the contract is found to be a Works Contract and the subject consortium found to be meriting as 'Association of Persons', (involving transfer of goods as well) then it will be treated as a supply of services in terms of Schedule - I to CGST Act, 2017, even if the members of the consortium raise distinct invoices and ONGC also pays directly to the member, the supply shall be that of Works Contract alone and tax shall be levied on supply of Works Contract. Individual members' invoices, however, may make supply of goods and services independently of the contract, however, they shall be required to differentiate in their invoices, whether the supply is towards the fulfilment of the subject work contract and they should also provide a mechanism for tracking the quantifi....
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....f on providing relevant information the Contract if found to be a Work Contract, member of the Consortium, supplying goods alone, cannot claim concessional rate of tax of 5% in terms of Notification No. 3/2017- Integrated Tax(Rate) dated 28.06.2017 since the supply of such goods would be the part of supplying Works Contract which is a service and the notification No. 3/2017 -Integrated Tax (Rate) applies for the supply of goods alone and the rate as applicable to Works Contract supply shall apply. Hence, this office prays Hon'ble Authority to direct the applicant to provide additional relevant details of the scope of work and the contractual framework of the members of the consortium detailing its composition and contractual arrangements amongst the participating members of the consortium, the existence of some common management, the arrangement of sharing profit, the composition of the consortium, roles of the applicant and members of the consortium in the course of the supply etc. as stated in para 4 above to arrive at proper conclusion. Further, M/s. Technip UK Limited (the applicant) has registered address at One St Paul's Churchyard, London, EC4M 8AP-UK and address ....
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.... has been held that the admissibility of the application is to be examined on the basis of the circumstances prevailing on the date of application and not subsequent events. In view of the aforesaid we reiterate that our application may be considered by this Hon'ble Authority on merits and appropriate ruling may be issued on the questions raised by us in the application, and oblige. The applicant submitted that the details of award of relevant contracts as follows, ONGC awards contract for integrated (SPS+SURF) Work Package for Development of its Mega Deep Water Project KG-DWN-98/2(Cluster-2) in East Coast. ONGC's mega deep water development initiative for integrated development of KG-DWN_98/2 (Cluster-2) Project in East Coast of India took a leap forward with the award of a major work package, viz. SPS+SURF (Subsea Production System + Subsea Umbilical, Risers & amp; Flow lines) to Consortium of BHGE, McDermott and L& T hydrocarbon on 01.10.2018 with awarded cost of Rs. 11,740.86 Crores (USD 1694.45 Million). This tender is one of the biggest integrated (SPS+SURF) tenders awarded globally in recent years. ONGC took a strategic of integrating hitherto separate....
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....issioning and installation work on turnkey basis for petroleum operations. Applicant has submitted documents such as a sample Notice Inviting Tender ('NIT') and Bid Evaluation Criteria released by ONGC. Tenders issued by ONGC normally relates to erection, commissioning and installation of plant and machinery for ONGC. In terms of the NIT, bids are invited for overall responsibility of entire project for an 'overall lump sum price' towards carrying out the obligations under the NIT. NIT permits a consortium of members to bid. Accordingly applicant would like to participate not individually but as part of consortium. This consortium would be of applicant and other member/ members for making joint bid. Further, members of the consortium will separately supply goods and services. Members of the consortium will raise invoice separately on ONGC and ONGC will pay them separately. On this factual matric applicant has raised many questions as above. During the course of hearing the members of the Bench informed the applicant to submit details as to date and event of the contract including the status of the contract as on the date. In response, Shri. Taru Jain, Adv., for the appli....