TaxTMI 
TaxTMI 
2022 (3) TMI 1146
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....M Long Central Cable-Stayed Module) Connecting 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....
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....e EPC Agreement dated January, 2018). 8. SPSC has submitted that payment for the construction work done by them is 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....
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....time of supply of goods' and 'time of supply of services.' While Section 12 of the CGST Act, 2017 provides for 'time of supply of goods', Section 13 of the CGST 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 s....
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....ent towards the supply of services by SPSC, the liability of GST arises at the time of receipt of such Mobilization Advance. However, if the Mobilization Advance is not in the nature of payment towards the services provided by SPSC, liability to pay GST does not arise at the 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 ....
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....d smooth take off of the project i.e., such an Advance is not towards discharge of an obligation. 19. The fact that Mobilization Advance extended by the Customers to SPSC is not a payment towards discharge of an obligation or towards a supply of goods/services, is also evidenced from the fact that SPSC is required to give a counter Bank Guarantee to the customers 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 m....
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.... vested right which cannot be taken away. In the present case, the Mobilization Advance is extended to SPSC only for mobilization of resources. Further, such Mobilization advance cannot be said to be a vested right which cannot be taken away in as much as there is an obligation on SPSC to repay the same subsequently. 23. In this regard, SPSC placed reliance on the cases under the Income Tax law wherein it has been 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 Constr....
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....posit has the following three characteristics viz. (i) it is an act of giving money to another, (ii) the recipient promises to preserve it or use it, and (iii) the said money is required to be returned. 27.2 SPSC has submitted that in the present case, when Mobilization Advance is extended by the customers, it fulfils all the three characteristics of a deposit mentioned above i.e (i) it is given in the form of money 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 pap....
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....t the amount of advance is being adjusted in the bills establishes the linkage between the advance and the service provided, therefore, the said amount is part of the gross amount received towards taxable service and thus exigible to service tax. The Tribunal held that service tax is not payable on the Mobilization Advance as the account books of the assesse indicate that the advance received is shown as current liability and not as income towards sale/provision of service. Therefore, 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. ....
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....SC which is secured by way of Bank Guarantee and required to be repaid. 34. SPSC submitted that Mobilization Advance is received towards procurement of machinery, etc. which are goods. In respect of goods, there is no requirement under GST law to deposit GST at the time of receipt of Advance. Therefore, on this count also, they are of the opinion that no GST is payable on the Mobilization Advance received by them. 35. SPSC has submitted that in view of the foregoing, it is of the view 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 ....
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....e considered as payment made for supply of goods or services or both if the supplier applies such deposit as consideration for said supply. ii. SPSC is a service provider and its contracts are for supply of Services. Thereby, we refer to Time of Supply of services. iii. As per Section 13(1) CGST Act, the liability to pay tax on service shall arise at the time of supply. iv. As per Section 13(2)(a) CGST Act, the time of supply of service shall be the earliest of the following dates, namely: date of issue of invoice or date of receipt of payment, 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 ....
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....vised information] Month Amendment relating to information furnished in S. No. (select) 11A(1) 11A(2) 11B(1) 11B(2) ix Further, We note that in GSTR-1 Form, at its Table 13 records the details of the following vouchers, issued in relation to Advances received, such as- 13. Documents issued during the tax period Sr. No. Nature of document Sr. No. Total number Cancelled Net issued From To 1 2 3 4 5 6 7 1. Invoices for outward supply 2. Invoices for inward supply from unregistered person 3. Revised Invoice 4. Debit Note 5. Credit Note....
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....case law of service Tax era pertaining to taxability on Inter Corporate deposits in nature of loan to subsidiary of Reliance Communications limited. The present GST matter pertains to Time of Supply in GST law on Advances received for supply of services and not Corporate loan service tax liability. We note SPSC, also, cited a civil dispute case law between Ario and GAIL Gas. 48. We find that the character of said Advance cannot be corrupted with terminologies such as following: i. Full Repayment of Mobilization Advance (clause 19.2.2. of EPC Agreement dated January 2018). We refer to Clause 19.2.7 of Contract, reproduced at para 41 (iii). This phrase used by SPSC that full said advance is repaid is misleading, as advance is adjusted into payments. There is no full repayment of said Advance but only for the unapplied left out portion of said Advance, if not adjusted in the invoice amount, then contract has provision to return the remaining portion. ii. 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 t....
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....ent to read the treatment of said advance (ii) copy of accounting entry when SPSC receives Payment from Service recipient for the said invoice to read the treatment of said advance in accounting entry (iii) Letter issued by the Service Recipient( Ministry of Road in the select case of EPC submitted before us) when the recipient provides said advance to SPSC. The said 3 documents were not produced. However SPSC vide email dated 21-2-22 submitted Receipt Voucher No. RTGS 50355 dated 11-3-21 on account of RA bill no 17TH, wherein the value of work executed was reflected and we note that the service recipient adjusted Advance and 'Interest on Advance' from the amount payable to SPSC. Also, we refer to the RA bill 25 Submitted along with the subject Application, wherein advance adjustment was made in payments. With the facts on record, we hold that said Advance is adjusted and applied to the payments to be made by service recipient and to say that said advance is not towards discharge of its service recipient's obligation is without merit. vi. Deposit The said Advance is applied toward payment. This fact is known both to the SPSC and recipien....
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....ch persons or category of persons as may be notified by the Government on the recommendations of the Council, (hereafter in this section referred to as ―the deductor), to deduct tax at the rate of one per cent. from the payment made or credited to the supplier (hereafter in this section referred to as ―the deductee) of taxable goods or services or both, where the total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees'. 50. Further, We note that there are different advances received by SPSC from its service recipient, as per the EPC Contract submitted before us. They are: 1. Said First advance equal to 5% Contract price. 2. Said Second advance equal to 5% Contract price, on submission of utilization certificate of said First advance. 3. Additional third Advance of maximum 5% contract price, for acquisition of key construction equipment required for works. The scope of work as per contract is works contract service, and we hold that all three advances are advances received by SSPC under the Service Supply Contract. 51. Ere passing our Ruling, we find it relevant to quote CBIC flyer no. 6 dated 1-1-2018 ....