TaxTMI 
TaxTMI 
2021 (12) TMI 109
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....nceforth, 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. BRIEF FACTS OF THE CASE AND SUBMISSION OF THE APPLICANTS IN THEIR APPLICATION IS AS UNDER - 3. The Applicant has entered into Agreement dated 08.03.2019 with Andhra Pradesh Mineral Development Corporation Limited (hereafter referred to as "APMDCL"), in terms of which, it has been appointed as a Mine Operator (hereinafter referred to as "MO") for planning, engineering, financing, construction, development, operation and maintenance of Suliyari coal mine and subsequent delivery of coal to the Owner. 3.1 In terms of Clause 2 of the Agreement, the Applicant is to provide "Mining Services" which has been defined in the definition clause 1.1, to mean "mining and related services more particularly set forth in Schedule 2". 3.2 Schedule 2 to the Agreement inter alia envisages that the Applicant shall undertake the following activities: i. Land Acquisition (1A) - The MO will assist and facilitate the acquisition of all types of land which include Government, Private, Forest land etc. All the land will be a....
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....reement with APMDCL dated 08.03.2019 along with the Schedules is attached and marked as Exhibit "A". 3.4 For the construction of the R&R Colony, the Applicant had appointed a sub-contractor, who will undertake the said construction work and invoice the Applicant for the supply of works contract services. In turn, the Applicant will raise an invoice on APMDCL for supply of works contract services, seeking reimbursement towards the actual expenditure, incurred on the construction of the R&R Colony without any mar-up or margin. 3.5 The applicant submitted that (a) The nature of Mining activity and the construction are totally independent of each other. The risks, rewards and the skillset required for execution of the works are totally independent of each other. (b) Both the works can be very well handled by different contractors. Even in the instant case, the applicant is not actually executing the work, but had entered into a back-to back arrangement with the contractors who are responsible for the actual execution of the construction work. (c) While the construction is a one-time activity that will start independently and will conclude soon, the mining contract stretc....
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.... Supplies", listed out some indicators for determining whether a supply can be said to be bundled in the "ordinary course of business". The indicators are listed out herein below for ease of reference: • The perception of the consumer or the service receiver. If large number of service receivers of such bundle of services reasonably expect such services to be provided as a package, then such a package could be treated as naturally bundled in the ordinary course of business. • Majority of service providers in a particular area of business provide similar bundle of services. For example, bundle of catering on board and transport by air is a bundle offered by a majority of airlines. • The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business. If the nature of services is such that one of the services is the main service and the other services combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main service. For example, service of stay in a hotel is often combined with a service or lau....
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....has been reproduced hereunder: "-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;" (ix) On the perusal of the above definition, it appears that the activity of constructing a building (immovable property) is one of the specified activities in the definition of works contract. The other condition of there being a transfer of property in goods is also satisfied inasmuch as the title of the steel, cement, etc. which goes in the construction of the building is transferred to APMDCL. Thus the, activity of construction of R&R colony squarely falls within the scope of the definition of "Works Contract" Services inasmuch as the activity involves "construction" of an Immovable Property and there is a "transfer of property in goods" involved in the execution of the construction of R&R colony. Submissions of applicant with respect to Question 2 (x) T....
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....ase, the applicant is procuring the works contract service and is in turn rendering the same to the APMDC. Hence the disallowance u/s 17(5)(C) shall not arise in the hands of the applicant, but may only arise in the hands of APMDC. In case the disallowance u/s 17(5)(C) is given effect in the hand of the ultimate consumer being APMDC, then applying the same in the hands of Applicant will amount to double restriction of ITC which is never the intention of the ACT. (xiv) Hence in the view of the Applicant the service of Mining and Service of construction or monitoring of construction are two independent activities. The consideration for both is independently determined. Hence the question of which is predominant of these two. shall not arise at all. As the applicant is receiving the Work contract services in the course of further supply of the same as works contractor, the restriction of section 17(5) (C) shall not arise in the hands of Applicant, but in the hands of the ultimate consumer only. 4. QUESTION RAISED BEFORE THE AUTHORITY- The Applicant has filed present application in order to obtain a Ruling with regard to the below mentioned questions: (i) Whethe....
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.... Shri Copal Chosla, GM, Finance, Mr. Vishal Agrawal, Tax Consultant and Shri HareshNikaam, Manager, Finance & Account, Shri Deep Khare, Deputy Commissioner, Satna, the concerned officer SGST and Shri Deelip Kumar, Asstt. Commissioner, CGST, Rewaappeared for personal hearing through virtual hearing. The representative of the applicant reiterated the submissions already made in the application. The applicant during virtual hearing emphasizes on the definition of Composite supply given in the Section 2(30) of CGST Act and submitted that the construction of R&R colony is not covered under the Composite supply and covers under Works contract service. He further emphasizes that:- (a) The nature of Mining activity and the construction are totally independent of each other. The risks, rewards and the skillset required for execution of the works are totally independent of each other. (b) Both the works can be very well handled by different contractors. Even in the instant case, the applicant is not actually executing the work, but had entered into a back-to back arrangement with the contractors who are responsible for the actual execution of the construction work. ....
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.... paid on milestone basis as under: Sr. Percentage of cost Mile Stone a) 5% of the cost towards Construction of R & R colony - as initial advance amount, interest bearing. Acknowledgement of letter of acceptance by the Applicant alongwith submission of Bank guarantee covering 110% of the advance amount and approval of Master Network and detailed PERT network on work schedule for construction of R & R colony. b) 5% of the cost towards construction of R & R colony - as initial advance amount, interest bearing. On certification by APMDCL that by the Applicant has opened its office at the site and mobilized its equipment alongwith submission of bank guarantee covering 110% of the advance amount. c) 80% of the cost towards construction of R & R colony On submission of GA drawings of the building indicating the various dimensions and design criteria of the building and on construction of the building in line with the approved design criteria and basic GA drawings. d) 10% of the cost towards construction of R & R colony On final acceptance of the R & R colony. Submissions on the issues raised for determination (vii) Insofar as question (1)....
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....ore, by no stretch of imagination can it be contended that the two supplies in question are made in conjunction with one another. (xiv) It was submitted that the activity of constructing the R&R colony was appropriately taxable as supply of works contract services, as defined in Section 2(119) of the CGST Act, to mean a contract for building, construction of an immoveable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract. (xv) that the construction of the R&R colony is construction of an immoveable property and that in the course of such construction the property in the steel, cement, sand, aggregates, etc. (goods) is transferred from the Applicant to APMDCL. The said supply is aptly classifiable as supply of works contract service. (xvi) Insofar as question (2) raised for determination is concerned, the same seeks a ruling on the question whether the applicant would be entitled to avail Input Tax Credit of the GST discharged by the sub-contractor appointed by it for the construction of the R&R colony. (xvii) that Section 17(5) (c) of the CGST Act stipulates that Input Tax Credit would n....
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.... the Applicant and APMDC submitted by the Applicant with their application and we observe that as per para 8.2 (c)(page no.36),only mentioned that R&R activities provided at clause 1B of Schedule 2 of this Agreement. The said para is mentioned under the heading of Mine operator obligation during the development stage of the Agreement. The relevant para 1B of the Schedule of Agreement in respect of Construction of R&R colony and Schedule 15 in respect of terms of payment for construction of R& R Colony is reproduced below :- "Para 1B Rehabilitation and resettlement: -The mine operator shall be responsible to prepare Rehabilitation and Resettlement plan for the Project, get it approved by the state government and accordingly, implement the approved plan; the Mine Operator shall he responsible for R&R activities as per the approved R&R policy/Scheme/Plan, including construction of R&R township, infrastructure facility at R&R site etc. However payment of compensation to eligible PAFs(Project affected families) as per approved R&R policy /scheme/plan shall be paid by A PMDC directly to appropriate government authority/ PAFs. R&R Colony shall be constructed by the Mine Operator ....
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....days beyond the schedule date of completion of Development Stage. However, in case of delay in completion of these facilities, the validity of this Bank Guarantee shall be extended by the period of such delay. C. Eighty percent (80%) of cost towards construction of R&R Colony against different milestones involved in construction of R&R Colony shall be as per terms and conditions provided at Appendix] of Schedule 2. D. Ten percent (10%) of the cost towards construction of R&R Colony on Final Acceptance of the R&R Colony, Note 1: The recovery of the interest component on the interest bearing advance amount shall be made from the progressive payments released to the Mine Operator. The amount of interest to be recovered from a particular bill shall be calculated @ 13.55% per annum on the value of advance corresponding to the percentage of total progressive payment being released. The period for which the interest is to be calculated shall be reckoned from the date of release of the advance payment to the actual date of release of the said progressive payment or the expiry of the stipulated time frame for release of such progressive payments under the contract....
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....rator on mutual finalization of plan and sign. Documented payment towards the cost of R&R colony construction shall be reimbursed to the mine operator." 7.5 We observe that in this case the construction of R&R colony is to be done from the sub-contractor by the Applicant and the invoice of the said construction was raised by the sub-contractor to the Applicant under Works contract service and thereafter the Applicant reimburse the same amount from the APMDC by raising the invoice to APMDC. The Applicant has additionally been given the mandate of construction of the Rehabilitation & Resettlement ("R&R") colony for which it will be reimbursed on actuals. 7.6 We observe that the Applicant submitted that the construction of R & R colony is not naturally bundled with the supply of mining services and the same is also not supplied in conjunction with mining services in the ordinary course of business. We find that as per the Agreement between Applicant and APMDC, these services i.e. mining service and works contract service is not naturally bundled as the construction of R&R colony is not related to mining service and provide independently by the Applicant. 7.7 We go through the....
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.... of the CGST Act, 2017.We observe that the Section 17(5) of the CGST Act, 2017 deals with blocked credits under the GST law and enlists various circumstances under which the Input Tax Credit cannot be availed by the Recipient of Supply, notwithstanding the provisions of Section 16(1) & (1) of CGST Act. The Sub-Section (c) of Section 17(5) deals with blocked/ineligible credit relating to "Works Contract Services"". The relevant provisions are as follows: "(c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service; Explanation. For the purposes of clauses (c) and (d), the expression construction includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property; Explanation. -- For the purposes of this Chapter and Chapter VI, the expression "plant and machinery" means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or" We observe that as per the provision of th....