TaxTMI 
TaxTMI 
2022 (3) TMI 1146
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....ing Missing Link between Okha and Beyt Dwarka on EPC Mode including Construction of Approached road on New National Highway No. NH-51 in the State of Gujarat (Works) on the terms and conditions laid down therein. 4. For carrying out the Works as specified under the said EPC Agreement, the Authority shall make payment of Contract Price to SPSC and relevant clause 19.1 of EPC contract is read as follows: "19.1 Contract Price 19.1.1 The Authority shall make payments to the Contractor for the Works on the basis of the lump sum price accepted by the Authority in consideration of the obligations specified in this Agreement for an amount of Rs. 689,47,00,000/- (Rs. Six hundred eighty nine crore forty seven lac only) (the "Contract Price"), which shall be subject to adjustments in accordance with the provisions of this Agreement. For the avoidance of doubt, the Parties expressly agree that the Contract Price shall not include the cost of Maintenance which shall be paid separately in accordance with the provisions of clause 19.7. The Parties further agree that save and except as provided in this Agreement, the Contract Price shall be valid and effective until issue of Completion Cert....
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....s given by the concerned authority on completion of a payment stage (say a month) as defined in an EPC Contract, post which SPSC raises an invoice on the concerned authority. A part of the Mobilization Advance is reduced in proportion to the value of the work completed as shown in the invoice raised by SPSC up to that stage. The amount of Bank Guarantee provided by SPSC is also correspondingly reduced in proportion to the Mobilization Advance adjusted in the invoices (Article 19.2.7 to Article 19.5 of the EPC Agreement dated January, 2018). In this regard, invoice is annexed herewith as Annexure - 2. 9. The EPC Contract also provides that if the Mobilization Advance has not been fully repaid by SPSC prior to the Termination of the contract as envisaged in the contract, the whole of the balance outstanding shall be immediately become due and payable by SPSC to the concerned authority and in such a case the concerned authority would en-cash the Bank Guarantee given by SPSC (Refer Article 19.2.8 of the EPC Agreement dated January, 2018). 10. The concerned Authority who is making the payment of Mobilization Advance to SPSC may or may not deduct TDS on such payment. There are cases wh....
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....Act, 2017 contains provisions for 'time of supply of services.' Thus, in order to determine the 'time of supply' in the present case, it is important to know as to whether the activity of SPSC is a supply of goods or supply of service. 14. SPSC activity qualifies as 'works contract' in terms of Section 2(119) of the CGST Act, 2017 as it relates to construction of an 'immovable property'. In terms of Para 6(a) of the Schedule II of the CGST Act, 'works contract' is specifically deemed as supply of service. 14.1 SPSC submits that in view of the above their activity qualifies as service accordingly, the provisions pertaining to 'time of supply of service' under the CGST Act, 2017 are required to be referred. 14.2 Section 13 of the CGST Act, 2017 provides for the 'time of supply of services', relevant extract of which is reproduced below: 13. Time of supply of services. (1) The liability to pay tax on services shall arise at the time of supply, as determined in accordance with the provisions of this section. (2) The time of 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 wit....
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....e time of receipt of Mobilization Advance. In this regard, it is important to refer to the definition of consideration under Section 2(31) of the CGST Act, 2017, the relevant extract of which is reproduced: 2(31). "consideration" In this Act, unless the context otherwise requires, - (31). "consideration" in relation to the supply of goods or services or both includes, - (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply; 15.1 A ....
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....ustomers in lieu of such Mobilization Advance. In this regard, reference can be made to the following provisions in the EPC Agreement dated January, 2018: 19.2.2 The Contractor may apply to the Authority for the first installment of the Advance Payment at any time after the Appointed Date, along-with an irrevocable and an unconditional guarantee from a Bank for an amount equivalent to 110% (one hundred and ten percent) of such installment, substantially in the form provided at Annex -III of the Schedule - G, to remain effective till the complete and full repayment thereof. 19.1 Thus, when a Bank Guarantee is given to secure the Mobilization Advance extended by the customers to SPSC, it cannot be said that such Mobilization Advance is towards discharge of an obligation. 20. It is also pertinent to note that where money is paid in discharge of an obligation, there is no question of repayment of the said sum. However, in the present case, the Mobilization Advance is extended to SPSC with an obligation to repay the same as per the terms of the contract. 21. In this regard, SPSC has referred the following provisions in the EPC Agreement dated January, 2018: 19.2 Advance Payment ....
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....held receipt of Mobilization Advance is not in the nature of income. The ITAT in the case of Deputy Director of Income Tax Vs. SEPCO Electric Power Construction Corporation (18.09.2009 - ITAT Bilaspur) held that mere receipt of cash in the form of Mobilization Advance does not make it to be of the nature of income even in case where the assesse is following cash system of accounting because it retains the character of a liability only and it attains the character of income only when the service connected therewith are rendered. The Tribunal further held that even though the payer deducted TDS on the Mobilization Advance, the Mobilization Advance is not in the nature of income. Reference is also placed on the decision of the ITAT in the case of DCIT Vs. Five Star Construction P Ltd. [ITA No. 1861/Del/2011 (Assessment Year: 2007-08)] wherein it was held that only that part of the Mobilization advance which has adjusted would be an income of the assesse for the year under consideration. Merely because tax at source had been deducted by builder, receipt of mobilization money could not be deemed as income of assessee. 24. Similarly, the High Court of Punjab & Haryana in the case of Com....
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....to SPSC, (ii) SPSC uses it for mobilization of resources, and (iii) there is an obligation on the part of SPSC to repay the Mobilization Advance. 28. SPSC has placed reliance on the High Court of Madhya Pradesh in the case of Parasram Pal and Ors. vs. Union of India and Ors [W.P. No. 5022/ 2015] dealt with the meaning of the term deposit: "17. The word Deposit as per Corpus Juris Secundum Volume Twenty-Six A. a deposit has been described as a mere incident of custody, and, in its ordinary signification, implies something more than mere possession. In a particular connection and context, it has been said that the word means more than a delivery for mere inspection; it means the delivery of a book or paper to one entitled to have the official custody thereof, either to be kept or to be redelivered, after it has served its purpose, to one having a right to receive it. As per the Major Law Lexicon 4th Edition 2010 of P. Ramanatha Aiyar's. the word deposit includes and shall be deemed always to have included any receipt of money by way of deposit or loan or in any other form. As per Judicial Dictionary Second Edition of Orient Publishing Company, the word deposit means the m....
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....ore, it is not towards value of services provided. The advance is only an amount given as kind of earnest money and for which the appellant gives a bank guarantee to the customer of equal amount. It is more in the nature of a deposit. Further, as per law, the gross amount charged shall include any amount received towards taxable service. In our considered view, the advance is not received towards taxable service. The advance is the customer's obligation as his part of the mutual commitment between the two parties to honor the terms of the contract. The above view was also followed later and reiterated by the Tribunal in the case of SMS Infrastructure Ltd. Vs. CCE [2017 (47) STR 17 (Tri. - Mumbai)]. 31. Further, SPSC submits that CESTAT in the case of Reliance Infratel Ltd. Vs. Commissioner of Service Tax [2015 (39) STR 829 (Tri. - Mumbai] the assessee provided Business Support Service to its holding company. The assesse and the holding company entered into a Master Service Agreement as per which the holding company extended the financial support to the assesse which was to be set off against the bills that would have been raised by the assessee on the holding company. The DGCEI is....
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.... that time of supply in respect of receipt of Mobilization Advance would be at the time when such Mobilization Advance is set off or appropriated against the consideration that is payable by the customers to SPSC. Question on which Advance Ruling sought 36. SPSC desires to obtain Advance Ruling on the question as to what is the time of supply for the purpose of discharge of GST under the CGST Act, 2017 and SGST Act, 2017 in respect of Mobilization Advance (hereinafter referred to as 'said advance' for the sake of brevity) received by it for construction services provided by it? Personal Hearing 37. Personal hearing granted on 18-2-22 was attended by Shri Rajat Mittal, Advocate and he reiterated the submission. Revenue's submission 38. Revenue has neither submitted its comments nor appeared for hearing. FINDINGS 39. At the outset we would like to make it clear that the provisions of CGST Act and GGST Act are in pari materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the correspo....
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....ent, whichever is earlier. We note a deeming provision laid down in the statute vide Explanation(i) to Section 13(2) CGST Act, which stipulates that supply of service shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment. Thereby in pursuance to Section 13(2) CGST Act, read with Explanation(i) to Section 13(2) CGST Act Time of Supply of Service for advances received is date of receipt of advances by SPSC. v. Further, vide Notification No 66/2017- Central Tax dated 15-11-2017, The Central Government granted Exemption from payment of tax, at the time of receipt on advances received for supply of goods with effect from 15-11-2017. However such deferment from payment of GST on advances received for supply of services has not been granted. vi. The GST law stipulates that in case of Advance received for supply of service, Time of supply shall be date of receipt of advance, irrespective of the fact whether supply is made at that time or not. The deeming provision at Explanation(i) to Section 13(2) CGST comes into picture. vii. With the said deeming provision enacted, GST law has also made provisions for any tax paid on rec....
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....ices for outward supply 2. Invoices for inward supply from unregistered person 3. Revised Invoice 4. Debit Note 5. Credit Note 6. Receipt voucher ** 7. Payment Voucher 8. Refund voucher (**On receipt of said Advances, receipt vouchers as stipulated in CGST Act are to be issued. Section 31(3)(d) CGST Act reads, a registered person shall, on receipt of advance payment with respect to any supply of goods or services or both, issue a receipt voucher or any other document, containing such particulars as may be prescribed, evidencing receipt of such payment). 43. The format of GSTR-1 is to capture advances received for Supply for determining its taxability on its date of receipt for supply of services. 44. Considering the facts and GST Scheme of law, we find no ambiguity that Time of Supply of Service on advances received is date of its receipt. 45. We f....
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..... Interest Bearing Advance We note that neither section 13(2) nor proviso to Section 2(31) CGST Act differentiates between advance and interest bearing advance. We note that the Interest borne on the said Advance is also used by the recipient as adjustment in paying its dues by recipient, as reflected in the RA bill 25 dated July 21 at sr no 2(vii) under deductions and Receipt Dwarka voucher RTGS-50355 dated 11-3-21 raised by SPSC. We find that vide this variant of advance, which bears interest, wherein advance and its interest is applied into the invoice amount raised by SPSC and balance due is paid by recipient. We hold that GST levy on advances for supply of services is leviable, irrespective of the form/ terminology of advances. iii. Counter Bank Guarantee in lieu of said Advance. We find that as per the contract with its recipient, wherein for the amount debited in Advances under Current liabilities of Balance Sheet of SPSC and that amount reflected in Revenue income of SPSC, a corresponding reduction is made in the value of the Bank guarantee. Thereby, the Bank guarantee amount is regularly reduced at each stage payments by recipient, as advances are applied into invo....
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....e is applied toward payment. This fact is known both to the SPSC and recipient as reflected in said EPC contract that said advance will be adjusted for payments to be made by recipient. SPSC applies said Advance as consideration for its supply. We find that as per the proviso to Section 2(31) CGST Act, the said advance is consideration. We find that SPSC has misplaced its reliance that said advance is a deposit and has cited case laws pertaining to the word 'deposit'. We find these case laws inapplicable in subject matter. vii. TDS provisions under Section 194C Income Tax Act, 1961 a. The issue before us is Time of Supply for GST levy on Advances received by SPSC. We are not ruling on the provisions of IT Act. We note that CGST Act 2017 and SGST Act 2017 are Indirect taxation laws and not in para materia with Direct Taxation Income Tax Act 1961. We hold that Competent Legislature has enacted the CGST Act, 2017 and the GST Scheme of law has to be canvassed within the confines of statutory provisions of CGST ACT and Rules. We find that SPSC has cited Income Tax case laws which shall have no bearing on GST taxation/ time of supply. We find that the case law of West Bengal Higher E....