2020 (10) TMI 47
X X X X Extracts X X X X
X X X X Extracts X X X X
....I 481 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA. Brief Facts of the Case 1.1 The Appellant having its corporate head office at Mumbai is, inter-olio, engaged in the manufacture of various types of UPS systems, which serve as an alternate source of power for a specific period of time in the event of power failure. The Appellant also supplies installation commissioning and maintenance and other services to its customers. 1.2 A UPS is typically used to protect hardware such as computers, data centers, telecommunication equipment or other electrical equipment where an unexpected power disruption could cause injuries, fatalities, serious business disruption or data loss. UPS units range in size from units, designed to protect a single computer without a video monitor, to large units, powering entire data centers or buildings. 1.3 The appellant is manufacturing UPS and its components at its manufacturing unit located at Ambernath and Pune in the state of Maharashtra. Some of the UPS components like battery and cables are either manufactured by the applicant or purchased by the applicant from third party vendors. The applicant has, inter alia, obtained GST registration in the state ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ied till taking over by Employer; User's Certificates and Test Reports as per specifications; * Documentation; (Chapter 15) * Provide all information, documents requested by Signaling, Telecommunication and AFC Contractors; * Interface management as specified in the Specification; * System operations and maintenance support services; * Training for operations and maintenance staff; * Preparation of Operation, Maintenance and Training Manuals; * Decommissioning, removal and/ or disposal of Temporary Works; * Design, manufacture, delivery and installation of foundations/ fixtures for equipment; *Warranty period and defect liability support after commissioning; * Providing necessary support and documents required including compliance for getting approval of the UPS system from Commissioner of Railway Safety; * Maintenance support, * All equipment necessary to allow the installation, testing and introduction of services on this line without disruption to Phase III services; * Any other service needed to provide a complete UPS system 1.6 Further, the Annexure to the Tender document released by DMRC clearly provides a detailed break-up of value of various g....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es designated by DMRC. Further, separate consideration for supply of goods and services have been provided. 1.9 Further, the UPS system are manufactured from the appellant's factory at Mumbai. Thus, the goods are supplied by the appellant from its Maharashtra GSTIN. However, the service portion of the contract i.e. erection, installation and commissioning service are rendered by the New Delhi branch of the appellant, which is separately registered under GST law. 1.10 In view of the above, the appellant has been treating the supplies made to DMRC as under: * supply of UPS from the state of Maharashtra as supply of goods * Supply of Erection, installation, commissioning, testing etc., of UPS system services from New Delhi as supply of services. 1.11 Accordingly, the appellant has been raising separate invoices on DMRC for supply of goods and supply of services. Illustrative copies of the invoices raised by the applicant on DMRC for supply of goods and supply of services have been enclosed with the appeal paper book. Thus, in the pre-GST as well as post GST regime, the applicant has been treating the supplies made to DMRC as separate supply of goods and services. 1.12 The ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2019 (10) TMI 481 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA (hereinafter referred to as the "Impugned Ruling") wherein it has been held as under- (i) The Ld. AAR has held that the supply of UPS system made by Appellant to DMRC does not qualify as works contract service and therefore the benefit of concessional rate of 12% in terms of Sr. No. 3(v) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (as amended w.e.f. from 25.01.2018) would not be available to the appellant. (ii) Further, it has been held that even though the supply of goods is made from Maharashtra GSTIN of Appellant and supply of installation services is made from their Delhi GSTIN of the Appellant and accordingly both the respective registered units have raised separate invoices on DMRC, it would be treated as one single contract between DMRC and the Mumbai GSTIN of Appellant. (iii) It has been held that the goods and services are supplied by appellant in conjunction with each other, wherein the supply of goods (UPS) is the principal supply. Therefore, as per the AAR, the supply made by the appellants under the said contract qualifies as a composite supply in terms of sub-section (30) of S....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Sr. no. 3(v) of Notification No. 11/2017 - C.T. (Rate), as amended w.e.f. 25.1.2018? 6. Therefore, the Appellant submit that the only issue for consideration for Ld. AAR was whether the contract entered into with DMRC for supply, erection, installation, commissioning and testing of UPS system would qualify as 'works contract' and accordingly would be subject to GST at the rate of 12%. 7. However, after answering the first issue to state that the supply made by the appellant would not qualify as works contract service, the Ld. AAR has proceeded to determine whether the said supply would amount to 'composite supply' in terms of Section 2(30) of the CGST Act. The relevant portion in the impugned ruling is as follows: "...We find from their submissions and agreement that the contract is considering a clear demarcation of goods and services to be provided by the applicant. Now we have to decide whether the supplies are naturally bundled and in conjunction with each other as required by the definition of composite supply..... From the discussions made above we find that in the contract submitted by the applicant the major part of the contract is supply of goods i.e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tory and consigned to DMRC's location cannot be diverted by the appellant for supply to any other customer. Thus, at the time of removal of the goods from the factory, the goods are appropriated towards the contract entered into with DMRC. This proves that the property in the goods stands transferred to DMRC once the said goods are dispatched by the appellant from the factory and the supply of goods is completed. Subsequently, the appellant submits that Delhi GSTIN provides service of erection, installation, commissioning, etc., of UPS system to DRMC at the location specified by DMRC. 14. In view of the above, the appellant is of the view that the supply of UPS system made from the state of Maharashtra would be leviable to GST at the rate of 18% as supply of goods and the supply of erection, installation and commissioning of UPS system made from Delhi GSTIN would be leviable to GST at the rate of 18% as supply of services separately. 15. The Ld. AAR vide the impugned ruling dated 4.10.2019 has agreed with the appellant's contention that the supply of UPS system to DMRC does not qualify as works contract service under Section 2(119) of the CGST Act, 2017. However, the Ld. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es for supply of goods and services. Therefore, the appellants submit that the supply made by the appellant is not 'in conjunction with each other' as required by the definition of composite supply. 21. Further, the Appellant submits that appellant may supply the UPS system and erection and installation services either independently or in or along with each other. The customer always has the option to avail either of the supplies independently. The customer may buy UPS system from the appellant and opt to avail the erection, installation, commissioning, testing, etc. services from any other supplier. Similarly, the customer may avail erection and installation services from the appellant without purchasing the UPS system from the appellant. 22. Thus, the supply of UPS system and erection and installation services is not dependent on each other and both the aforesaid supplies are capable of being made independently. The appellant submit that activity of erection and installation of UPS is a significant portion of the contract and not merely ancillary to the supply of UPS system. Hence, in the present case the supply of UPS system cannot be said to be a 'principal supply....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rate applicable to the supply of UPS system (the principal supply). 29. The appellant submit that the aforesaid finding of the Ld. AAR is incorrect for the following reason. 30. Section 25(4) of the CGST Act, 2017, inter alia, states that a person who is required to obtain GST registration, in more than one State or Union territory shall, in respect of each such registration, would be treated as distinct persons for the purposes of this GST Act. Thus, the GST law creates a deeming fiction whereby the different units of a same legal entity which are located in different states would be deemed to be distinct persons. 31. In the present case, the UPS system is supplied by the appellant from the Maharashtra GSTIN and the erection and installation services are supplied by the Delhi GSTIN. The Maharashtra GSTIN and the Delhi GSTIN of the appellant, although being a part of the same legal entity, are distinct persons under Section 25(4) for the purpose of GST. 32. At this point it is pertinent to refer to Section 2(71) of the CGST Act which defines the term "location of the supplier of services". Section 2(71) reads as under- "(71) "location of the supplier of services" means, - .....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The Appellant submits that the supply of UPS System (goods) and erection and installation services are two independent supplies agreed to be executed under one single contract, by two distinct persons under GST. Merely because there exists one contract for two different supplies, the supply made under such contract cannot partake the characteristics of 'composite supply' under Section 2(30) of the CGST Act. 40. Thus, the appellant submits that finding of the Ld. AAR that supply made by the appellant under the said contract qualifies as a composite supply is incorrect in law. Thus, the impugned ruling given by the Ld. AAR, to the extent it considers the supply of goods and services under the said contract as one composite supply, is liable to be set aside. PRAYER In view of the foregoing, it is respectfully prayed that the Appellate Authority for Advance Rulings of may be pleased to: - a) Set aside the impugned ruling dated 4.10.2019 to the extent it states that the supply made by appellant under the said contract qualifies as composite supply; (b) Modify the impugned ruling to state that the supply of UPS System and erection and installation services supplied under ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the Circular No. 47/21/2018-GST dated 08.06.2018 issued by CBIC, at Sr.No.2 on the question of 'supply of goods (spare parts) and supply of service (labour) in servicing of the car. The issue before the Ld. AAR as sought by the appellant was whether the contract entered into with DMRC for the supply, erection, installation, commissioning and testing of UPS systems qualifies as supply of works contract under Section 2(119) of CGST Act, 2017. The appellant had enclosed the contract entered by them with the DMRC. The Ld. AAR was 'required to give his rulings only based on the said contract and not in general. The facts are not under dispute that the appellant had entered into a contract with the DMRC for supply of installation, testing and commissioning of uninterrupted power supply system for signaling, telecommunication and automatic fare collection system. The contract itself reflects that it is a composite supply. The facts are again not under dispute that the supply by the appellant would not fall under the category of 'works contract' as the same specifically covers only immovable property. The both Circular referred by the appellant in his appeal is not rele....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he same. Based on the contract in question, there can be no dispute that the supply is a composite supply. The definition of the composite supply does not restrict or imposes any conditions about the location of the supplier in respect of the composite supply. 42. The Respondent further contended that since the Appellant had raised two questions before the Advance Ruling Authority and the Advance Ruling Authority had answered the main Question 1 as to said supply of the goods i.e. UPS Systems and supply of services i.e. the erection, Commissioning, testing, installation of the UPS systems by the Appellant to DMRC in terms of the subject agreement would not constitute the 'works contract' services, then as per the law, the Appellant cannot go beyond the said two questions of the advance ruling application filed by them and file appeal against the advance ruling order praying that the ruling pronounced by the Advance Ruling Authority, wherein the AAR has held that the supply of UPS systems and its erection, commissioning, testing and installation would be construed as composite supply in terms of section 2(30) of the CGST Act, 2017, be modified. Personal Hearing 43. A pers....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he above facts and circumstances, the only moot issue, before us, is as to whether the aforesaid said supply would be construed as Composite Supply or not. At the outset, we would like to first examine the meaning of 'Composite Supply' as provided under section 2(30) of the CGST Act, 2017, which is being reproduced herein under: - (30) "composite supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply; Illustration: Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply". Thus, for any combination of supplies to qualify as the 'composite supply', it has to satisfy the following conditions: (i) It should be made by a taxable person; (ii) It should be made to a recipient; (iii) Supplies should be naturally bundled and supplied in conjunction with each other in the ordinary course of bu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the recipient of the goods, i.e. DMRC after carrying out all the inspection procedures by the persons, authorized by the Recipient in this regard. It is also argued by the Appellant that services of erection, commissioning and installation of the UPS Systems by the Delhi unit begins only after the ownership/title of the said goods has already been transferred from the Appellant to the Recipient. Hence, the above said services cannot be said to be supplied in conjunction of the supply of the said goods, thereby, precluding the said supplies from being in the nature of "Composite Supply" as envisaged under section 2(30) of the CGST Act, 2017. Here also, we find the Appellant's argument cogent and compelling. 49. It is also opined here that out of the two supplies, i.e. supply of UPS Systems and supply of services like erection, commissioning, installation, testing, etc., it would not be proper to claim one of the supplies as the "Principal Supply" as envisaged under section 2(90) of the CGST Act, 2017, as both the supplies i.e. the supply of goods and the supply of services are equally important and indispensable, because in the absence of any of these two, the objective and pur....