TaxTMI 
TaxTMI 
2019 (7) TMI 812
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....h Main Road, Anna Nagar, Chennai-600040 (hereinafter called the Applicant or TPL) are engaged in the process, design, detailed engineering, procurement, shop fabrication & inspection, supply, storage, site fabrication, erection, inspection & commissioning of fluid servicing system of Semi Cryo Integrated Engine Test Facility. They are registered under GST with GSTIN 33AAACT4119L1ZF. They have preferred an application seeking Advance Ruling on : 1. "Whether supply of Engineering, Procurement and Construction (EPC) contract for establishment of Fluids Servicing System where in both goods and services are supplied can be construed to be a composite supply in terms of Section 2(30) of CGST Act, 2017". 2. Yes, Whether the Principal Supply in such case can be said to be "Establishment of Fluids Servicing System (FSS)" can be taxable at 5% GST vide Notification No.45/2017- Central Tax (Rate) dated 14/11/2017". 3. If principal Supply taxable at 5%, whether the entire transaction in the contract is taxed as per the rate applicable to Principal Supply? The Applicant has submitted the copy of application in Form GST ARA-01 and also submitted the copy of Challan e....
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....- Test-bays with foundation; Pavement and approach roads; Buildings and Sheds; Blast wall & spillage protection walls; Foundation for equipment. Minor Civil Works: The minor civil works are in the scope of the applicant which covers providing Plain cement concrete, Reinforced cement concrete, brick masonry, grouting, anchor bolts. • Erection & Commissioning Includes: • Mounting of Equipments • Structural Works. • Electrical works • Commissioning The composition of the price breakup of contract price is as below: Sl.No. Particulars Payment in INR Payment in INR equivalent to the extent of USD Total in INR Percentage of contract rice 1. Engineering Cost 31,811,000 287,857 19,507,590 51,318,590 1.89% 2. Material Cost (Supply of equipment, flow components, instruments, pipes and pipe fittings etc. 1,600,030,050 10,969,915 742,802,977 2,342,833,027 86.48% 3. Erection cost 266,625,950 150,000 10,165,250 276,791,200 10.22% 4. Commissioning Cost 33,136,000 75,000 5,082,625 38,218,625 1.41% &nb....
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....t is also defined as Composite Supply and includes a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, Renovation, alteration or commission of immovable property wherein transfer of property in goods is involved in the execution of such Contract. The intent of the contract executed by them is not in the nature of erection, commissioning. The main intention of Contract is to supply the Whole FSS in totality consisting of various goods and services are incidental to provision of such goods. • ISRO wants functional FSS and services such as erection, commissioning, etc are only a means to provide the main supply of goods and are only incidental. The principal supply will be provision of FSS and not provision of works contract Service. And the principal supply or dominant intent is provision of goods which constitutes 86% in the contract, therefore entire contract shall be taxable @ 5% GST. In view of the both the above conditions are met by the Contract, Supplies undertaken in the contract covered under SI.No. 1 of Notification No. 45/2017-C.T.(Rate) and the definition of Compo....
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....liquid nitrogen tank, isosene tank, spiral heat exchanger, atmospheric vaporizer, isosene pumps, vacuum system, chiller system, supply of instruments, EP valves, Control Valves, pressure switch and isolation valve, cable glands. • The major equipment and other free issue material will be erected on the foundations provided by ISRO, with bolts which are grouted on the foundations. These equipments therefore can be removed as such by untightening of bolts and can be used elsewhere. • The structural works to be done by TPL include design, supply of material, fabrication, assembly and erection of all types of structures like pipe supports, templates, spreader beams, structural bridges, structural staircases, access platform at the top of pressure vessels etc., • The minor civil works will be done with plain cement concrete, reinforced cement concrete, brick masonry, grouting, anchor bolts, breaking and disposal of PCC/RCC, brick masonry. This is required for grouting of equipments, pipe supports, structural works etc and also for RCC foundation/ pedestal for pipelines and valves of sizes greater than or equal to DN100 and PCC foundation for sizes ....
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....and stated that they are constructing various fuel tanks along with heat exchange pipelines, valves, switches connecting to the test bed of the Cryogenic Engine. The test bed is built by ISRO. The Civil work involved is minor civil work of RCC foundation for pipeline. The applicant has to do commissioning of tanks and fluid pipelines and testing in standalone for the structure and not for the whole system They stated that it is a composite supply where Principal Supply is supply of goods which is Scientific/ equipments and hence it is eligible under Notification No.45/2017 Central tax (Rate) Sl.No. 1. 4. The State authority appeared in Person and submitted a written submission along with a copy of advance Ruling by A.P. The State Tax Authority regarding the question raised by the applicant has furnished the following Comments: • In the instant case, the supply of Engineering, Procurement & Construction (EPC) contract involves carryout of services related to installation, commissioning and testing of the goods supplied. To create the test facility for testing of integrated cry engine, supply, installation and testing and commissioning of systems are involved. This cr....
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.... time of supply of the specified goods. • At the same time, intention of the notification 45/2017 CT (Rate) specifically mentioned that exemption is only to supply of scientific and technical instruments, apparatus, equipment etc. and the same is not applicable for the supply other than that. In the present contract, the supply of the applicant extends to other than scientific and technical instruments, apparatus, equipment i.e. namely supply of tools, tackles and other materials clean up of work site, first aid services, electrical safety regulation services etc., Specifically the supply of tools and other materials involves the supply of expendable devices like anchor, grinding and abrasive wheels, plugs, hacksaw blades, taps, dies, drills, reamers, chisels, files, carborundum stones, oil stones, wire brushes, necessary scaffolding, ladders, wood planks, timbers sleepers etc. and consumable material like oxygen, acetylene, argon, lubrication oils, greases, cleaning fluids, cylinder oil, graphite powder and so on. Hence, the Notification no.45/2017, CT(rate) is not applicable to the above mentioned supply of goods which are not related to supply of Scientific and tech....
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....esign, procurement, o Chemical consumables- Procurement • Inspection & Transportation - Third party inspection and inland & offshore transportation of all material supply • Construction - Planning, supervision, installation work, piping, civil, structural, building electrical installation, insulation works of equipment, machinery & instruments • Pre-commissioning & Commissioning- Planning, cleaning of equipment/ piping, purge and drying- out of Cryogenic equipment/ piping, conducting mechanical running, functional sequence test, commissioning & performance test, equipment required for this • The Semi-cryogenic Integrated Engine will be tested in a bay of 20 m X 20m X 31m (provided by IPRC) inside which the Isrosene , liquid oxygen, Liquid Nitrogen system, Gaseous Nitrogen System, Gaseous Helium System are mounted. Several of the piping circuits, vacuum pumps provided by TPL will be kept in the vacuum pump room and centrifugal pumps in the isrosene pump room. Water Systems are to be mounted in the chilling water pump room. • The payment schedule indicates timelines of completing process design review, detailed engineer....
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....inary course of business, one of which is a principal supply; In the case at hand, TPL supplies Non Cryogenic Tanks, Heat exchanger and Pumps for cooling ISROSENE, Ejector System, LN2 Bath Type Heat Exchanger For Cooling GN2 and GHe, Vaporizers, Chilling Water Plant, Steel Pipes, Pipe Fittings including Flanges, Super-insulated Pipelines, Flexible Hoses, Electro-Pneumatic Valves, Control Valves, Non-return Valves, Safety Relief valves, Rupture Disc Devices, Filters, Pressure Regulators, Pressure Gauges. All the above materials are to be designed, engineered, tested and then erected at the site. Erection or Construction involves planning, installation of the civil, structural, electrical, insulation, piping circuits, equipment, instruments and the fluid systems using grouting, masonry, concrete work for installing the same at test bed facility often semi-cryogenic engine. Mere supply of the equipment, instruments, pipes and fluid tanks is not enough, the same has to be integrated and erected and finally commissioned at the test - bed facility. The Contract itself shows that the supply of these equipment and instruments are necessarily to be given with a host of services such as d....
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.... of the structures in which they were fitted were no longer moveable goods. It was in those peculiar circumstances that the installation and erection of machines at site were held to be by this Court, to be immovable property that ceased to remain moveable or marketable as they were at the time of their purchase. Once such a machine is fixed, embedded or assimilated in a permanent structure, the movable character of the machine becomes extinct. The same cannot thereafter be treated as moveable so as to be dutiable under the Excise Act. But cases in which there is no assimilation of the machine with the structure permanently, would stand on a different footing. In the instant case all that has been said by the assessee is that the machine is fixed by nuts and bolts to a foundation not because the intention was to permanently attach it to the earth but because a foundation was necessary to provide a wobble free operation to the machine. An attachment of this kind without the necessary intent of making the same permanent cannot, in our opinion, constitute permanent fixing, embedding or attachment in the sense that would make the machine a part and parcel of the earth permanently..........