AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (7) TMI 352
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....nce Ruling, a reference to such a similar provision under the CGST or AP GST Act would be mentioned as being under the GST Act. 3. Brief Facts of the case: Halliburton Offshore Services Inc. is a global service provider, engaged in providing various oilfield services to Exploration and Production companies across the globe. Presently, the Applicant has contracted to provide Mud Engineering and Drilling Waste Management services for drilling three HPHT Exploratory Wells in KG Basin, Andhra Pradesh. The applicant had filed an application in form GST ARA-01, Dt:19.12.2019, by paying required amount of fee for seeking Advance Ruling on the following issues, as mentioned below. 4. Questions raised before the Authority: The applicant filed the present application seeking a ruling from this Authority on the following issues: a) Whether the supply of mud engineering services along with supply of imported mud chemicals and additives provided on consumption basis by the Applicant under the Contract qualify as composite supply. b) If answer to Para (a) is yes, then whether the supplies made under the Contract merits classification under Entry 9986 (ii) - Service of exploration, minin....
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.....2 of Schedule II of the Contract provides as under: "16.2.2 The Contractor shall supply complete line of mud chemicals, barites & additives conforming to relevant API/BIS specifications required for preparation and maintenance of mud and completion fluid. The Contractor shall maintain adequate stock of all chemicals including contingency back-up chemicals and ensure timely supply as per operational requirement of the well for uninterrupted operations. However the payment will be made on actual consumption basis duly certified by the Company Representative and OIL Chemist." 6.3 In view of the above-mentioned scope of work for supply mud chemicals and additives, it is submitted that such chemicals, additives and materials supplied under the Contract for supply of mud engineering services are essential to perform service under the Contract. In this connection, as per the definition of 'composite supply' provided under Section 2(30) of the CGST Act, composite supply means a supply is comprising of two or more taxable supply of goods or services or both, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a prin....
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....dditives are naturally bundled and supplied in conjunction with the supply of mud engineering services, such supply of chemicals and mud engineering services would qualify as 'composite supply' as per Section 2(30) of the CGST Act. 7. In this regard, the second aspect which is raised before the authority is whether such mud engineering services are covered by Entry 9986 covering services of exploration or drilling inserted vide Notification no. 1/2018-Central Tax (Rate) dated 25.01.2018 amending the original notification no. 01/2017-Central Tax (Rate), dated 28.06.2017 and substituted Entry 24(ii) with the following entry: Sl.No. Chapter, Section or Heading Description of Service Rate (per cent.) Conditions (1) (2) (3) (4) (5) 24 Heading 9986 (ii) Service of exploration, mining or drilling of petroleum crude or natural gas or both. 12 - 7.1 The description of scope of services provided under the Contract reflect the Applicant is providing mud engineering and waste management services to OIL India for smooth drilling of well and to ensure that the well is drilled in the desired size. It further prevents the well from collapse and maintains the integrity of well the....
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.... Contract by the Applicant does not qualify as composite supply, then it becomes relevant to determine the classification of mud chemicals and additives supplied by the Applicant. 8.2 As mentioned above, the Applicant is undertaking supply of mud chemicals (such as drilling mud, completion fluids and well bore cleanup chemicals/additives or any other chemicals) in the course of supplying such mud engineering services, waste management, fluid management services and operation and maintenance of Mud Plant. 8.3 The relevant clauses relating to supply of material of the Contract have been provided under: "16.1.2 The Contractor will be required to maintain adequate stock of mud chemicals in a project warehouse. All imported or long lead time on critical chemicals shall be stocked in sufficient volume to cater uninterrupted drilling program. Locally available non critical items with less lead time can have a smaller minimum volume. The Contractor shall be responsible to maintain minimum stocks. The chemicals and additives imported exclusively for this project will be duty free based on EC (Essentiality Certificate) issued by DGH with confirmation letter given by the Company. 16.1.3....
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....the Oil and Natural Gas Corporation or OIL India Limited on nomination basis, subject to production of EC by the supplier. 8.6 In view of above factual and legal analysis, the Applicant submits the following: a) Supply of mud chemicals and additives provided by the Applicant under the Contract does not qualify as composite supply. b) If supplies provided under the Contract by the Applicant qualify as composite supply then such supply of mud Engineering and drilling services along with supply of mud chemicals and additives would be subject to GST 12%/18%, as the case may be, as services of exploration, mining or drilling of petroleum crude or natural gas or both under Entry 9986(ii) of Notification no. 11/2017-CT (Rate) dated 28 June 2017. c) If supplies provided under the Contract by the Applicant does not qualify as composite supply then supply of goods such as chemicals, additives, etc. for specified petroleum operation will be eligible for concessional GST rate of 5% against an EC in terms of Serial No. 404 of the Notification no. 50/2017-Customs dated 30 June 2017. 9. Discussion and Findings: 9.1 We have examined the issues raised in the application. The taxability and....
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....posite supply and Mixed supply provided by the Central Board of Indirect Taxes & Customs in the website www.cbic.gov.in. Accordingly, the aspects are examined and the findings are as under: 9.4 M/s Halliburton Offshore Services (hereinafter referred to as ' the Applicant') was awarded a Contract No 62054290 by M/s Oil India Limited (hereinafter referred to as 'M/s OIL') vide letter under Ref No. OIL/KGB/CONT-6205290/637 dated 19.08.2014 (hereinafter referred to as 'the Contract'). As per said contract, the applicant should provide 'Mud Engineering and Drilling Waste Management services' for drilling three (3) HPHT Exploratory Well in KG Basin. 9.5 Clause-to of Section-II of the Contract speaks about Scope of work i.e. Scope of Service to be provided by the Applicant. It is noticed that the Mud Engineering Services to be provided by the Applicant is inclusive of Tools/Equipment/Laboratory facilities / Consumables / Chemicals / additives and Personnel for drilling of HTHP Wells in KG onshore. The contract further laid emphasis that the applicant is required to provide complete mud service and that the scope of the work includes (but not limited to) designing and formulation of mud ....
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....r conditions combine or happen together" - Cambridge Dictionary (on line version) As per the above said definitions, the phrase 'in conjunction with' would mean..."the fact of two or more things occurring/happened together or simultaneously". Accordingly, in plain reading and understanding, the phrase or sentence viz. "supplied in conjunction with each other" used in the definition of 'Composite Supply' under Section -2(30) of the CGST Act, 2017 would imply "occurrence or happening of the two things or events namely supply of services and supply of goods together or simultaneously..". Therefore, in the light of scope of work read with terms & conditions as provided in the Contract (including rate of payment), it is necessary to examine whether the additives /chemicals supplied (on consumption basis) by the Applicant are in conjunction with supply of services or not. 9.8 It is observed that for "Mud Engineering and Drilling Waste Management Services", the scope of work was detailed under Section-II of the Contract. The said scope of work consists of 'deployment of personnel (mud coordinator, Mud Engineer etc,)- Ref: Clauses 11.1 to 11.3 'Technical support (clause-17), Laboratory E....
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....ase with regard to demobilization of personnel, technical equipment and additives/chemicals/consumables etc. All these facts lead to a conclusion that all these elements, technical personnel/equipment and goods are separately available and can be procured independently. 9.10 In terms of Clause 11.4 of the Scope of the Work under Section-II of the Contract, 'the Applicant will remove and replace any personnel in the Contract if deemed not suitable or experienced enough to carry out the work in a reasonable time without effecting company's operation at their own expenses provided that OIL requests so in writing'. Under this clause, it appears that a choice is available to the service recipient for replacement/removal of technical personnel (a part of their scope of work of the Contract) independently. Vide clause 13.1 of Scope of the Work under Section-II of the Applicant shall ensure sufficient quantity of materials and chemicals are available at the rig site and at the base and the applicant is also under obligation for providing of actual delivery verification. 9.11 Clause-16.2 of Section-II of the Contract refers to supply of mud chemicals and Additives - which includes submiss....
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.... to be supplied in conjunction with supply of services (technical assistance by way of supply of technical personnel) and supply of other goods namely technical equipment. 9.13 As the essential second criteria of 'supplied in conjunction with' had not been complied, the supply of mud engineering services along with supply of imported mud chemicals and additives provided on consumption basis by the Applicant' under the contract do not qualify and classifiable as 'composite supply'. 9.14 And therefore, the supply of imported mud-chemicals and mud additives provided on consumption basis shall be classifiable as supply of goods under respective EISNs of goods as specified under CGST Act, 2017. Similarly, it is found that the other events supply of goods (on rental basis) and supply of services (supply of technical personnel) shall be accordingly classifiable independently under respective HSNs of Services/Goods as the case may be. 9.15 As the Answer to Question-A is No, the necessity of classification of supplies as sought under Question or Point-B to ARA does not arise. As it is found that the scope of the work under the subject contract is not a 'composite supply' and each of the ....