TaxTMI 
TaxTMI 
2021 (1) TMI 1098
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.... from Odisha Government /ULBs for the Green Field Public Street Lighting System in the State of Odisha is not liable to GST and if liable to GST, then at what rate of GST? Q2. What shall be the GST rate for the balance 10% of the Project Capital Expenditure and O&M Fees received as Annuity Fee over the period of 7 years by the Applicant as per SIOM Agreement considering the Si. No. 3(vi) of the notification No. 11/2017 Central Tax (Rate), dt. 28-06-2017 as amended by Notification No. 31/2017 Central Tax (Rate), dt. 13-10-2017 and corresponding notifications of Odisha State Tax Rate as amended. Q3. What shall be the time for raising GST Invoices for Capital Subsidy and Annuity Fee (consisting of 10% of Project Capital Expenditure and O&M Fee) payable in 7 years? Q4. Whether the rate of tax on the supplies by the sub-contractor to the Applicant shall be 12 % GST (6% CGST and 6 % SGST) in terms of serial no. 3 (ix) of Notification No.11/2017-Central Tax(Rate) dated 28.6.2017 as amended by Notification No.1/2018-Central Tax (Rate) dated 25.01.2018/ Odisha State Tax (Rate) dated 28.06.2017 as amended. 1.1 At the outset, we would like to make it clear that the provisions of both t....
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....stem till the end of the term of the Agreement. 2.4 The Applicant submitted that 90 per cent of Project Capital Expenditure received as capital subsidy is not "consideration" as defined in Section 2(31) of the CGST Act. Under Paragraph 13.1(a) (i) of the Agreement, both the Authority and the ULBs have jointly agreed to provide the Applicant with the consideration, being 90% of the total capital expenditure incurred for the project. As per Para 1.3 of Escrow Agreement, the ultimate responsibility for depositing the Capital Subsidy in Escrow Account shall be with the Authority (Odisha Government). Hence Odisha Government is responsible for depositing Capital Subsidy equal to 90 per cent of amount received by the Applicant. 2.5 The Applicant submitted that they are not liable to pay GST on capital subsidy (90 % of the total capital expenditure) amount received in terms of SIOM Agreement and Escrow Agreement as per the discussion held with the authority which awarded the work. 2.6 It was also submitted that the applicant has fulfilled all the conditions of works contract service (WCS). Therefore, the supply made by the applicant qualifies as a supply of works contract services. Furt....
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....-section (1) of section 31, or the date of receiving of payment whichever is earlier. The applicant submitted that the timing for raising of GST Invoice of Annuity fee shall be at the time of sending Bill for claiming the payment to the Authority/ ULB. 2.10 The applicant submitted that its supply is a Composite Supply of Works Contract as defined in sub section (119) of section 2 of the Central Goods and Services Tax Act, 2017, which is provided to a Local Authority, by way of Construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a Civil structure or any other original works meant predominantly for use other than for commerce, industry or any other business or profession and therefore liable to tax rate of 12% under Entry 3(vi) (a) of notification no. 11/2017 - Central Tax (Rate) dated 28-06-2017 as amended. 2.11 The Applicant submitted that the rate of tax on the supplies by the sub-contractor to the Applicant shall be 12 % GST (6% CGST and 6 % SGST) in terms of serial no. 3 (ix) of Notification No.11/2017-Central Tax(Rate) dated 28.6.2017 as amended by Notification No.1/2018-Central Tax (Rate) dated 25.01....
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....that 10% of the Project Capital Expenditure would merit entitlement for concessional rate of GST @ 12% [CGST @ 6% + SGST @ 6%] in terms of Serial Number 3(vi) of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 (as amended). 4.2 We find that the questions before us to answer are (a) Whether Capital Subsidy (90% of Project Capital Expenditure) received by the Applicant for execution of the Green Field Public Street Lighting System is liable to GST or not, if liable to GST, then at what rate of GST? (b) What shall be the applicable rate of GST for the balance 10% of the Project Capital Expenditure and O&M Fees received as Annuity Fee (c) What shall be the time for raising GST Invoices for Capital Subsidy and Annuity Fee and (d) what would be the the rate of GST on the supplies by the sub-contractor to the Applicant in the instant case. 4.3 Before proceeding to answer the aforesaid questions, it is essential for us to examine whether in the present case, the supply being undertaken or proposed to be undertaken by the applicant would qualify to be a supply of 'composite supply 'or 'works contract'. Therefore, we need to discuss all the provisions relating to 'composite su....
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....osite supply in the subject case since in the subject case there is no building, construction, fabrication, completion, erection etc of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of the contract. 4.7 Besides, as per para 1(c) of Schedule II of the CGST/OGST Act, any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods and not a service. 4.8 The next issue to be considered and examined is whether the supply of the applicant falls under the supply of 'works contract service'. As per Section 2(119) of the CGST Act, 2017, unless the context otherwise requires, the term "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. The following two points emerge from the abov....
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....n and maintenance services. Further, after the Greenfield Public Street Lighting System has been commissioned, the Applicant is then required to undertake the Operation and Maintenance of the system till the end of the term of the Agreement. The applicant has also explained what a Greenfield Public Street Lighting System & central control, monitoring system and automation system is, in their case and also the processes involved in the subject case. The applicant has tried to establish that the supply made by them qualifies as a supply of 'works contract service'. 4.11 The salient features of the agreement indicate that the obligation on the applicant is in relation to the effective installation and functioning of the goods supplied by them and thereafter, they would undertake the activities of 'operation and maintenance' of the same. The contract governing their supplies does not relate to building, construction, and fabrication etc. of any immovable properties, as envisaged in the definition of 'works contract'. Their supplies are in the nature of movable property i.e. supply of goods which involves ancillary services such as installation, commissioning etc. All these services wh....
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....dy which generally means grant/grant-in-aid or a benefit given to an individual, business or institution, usually by the government. It is also not a subsidy which typically given to remove some type of burden and to promote a social good or an economic policy for overall interest of the public. The so called 'capital subsidy' cannot be a 'subsidy' by any stretch of the imagination, rather the same is a consideration as defined in Section 2(31) of the CGST Act in relation to the supply of goods and therefore, the said 'capital subsidy' shall certainly be liable to be included in the Transaction Value for the purpose of calculation of GST. We are of the considered view that the applicant is liable to pay GST on 'Capital Subsidy' ( 90% of the total capital expenditure). 4.14 The next question to be answered is 'what shall be the GST rate for the balance 10% of the Project Capital Expenditure and O&M Fees received as Annuity Fee over the period of 7 years by the Applicant as per SIOM Agreement considering the Sl. No. 3 (vi) of the notification No. 11/2017 Central Tax (Rate), dt. 28-06-2017 as amended by Notification No. 31/2017 Central Tax (Rate), dt. 13-10-2017 and corresponding not....
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....eld Public Street Lighting System in the State of Odisha is not liable to GST and if liable to GST, then at what rate of GST? Answer:- Capital Subsidy (90 per cent of Project Capital Expenditure) received by the Applicant is liable to GST. The GST will have to be paid on the goods at the appropriate rate after classification under the appropriate heading. Question No.2 What shall be the GST rate for the balance 10% of the Project Capital Expenditure and O&M Fees received as Annuity Fee over the period of 7 years by the Applicant as per SIOM Agreement considering the SI. No. 3(vi) of the notification No. 11/2017 Central Tax (Rate), dt.28-06-2017 as amended by Notification No. 31/2017 Central Tax (Rate), dt. 13-10-2017 and corresponding notifications of Odisha State Tax Rate as amended. Answer:- The supply being undertaken or proposed to be undertaken by the applicant would qualify to be a supply of 'composite supply' in terms of definition under Section 2(119) of the Central Goods and Services Tax Act, 2017, where the principal supply is ' supply of goods' not 'supply of service'. Therefore, question of the applicability of concessional rate of tax in terms of Notification No. 11....