AI Drafter 
TaxTMI 
TaxTMI 
2019 (11) TMI 1145
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....ruling in respect of the following questions:- (a) Whether the proposed activity of setting-up of the data centre facilities as explained proposed to be undertaken by the Applicant would qualify as 'works contract' as per Section 2(119) of the Central Goods and Service Tax Act, 2017 and Section 2 (119) of the Karnataka Goods and Service Tax Act. 2017? (b) What is the rate of GST applicable on the proposed activities? 4. The applicant furnishes some facts relevant to the stated activity: 4.1 The Applicant is inter alia engaged in sale of IT products and services in relation thereof. The Applicant proposes to undertake projects for setting-up of data center facilities for its clients including government agencies/ bodies. Draft agreement along with scope of work ("hereinafter referred to as SOW") proposed to be executed by the Applicant for one such project has been submitted by the applicant. 4.2 A brief write up on the activities proposed to be undertaken by the Applicant in setting up of data centre is explained in detailed manner in the table below: Activities undertaken under various stages as per the draft SOW entered with the clients Nature of ....
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.... the meaning and scope of works contract in the service tax regime and also cited several judicial pronouncements to that effect. It is put forth that the Hon'ble Supreme Court has analysed the nature and scope of the term of 'Works contract' and it was held that works contract is basically a composite supply of both services and goods relating to immovable property. In this regard the applicant places reliance on decision in the case of State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd = 1958 (4) TMI 42 - SUPREME COURT. and the Apex Court in the case of Gannon Daunkerley & Co. & Ors. Vs. State Of Rajasthan & Ors = 1992 (11) TMI 254 - SUPREME COURT. 5.2 The applicant then states that under the GST regime Section 2(119) of the CGST Act, 2017 defines the term 'works contract' as under:- "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 goods (whether as goods or in some other form) is involved in the execution of such contract;" 5.3 The Applicant su....
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....act'. 5.7 The applicant first places reliance on the decision in the case of in the case of Kone Elevator India Pvt. Ltd. V. State of Tamil Nadu = 2014 (5) TMI 265 - SUPREME COURT. In this case, the Appellants were involved in the supply of elevators, escalator etc along with its mechanical erection, electrical wiring, testing and installation of the same. Further, they were also contractually bound in the maintenance and operations of the elevators supplied to the clients. The question to be determined before the Hon'ble Apex Court was whether the same involved "sale of goods" or "Works Contract services". The Hon'ble Apex Court has provided a detailed analysis of the term Works Contract' and it was held that the term 'Works contract' as per Article 366(29A)(b) of the Constitution of India, 1949 encompasses a wide range and varieties of a contract. The applicant has given a detailed tabular presentation of the issue before the Apex Court, the analysis therein and the same elements being present in their case under consideration. We have taken note of the presentation made in Para A. 15. In the view of the above discussed Supreme Court Judgment, the Applicant submits that the te....
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....ries Ltd. & Anr. Vs. Commissioner of Central Excise & Anr. = 2000 (8) TMI 86 - SUPREME COURT where the Hon'ble Supreme Court has held that installation or erection of turbo alternator on platform constructed on land, and not a common base, would be immovable property. Similarly reliance is also placed on the decision in the case of Quality Steel Tubes (P) Ltd. v. Collector of Central Excise, U.P. = 1994 (12) TMI 75 - SUPREME COURT, where the question involved was whether tube mill and welding heads erected and installed by the Appellant for manufacture of tubes and pipes was excisable. The Hon'ble Apex Court relied on the landmark judgements in the case of Union of India & Another v Delhi Cloth and General Mills Co. Ltd = 1962 (10) TMI 1 - SUPREME COURT, and Indian Cable Co. Ltd. V Collector of Central Excise, Calcutta = 1994 (9) TMI 72 - SUPREME COURT, and held that plant and machinery embedded to earth, structures, erections and installations are to be considered as immovable property. 5.13 In view of the above, the Applicant submits that activities proposed to be undertaken in setting up the data centre qualify as immovable property as the same is imbedded in earth as provide....
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....s been taken into account while examining the questions raised by the applicant. The applicant has given a detailed account of the proposed activity and has envisaged two scenarios. In the first situation the entire proposed activity is assigned to the applicant. In the second situation the applicant may be assigned certain part of the activity, like civil works, electrical works etc. The applicant has extensively explained and concluded that in both the situations the supply made by them qualifies to be treated as works contract. We proceed to examine the applicants arguments. 9. Section 2(119) of the CGST Act, 2017 defines the term 'works contract' as below:- "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 goods (whether as goods or in some other form) is involved in the execution of such contract; 9.1 The aforementioned definition of Works Contract requires that the contract or the supply shall be in relation to the various activities of building....
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....on to an immovable property. 9.4 The applicant and their representative have delved into the definition of an immovable property on the basis of various judgements of various Courts. We have considered the arguments put forth by the applicant. 9.5 The applicant, when they enter into a contract for the setting up of the data centres, is given the building which is required to be converted into a fully functional data centre. The applicant carries out the refurbishment of the entire building by carrying out the various civil, electrical and mechanical works on the civil structure. All these works, especially the Civil works have a sense of permanence and cannot be dismantled and taken away. Moreover other works like electrical works are also such that they cannot be removed and relocated without substantial damage. Furthermore once the entire work has been completed, then the building acquires a new look and an identity in terms of its functionality. In other words once the contracted activities are carried out on the building then it acquires the identity of the desired data centres. Thus the contracted activities and the supply of the required material are in relation to an i....