TaxTMI 
TaxTMI 
2021 (4) TMI 565
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....has sought advance ruling in respect of the following question:- "Whether the supplies made by Cost Centres C,D, E and G are independent supplies of goods and services (as applicable) or composite supply with principal supply of goods?" 3. Regarding the admissibility of the application, it is seen that the question is about "determination of the liability to pay tax on any goods or services or both" and hence is admissible under Section 97(2)(e) of the CGST Act 2017 and Section 97(2)(e) of the KGST Act, 2017 and hence admitted. 4. The applicant has furnished some facts relevant to the issue and the same is as under: 4.1 The applicant is a Company inter-alia engaged in manufacture and supply of a wide range of products to meet the needs of mining, construction, power, irrigation, fertilizer, cement, steel and rail sectors. The applicant is also one of the leading manufacturers of rail and metro coaches. 4.2 The applicant was a successful bidder to the tender invited by BMRCL for Supply of "150 numbers of Standard Gauge Intermediate Cars compatible with and suitable for integration with existing trains of Bangalore Metro Rail Project Phase- 1" procured under Cont....
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....of Quality Assurance Plan vi. Submission of Safety Assurance Plan and Site Safety Plan vii. Submission of Environmental Plan viii. Submission of Software Quality Assurance Plan; ix. Submission of Inspection, Testing and Commissioning Plan x. Liaison with other Designated Contractors during the design process xi. Submission of the Preliminary Design, the pre-Final Design xii. Submission of the Final Design Document xiii. Submission of As-Built drawings xiv. Any other item considered necessary to comply with the Scope of Supply 4.6.2 Cost Centre B: Delivery and receipt of offshore manufacturing The activities undertaken by Cost Centre B includes:- i. Selection of suppliers for major system and sub-systems for Trains/ Cars ii. Completion of all routine and type testing of equipment iii. Completion of Main Tooling for manufacture iv. Completion of all Factory Acceptance Tests v. Completion of test running in factory vi. Completion of manufacture, testing, running etc and inspection/clearance first prototype unit by the Engineer and shipping to port in Indi....
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....service trails of trains etc will be provided by the Applicant vii. Any other item considered necessary to comply with the scope of 'Facilities' 4.6.5 Cost Center E: Taking over of unit/train for revenue services The activity undertaken by Cost Centre E includes- i. Completion of minor outstanding works during dispatch of unit ii. Completion of any defects/deficiencies observed during machine type test and integration test iii. Joint inspection iv. Completion of defects and deficiencies observed during the joint inspection v. Any other item considered necessary to comply with the scope of 'Facilities' 4.6.6 Cost Center G: Supply of Unit Exchange spares, mandatory spares and consumable spares and special tools, testing and diagnostic equipment The activities undertaken by Cost Centre G includes:- i. Supply of unit exchange spares up to expiry of Defect Liability Period ii. Supply of mandatory spares up to expiry of Defect Liability Period iii. Supply of consumable spares up to expiry of Defect Liability Period iv. Supply of special tools, testing and diagnostic equip....
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....G Supply of Unit exchange spares, mandatory spares and consumable spares for period up to expiry of defect liability period and special tools, testing and diagnostic equipment 25, 15,637 84,524,000 44,45,60,498 Bid Total 'A' To 'G' (Excluding Cost Center 'H') 6,52,47,315 4,106,779,360 659,54,95,258 H Training, Operation and Maintenance Manuals (Optional) which is incidental but integral part of the Supply Contract 13,62,275 12,05,23,710 10,51,68,588 6.2 For Cost Centres A to E, Clause 4 of the contract states that contract price is inclusive of the Basic Customs Duty at the concessional rate available under the project import registration. Further, it is agreed that applicable excise duty, service tax, VAT as applicable prior to 1.07.2017 and GST as applicable post 1.07.2017 shall be paid by BMRCL to the Applicant based on the invoice of the applicant. 6.3 Similarly, for imported spares supplied by Cost Centre G, it is agreed that the contract price shall be inclusive of Basic Customs Duty, CVD and SAD on imported finished spares. The VAT and GST component as applicable shall be paid by BMRCL as charg....
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.... applicant stated as under 8.1 While, BMRCL has paid GST charged relatable to the supplies made by cost center A and C, they have disputed the payment of GST at the rates charged by the applicant for supplies made vide Cost Centers D, E and G. 8.2 It is the understanding of BMRCL that the supply for the disputed cost centers are essentially composite supply taxable at the rate of 5%/ 12% i.e., the rate applicable to principal supply of Rolling stock and that other supplies in the cost center D to G are incidental and naturally bundled to the principal supply of rolling stock and supplied in conjunction with each other. 8.3 The details of the nature of supply and rate of tax as disputed by BMRCL is as under: Cost Centre Description Supply GST Rate levied by BEML Admitted by BMRCL D Commissioning and acceptance of trains/ cars in depot Service 18% 5% & 12% w.e.f 01.10.19 E Taking over of unit/ train for revenue service Service 18% 5% & 12% w.e.f 01.10.19 G Supply of unit exchange spares, mandatory spares and consumable spares and special tools, testing and diagnostic equipment. Goods 28% /18% 12% 9. Regarding the....
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....e CGST Act, there shall be levied a tax called the central goods and service tax (hereinafter referred to as "CGST") on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under Section 15 and at such rates, as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. 11.1.2 The SGST Act/UTGST Act provides for levy of SGST on intra-State supplies of goods or services or both. Similarly, in terms of Section 5(1) of the IGST Act, IGST shall be levied on all inter-State supplies of goods or services or both at the stipulated rate and value. 11.1.3 Section 7(1) of the CGST Act provides that supply includes all forms of supply of goods and/or services or both made or agreed to be made consideration by a person in the course or furtherance of business, import of services for a consideration and activities specified in Schedule I made or agreed to be made without a consideration and activities specified in Schedule Il. 11.1.4 It is submitted that definition of "supply" under GST as provi....
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.... Management Plan and Detailed Interface Documents iii. Submission of Works Programme iv. Submission of Design Submission Programme v. Submission of Quality Assurance Plan vi. Submission of Safety Assurance Plan and Site Safety Plan vii. Submission of Environmental Plan viii. Submission of Software Quality Assurance Plan; ix. Submission of Inspection, Testing and Commissioning Plan x. Liaison with other Designated Contractors during the design process xi. Submission of the Preliminary Design, the pre-Final Design xii. Submission of the Final Design Document xiii. Submission of As-Built drawings xiv. Any other item considered necessary to comply with the Scope of Supply 11.2.2 It is submitted that the supply is incidental to Cost Centre C, the supply is that of goods and the scope and taxability is as discussed in detail under Cost Centre C. 11.2.3 As per the Contract entered, Cost Centre C is engaged in the supply of Standard Gauge Intermediate Cars to BMRCL. The activities undertaken by Cost Centre C includes the following:- i. Selection of suppliers for major ....
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....heading 8603 have been shifted to Schedule Il from Schedule I attracting CGST at the rate of 6%. Similar notifications have been issued by the Government of Karnataka under the KGST Act also. 11.3 Regarding the time of Supply, the applicant submitted as follows 11.3.1 It is submitted that once the nature of supply has been ascertained as supply of goods, time of such supply shall be understood in terms of Section 12 of the CSGT Act. Section 12(2) of the CGST Act provides that time of supply for goods shall be the earlier of the following dates, namely:- (a) the date of issue of invoice by the supplier or the last date on which he is required, under section 31, to issue the invoice with respect to the supply; or (b) the date on which the supplier receives the payment with respect to the supply. 11.3.2 In the instant case, various milestones have been identified and cost towards the same has been apportioned against the milestone as per Annexure FB2 of the Contract itself. Accordingly, the Applicants are raising invoices based on the achievement of the milestone. Therefore, for Cost Centre C, raising of invoices shall be the time of supply of good....
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....f supply of services shall be the earliest of the following dates, namely :- (a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under section 31 or the date of receipt of payment, whichever is earlier; or (b) the date of provision of service, if the invoice is not issued within the period prescribed under section 31 or the date of receipt of payment, whichever is earlier; or (c) the date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (a) or clause (b) do not apply. 12.6 In this case also, the applicant states that the contract specifies individual milestones, timeframe for completion of the milestone vis-a-vis the cost apportioned against each milestone. The Applicant makes the supplies based on the timelines and the milestones as agreed and accordingly raises the invoices. 12.7 The Applicant have been raising invoices as per the timeframe indicated under Section 31 of the CGST Act. It is submitted that the time of supply will be determined based on the invoices as the payment is received by the Applicants only after issuance ....
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....epair and maintenance vi. Any other item considered necessary to comply with the scope of supply 14.2 It is submitted that this separate identifiable nature of the supplies is more particular in the supply of spares made by Cost Centre G which is completely contingent on requirement of spares by BMRCL. In other words, the supplies effected in so far as Cost Centre G is concerned is made on the basis of actual requirement and the quantity of spares shall be increased or decreased as per foot note (4) under Cost Centre G of Pricing Document. Therefore, it establishes that the spares supplied are independent of the supplies made by other cost centres. 14.3 The classification and rate of tax for such supply of goods are dependent on the types of spares supplied based on the requisition by the recipient of such supplies. For instances, the Applicant have classified supply of spares for HVAC systems under Chapter Heading 84213920 chargeable to CGST at 18%. Therefore, depending upon the nature of spares, the supply of goods are classified under different Chapter Headings and taxed accordingly. 14.4 Regarding the time of supply for the above, the applicant submitted as un....
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....idual classification of such supplies and rate of tax applicable at time of supply. 19.2 In the case of Randox Laboratories India Private Limited 2020 (32) G.S. T.L. 261 (A.A.R. - GST - Kar.), the question before the Authority for Advance Ruling was whether sale of reagent along with machine rentals and services is a composite supply or not. It was held that even though the supplies were flowing from a single contract, supplies were not made in conjunction with each other and there was specific considerations for each of the supplies. Accordingly, the transaction could not be treated as "composite supply" and supply of goods and services were to be taxed separately on invoice value, which would be transaction value. 19.3 In the case of Keysight Technologies International India Pvt. Ltd. 2020 (32) G.S.T.L. 126 (A.A.R. - GST - Haryana), the question before the Authority for Advance Ruling was whether the supply of electricity through power grids and supply of utilities/ leasing by way of DG sets are separate supplies or composite supplies. It was held that supply of utilities and supply of electricity were neither naturally bundled together nor supplied in conjunction with each....
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.... treated as 'composite supply' with the supply of intermediate cars undertaken by Cost Center C as the principal supply on which GST shall be payable at the rate of 5% vide Entry 237 of Notification 1/2017 dated 28.06.2017 upto 30.09.2019 and thereafter at the rate of 12% vide Notification No. 14/2010 dated 30.09.2019. 21. Regarding the Classification and rate of tax, the applicant has submitted as under: 21.1 It is submitted that once the entire Contract is considered to be a composite supply with supply of Standard Gauge Intermediate Cars as the principal supply, the classification of Self-propelled railway or tramway coaches, vans and trucks, other than those of heading 8604 under Chapter Heading 8603 is to be resorted to for the entire supply. 21.2 Therefore, applicable tax payable on the entire composite supply shall be at the rate of 5% till 30.09.2019 in terms of Notification No. 1/2017-Central Tax (Rate), dated 28.06.2017 and at the rate of 12% from 1.10.2019 in terms of Notification No. 14 / 2019-Centra1 Tax (Rate) dated 30.09.2019. 21.3 Regarding the time of Supply for the above, the applicant has submitted as under: 21.3.1 It is submitted that in t....
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....he principal supply, the time of supply is to be understood in terms of Section 12 of the CGST Act read with Section 31(4) of the CGST Act for each milestone. Therefore, the time of supply will be the time of completion of each milestone and invoice is required to be raised on the basis of completion of each milestone such as supply of cars, Testing and Commissioning and Supply of spare parts. 22. In view of the submissions made, the applicant has requested to pass a ruling on the following:- (a) Whether the supplies made by all Cost Centres C, D, E and G is to be considered as separate supplies and time of supply is to be determined independently based on the nature of supplies? (b) Whether the supplies by Cost Centre C is supply of goods and taxable at the rate of 5%/ 12%; that the supplies by Cost Centres D and E are supply of services and are taxable at the rate of 18%; that the supplies by Cost Centre G are supply of goods taxable at the applicable rates of 18% / 28%? (c) If the answer to question in serial no (a) is in negative, then whether Supplies made by Cost Centre D and E along with other Cost Centres A B C and G should be held to be compos....
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....nuals etc. 27. It is also seen from the above, that the contract was for supply of intermediate cars which are compatible with the existing trains and for integration with installation and commissioning of cars supplied, including training, supervision and maintenance and supply of spares and preparation of manuals etc. and this is a single contract. 28. The contention of the applicant is that since the scope of activities to be undertaken has been clearly demarcated in the contract entered with BMRCL, each cost centre of the applicant is making separate supplies based on their scope. The applicant further states that the scope of each of the cost centres are independent of each other and the obligations and responsibilities of each of the Cost Centres should be based on their independent scope of works. With this, the issue whether the individual cost centres are independent of each other is to be verified. 28.1 The contract is verified and found that the contract is a single contract for both supply of goods and also for services related to those goods supplied, like installation, integration, commissioning, training and maintenance and splitting of the entire contract i....
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....shall be reimbursed to the Contractor. In the event of GST being implemented, GST as applicable shall be reimbursed to the Contractor as invoiced by the Contractor to the Employer. In case of decrease/ increase in the rate of Basic Custom Duty, the contract price shall be decreased / increased accordingly. In case of indigenous spares, the contract price shall include the following duties and taxes: Excise Duties and CST on indigenous finished spares. The Contract price shall not include the VAT payable on the transaction between the Contractor and the Employer. The Employer shall reimburse the VAT payable to the Contractor as invoiced by the Contractor. In the event of GST being implemented during the contract period, Employer shall reimburse the applicable GST to the contractor as invoiced by the Contractor to the Employer. Payments to the Contractor shall be made on the basis of actual supplies made. Further, the quantity of spares shall be increased / decreased as per foot note (4) under the Cost Centre "G" of Pricing Document, Annexure FB-2: Milestone Payment Schedule. C) Cost Centre Training, Operation and Maintenance Manuals : The Contract Price fo....
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....ered under Cost Centre H, being optional, cannot be treated as a part of the contract of supply of 150 cars and integration and other services, until that option is exercised by the contractee. This cost centre would be operative only on the request of the contractee and when such request is made by the contractee, the applicant is bound to provide such services at the agreed upon rates. 28.5.2 It can also be seen that the cost centre relating to spares would be a separate supply, which is supplied in conjunction with the principal supply. 29. Analysis shows that, it is clear that the supplies made under Cost Centre C is of goods, Cost Centres D and E are related to services and supplies made under Cost Centre G is related to the spares. 30. On the question, what would be the nature of supply of the Cost Centres C to E, there is no dispute on this issue being a composite supply of intermediate cars. The composite supply is defined in Clause (30) of section 2 of the Central Goods and Services Tax Act, 2017 as 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,....
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....lies within the same contract, the answer is yes, when the parties intend to treat them as different supplies. But in this case, the intention of the parties is to make it an integral part of the same supply contract and the contract is for "Supply of 150 Nos Standard Guage Intermediate Cars as per the requirements of BMRCL compatible with and suitable for integration with existing trains of Bangalore Metro Rail Project Phase 1" 32. The applicant had taken support of various advance rulings and they are not applicable in the present case, as the rulings are only applicable to the applicant and the department only. 33. Having said that, coming to the question of the applicant, whether the supplies made by Cost Centres C, D, E and G are independent supplies of goods and services (as applicable) or composite supply with principal supply of goods, as already explained, the same are to be treated as forming a composite supply and the same is to be treated as supply of intermediate cars as per section 8 of the CGST Act, 2017. 34. The applicant has also asked that in case the whole activity is considered as composite supply with the Principal supply being the supply of intermedia....