TaxTMI 
TaxTMI 
2020 (3) TMI 481
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....enceforth, for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST or MP GST Act would be mentioned as being under the GST Act. 3. BRIEF FACTS OF THE CASE: 3.1. The applicant, M/s Vihan Enterprises is engaged in works contract. The applicant is engaged in inter alia, in construction of new 33 / 220 kV Pooling Substation at Badwar, REWA along with associated 220 kV DCDS Transmission line (Route length 3.0 Kms) and associated feeder bay work on total Turnkey basis against Bid Identification No. RUMS/2016-17/372/014 (Lot-I) under World Bank Financing for Rewa Ultra Mega Solar Limited, hereinafter referred to as RUMS. 3.2 The work was allotted vide Notification of Award No. 04-01/RUMS/2016-17/372/14 (Lot-I) /TK - II/89 dated 23.09.2016 read with revised Notification of Award No. 04-01/RUMS/2016-17/372/14 (Lot-I) /TK - II/119 dated 17.11.2016. 4. QUESTIONS RAISED BEFORE THE AUTHORITHY:- The following questions have been posted before the Authority in the application:- 4.1 Whether the explanation to Entry No. 234 of Schedule I to Notification No. 01/2017 - Central Tax (Rate), as amended from time to time, shall apply to constructi....
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....ribed in Volume - II of the Bid document. d) Erection, Testing and Commissioning of all items indicated in Annexure - III and IV. e) Supply, erection testing and installation fabricated, galvanized sub-station structures, stringing and earthing material, supplies testing and commissioning of all outdoor;/indoor plant. Civil work associated with construction of substation works. f) Carryout erection work as stipulated in the Bid Document which involves fabrication, galvanizing and delivery of Double Circuit /Multi Circuit Towers, there body extensions, river / line crossing gantries, hangars, U Bolts, D Shackles, Bolts Nuts, spring washers, pack washers, step bolts, tower accessories, earthing rods with clamps, danger boards, number plates, face plates and anti-climbing devices (including fixing arrangements and barbed wire) and ground wire, ACSR Conductor, ground wire, disc insulators, hardware and accessories for conductor and ground wire and complete erection of transmission lines including detailed/check survey, casting of foundations, tower erection, stringing etc and testing of commissioning of transmission lines. 6.5. Under the contract, the list....
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....nstruction is separately mentioned in the contract and invoices for the same are raised separately. Therefore, they charged GST at the rate applicable to the goods and have not included them in the value of the supply of construction service. 6.14. Regarding applicability of Entry No. 234 in Schedule - I of Notification No. 1/2017 - Central Tax (Rate) and the corresponding notifications issued under MPGST Act and Entry No. 38 in Notification No. 11/2017 - Central Tax (Rate) and the corresponding notifications issued under MPGST Act: 6.14.1. The provisions of law, which form the basis of the dispute of interpretation are Entry No. 234 in Schedule - I of Notification No. 1/2017 - Central Tax (Rate) and the corresponding notifications issued under MPGST Act and Entry No. 38 in Notification No. 11/2017 - Central Tax (Rate) and the corresponding notifications issued under MPGST Act. 6.14.2. Notification No. 1/2017 - Central Tax (Rate) contains the rate of CGST on goods being supplied. Entry No. 234 of Schedule - I of the said notification is as under: S.NO. Chapter / Heading / Sub-heading / Tariff item Description of Goods (1) (2) (3) 234 84 or 85 Fol....
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....ervice, where the supplies included any of the items included in SI.No. 234, such were taxed at the rate applicable to the Works Contract under which the goods were being supplied, i.e. 18%. Even though the supply of the goods was taxable @ 5%, but owing to the composite nature of supply, the goods and the service were taxed in aggregate @ 18%. 6.14.5. To remove this anomaly, the explanation was added, along with introduction of Entry No. 38 in Notification No. 11/2017 - Central Tax (Rate) and in corresponding notifications issued under MPGST Act. which stated that out of the gross value of the supply, 70% shall be deemed to be on account of goods and 30% was deemed to be on account of service. Accordingly, the effective rate came to 8.9% as under: S.No. Particulars % of value Rate of tax Effective Rate of tax (1) (2) (3) (4) (5) 1. Goods 70 5% 3.5 % 2. Services 30 18% 5.4% Total 8.9% 6.14.6. This fact was clarified in Press Release by the Board, communicating the recommendations made during 31 st meeting of the GST Council held on 22nd December, 2018 (New Delhi) vide C.B.l. &....
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....ted by the Solar System. The Solar Power is supplied to the Sub-Station that is set up by us. From this sub-station, the power is further transmitted for supply. 6.14.10. The work done by them is identical to the work done for any other Power Generating System, be it Hydro Power, Thermal Power or any Power Generating System. 6.14.11. After electricity is generated in power plant, its transmission is done by using step-up transformers that increases the voltage. This high voltage electricity is transmitted through a network of electrically conductive wires of aluminium or copper. These lines are called high-voltage transmission lines that can transmit electricity over long distances. Thereafter, electricity is distributed via electric distribution substation. At the substation, the high voltage electricity from the high-voltage transmission lines is passed through step-down transformers that lower the voltage. The electricity is then transmitted to network of local electric distribution lines. Before electricity enters a home, the voltage is again lowered using step-down transformers. In most countries the voltage is 220 V AC or 110 V DC. In a home, electricity is distributed ....
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....me a works contract. Only where transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract, then such value of such goods form part of the Works Contract. 7. DISCUSSIONS AND FINDINGS: 7.1. We have carefully considered the submissions made by the applicant in the application and during time of personal hearing. The first issue is regarding applicability of explanation to Entry No. 234: 7.2. In the GST laws, Works Contract is defined under section 2(119). The text of the provision is as under:- "(119) "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;" Work Contract, by way of deeming provision is treated to be a supply in the nature of a service and is taxed as a service as per the rate applicable, notified in Notification No. 11/2017 - Central Tax (Rate) and corresponding notifications issued u....
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....ing up of the goods that are listed in Entry No. 234. It is worth noting that the wording of Entry No. states that construction services arc "in relation of', thus, there may be situations, where construction or engineering or installation or other technical services are being provided in relation of setting up of Bio-Gas Plants, Solar Plants etc., as mentioned in Entry No. 38, but such service does not include supply of the goods listed in Entry No. 234. In such cases, the explanation to Entry No. 234 shall not be attracted. To summarize, the applicability of deemed bifurcation of the value of supply into goods and services is where the goods mentioned in Sl.No. 234 are being supplied along with or under a Works Contract of the nature covered in Entry No. 38. The list of goods in the Entry is exhaustive and not in the nature of an inclusive list. Thus for the applicability of the Notification, the supply has to be of an item mentioned in Entry No. 234 or parts of items mentioned in the Entry. 7.7 From the agreement the applicant has entered into with RUMS, it is seen that the applicant has been awarded a contract, where some of the supply is in th....
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....ry No. 234. Works Contract in relation to any of the goods listed in Entry No. 234, where such goods are not part of the Works Contract shall not merit taxation under Entry No. 234. The second issue is regarding rate of tax on goods supplied under the contract: 7.11 From the contract entered into by the applicant, it is seen that the contract is in the nature of a Turnkey Contract and has been divided into different parts. The whole contract is a single contract but the activities are clearly defined and segregated, with the values for each segregated supply being duly stated in the Annexures to the Agreement. The contract price of the Agreement is also mentioned separately in para 5.1 of the contract. The para states the value of supply separately for :- - Equipment for Sub-Station and Feeder Bays; - Material for Transmission Line; - Erection Testing and Commissioning of Outdoor and Indoor Equipment; - Erection Testing and Commissioning of Transmission Line and - Civil Work for Substation and Feeder Bay. Annexure I to V of the agreement contains the detailed item-wise break-up of the cost. 7.12 These separate activities i....
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....GST Act shall apply. Further in the case of Erection Testing and Commissioning, as well as in Civil Work for Substation, the supply shall be taxed as service and rates applicable to a Works Contract shall apply. 8. RULING (Under section 98 of Central Goods and Services Tax Act, 2017 and the Madhya Pradesh Goods and Services Tax Act, 2017) In view of deliberation above we pass the advance ruling as under- 8.1. Goods listed in Entry No. 234 of Notification No. 1/2017 - Central Tax (Rate) and corresponding notifications issued under MPGST Act are not part of the supply and therefore, the Explanation to Entry No. 234 of Notification No. 1/2017 - Central Tax (Rate) and corresponding notifications issued under MPGST Act shall not apply to the supply of works contract service in contract of construction of new 33 / 220 kV Pooling Substation at Badwar, REWA along with associated 220 kV DCDS Transmission line (Route length 3.0 Kms) and associated feeder bay work on total Turnkey basis against Bid Identification No. RUMS/2016-17/372/014 (Lot-I) under World Bank Financing for Rewa Ultra Mega Solar Limited. 8.2 Supply of goods under a contract for building, construction, fabrica....