TaxTMI 
TaxTMI 
2022 (4) TMI 185
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.... in terms of SI. No. 24(11) of Rate Notification? B. Alternatively, whether the services provided by the Applicant are classified under SI No. 21 (ia) of heading 9983 of the Rate Notification as 'Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both' and attracts GST @ 12% in terms of SI. No. 21(ia) of Rate Notification? C. Further, if the subject services are not classifiable under the aforesaid entry, what would be the appropriate classification for the same and at what rate GST would be imposable? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST Act. 2 FACTS CONTENTION - AS PER THE APPLICANT 2.1 Worley Service India Private Limited, the Applicant registered In....
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....es, intro field pipeline networks, facilities at central gathering pad and trunk line to the VL's processing facility. The Development Project covers various fields and project coverage includes Intrafield pipeline augmentation, Development for production ramp up of Development wells & surface facilities, etc. The Applicant has been appointed as a Project Management Consultant to manage the Project right from the detail design to commissioning and is inter alio required to review, monitor, manage and control all aspects of the execution of the Project. PMC services 2.7 VL has entered into separate agreements dated 29.05.2018 and 10.01.2019 with the Applicant in relation to Project 1 and Project 2, hereinafter also referred to as 'Projects' respectively, for supply of PMC services. The PMC services are customized and tailor made to suit the requirements of VL and further require extensive technical and sound expertise. As per the agreements, the Applicant is required to continuously review, monitor, manage and control all aspects of the execution of the projects on behalf of VL to complete it with quality, on time and within the approved cost. The Applicant is appoi....
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....BOTH UNDER SI No. 24(ii) OF HEADING 9986 OF THE RATE NOTIFICATION UNDER SAC 998621 2.10 In the present case, the Applicant provides customized and tailor made PMC services to suit the specific requirements of VL. On account of the unique nature and complexity of the services, the Applicant has the work force of professionally trained engineers who possess the qualification, technical expertise and skill sets required for executing the Projects and achieving the desired objective. Such services are in the nature of operational or administrative assistance in any manner to VL, and merits classification as 'support services to exploration, mining or drilling of petroleum crude or natural gas, or both under SI No. 24 (ii) of heading 9986 of the Rate Notification under SAC 998621'. 2.11 While determining the classification of the subject services under the Rate Notification, reference must be made to the Scheme of Classification of Services ('Scheme of Classification') which forms part of such Notification. The heading 9986 of SAC relates to 'Support services to agriculture, hunting forestry, fishing, mining and utilities'. Heading 9986 of the SAC relates t....
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....erational, administrative, consulting and management services, or any other such support services, which the entities or recipients would carry out themselves, but have outsourced the same to the supplier of such services. 2.15 In the present case, VL has contracted with an EPC contractor for the purpose of development of Raageshwari well pads, pipelines, etc. as well as for execution of development wells and surface facilities to increase prospect of mining and pursuant sale of gas, procured from the fields therefrom. 2.16 VL was required to review, monitor and manage the activities of such EPC contractor for the development Project but has outsourced the same to the Applicant vide separate agreements covering the scope of PMC services. In light of the said scope of work, Applicant has been outsourced the activity of administration and management of the entire Projects, on behalf of VL. The Applicant supports VL to efficiently complete the Projects so as to assist in increasing the mining activity and sales of gas from the respective fields of the Projects. In view of this, it is submitted that the said activity carried out by the Applicant squarely falls within the ambit of....
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....ertaken for the purpose of winning any mineral The Oilfields (Development and Regulation) Act, 1948 (b) 'mines' means any excavation for the purpose of searching for or obtaining mineral oils and includes an oil well 2.19 From the above it is submitted that mining is the process of extracting of minerals/petroleum/natural gas, as the case maybe and also includes within its ambit, the ancillary and incidental activities such as extraction, purification, development of existing mining facilities, all of which is in relation to the activity of mining of minerals/petroleum/natural gas from the Earth. Thus, activity of extraction would qualify as mining, but also, it would include development of existing mining facilities, in order to bolster the quantum of mined goods, etc. It is pertinent to note that the activity of mining pertaining to extraction of oil and gas is carried out by VL in relation to Project 1 and Project 2. 2.20 The PMC, services provided by the Applicant in relation to the Projects would be of no significance/relevance if there is per se, no activity of mining operations. Moreover, the PMC services would be insignificant when performed in isolation....
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.... provide a detailed report. - In case of any deviations from the performance Guarantee parameters, to analyse the issue and provide solutions to resolve the issue in collaboration with EPC Contractor/OEM. 8. Hand over services - Compilation and handover of all Project related documents/date in Native files to VL. This includes the following activities but is not limited to - All material test certificates and inspection reports - Data sheets - Models/software files - List & drawings of spare parts - Performance test reports - Vendor warranty documents 9. Schedule management services - Review and approve EPC Contractor baseline schedule, PMS and Progress Reporting formats - Review Progress and schedule management - Critical Path Analysis - Expedite activities on critical path 10. Project risk Management services - Review Project risk register and advice on additional risks/mitigation plans - Assist in implementing mitigation plans identified - Communication of risk and mitigation to the concerned stakeholders on a timely basis. - Prepare a detailed report on the Risk Management and handover to VL at the end of Project....
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....oring of cost trend register and reporting deviations as applicable. 17 Integrated Project Management Office - Acting as single point of contact to consolidate the Work of EPC Contractors and sub-contractors of various modules of the Project in close coordination with the Project Team. - Identify potential problems/setbacks which have impact on cost, quality and schedules of overall project and suggest remedial actions. - Establish Project review and monitoring processes. - Periodically generate business report for engagement and discussion with management. 2.22 Since the Projects are essentially for development/augmentation of existing oil and gas fields, services provided by the Applicant are integrally connected with the mining operations. Hence, the supply of services provided by the Applicant is squarely covered within the ambit of Si No. 24 (ii) of heading 9986 of the Rate Notification under SAC 998621 and would attract GST @ 12% in light of the Rate Notification mentioned above. 2.23 Further, Circular No. 114/33/2019-GST dated October 11, 2019 has provided clarification on the scope of support services to exploration, mining or drilling of petroleum c....
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....to the aforesaid submissions, in the event the supply of services by the Applicant do not merit classification under Heading 9986 of the SAC, the said services would merit classification as 'Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both' under Si No. 21(ia) of heading 9983 of the Rate Notification which provides the rate of tax leviable on the services meriting classification under the Heading 9983 of the SAC. On a bare reading, it is seen that the said entry is broad in its entirety, as it includes business services. 2.27 The definition of 'business' under Section 2 (17) of the CGST Act, 2017 is an inclusive definition and the word 'include' is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute. Hence the said definition would also include operational administrative, consulting and management services. 2.28 Entry (ia) of Sl. No. 21 of Rate Notification was inserted vide Notification No. 19/2019 with effect from October 1, 2019 in order to classify particular services such as man....
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....iness services relating to exploration, mining or drilling of petroleum crude or natural gas or both' and consequently attracts GST @12%. 2.30 Further, para 2 of the Circular specifies that most of the activities associated with exploration, mining or drilling of petroleum crude or natural gas fall under heading 9986 of the SAC. Further, it has been clarified that certain services such as technical and consulting services in relation to exploration, would merit classification under the Heading 9983 of the SAC. The said Circular clearly states that technical and consulting services relating to exploration also fall under heading 9983 and would also get classified under SI. No. 21(ia) of Rate Notification as 'other professional, technical and business services relating to inter alia mining'. It is pertinent to note that since the wordings used under the Heading 9983 of the SAC is broad in nature, various services which are provided in relation to exploration, mining or drilling would fall within its ambit and attract GST @ 12%. The Circular thereafter clarifies that 'Geological and geophysical consulting services' and 'Mineral exploration and evaluation'....
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....ment consultancy services, the Applicant is required to manage the Projects right from the detail design to commissioning and is also required to review, monitor, manage and control all aspects of the execution of the Projects. The present application is filed to determine the classification of the impugned services under the relevant GST Rate Notification and the applicable tax rate thereon. The Applicant stated that it is one of the world's largest engineering, procurement and construction management ('EPCM') service providers engaged in the oil and gas, chemicals, metals and minerals sector and are providing PMC services and EPCM services to local and international customers. The PMC services are provided to various natural oil and gas companies as well as oil and gas mining and exploration companies. The details of projects involved in present application are mentioned in the subject application and are therefore not reproduced for the sake of brevity. 5.3 In respect of the RDG Gas Development Project (Project1), VL is the operator of the onshore hydrocarbon block - RN-ON-90/1 (hereinafter, referred to as the 'block') for itself and others. In order to ex....
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....nta Limited are pertaining to the oil and gas sector and in particular for augmentation of the oil/gas facilities and therefore it can be said that both the impugned projects are pertaining to mining of oil/gas. Further, for both the Projects, VL has appointed EPC Contractor for the engineering, procurement, and construction activities to deliver the completed Projects. 5.8 We further find that, the applicant has been contracted to supply customized and tailor made PMC services to suit the requirements of VL and from the oral and written submissions made by the applicant we find that there is no supply of goods involved in the subject case and therefore the impugned supply is a supply of services under the GST Laws. 5.9 The applicant was classifying their supply under Service Accounting Code ('SAC') 998339 as 'Project management services for construction projects' and paying GST @ 18% as per residuary entry under Sr. No. 21 of Notification No. 8/2017-I.T. (Rate) dated 28.06.2017. However subsequent to issuance of Notification No. 19/2019 - Integrated Tax (Rate) dated September 30, 2019, the Applicant is of the belief and contending that the impugned services s....
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....cipation in the mining activity, and in the subject case, it would appear that it is actually the EPC contractor who is giving support services to VL by being responsible for all the engineering, procurement, and construction activities to deliver the completed Projects. 5.11.3 In view of the above mentioned in para nos 5.11.1 and 5.11.2, we find that the impugned activity is not covered under Heading 998621 and therefore the first question raised by the applicant will have to be answered in the negative. To arrive at this decision we have considered all the averments made by the applicant with respect to the term 'support services' 5.12.1 The second question raised by the applicant is "whether the services provided by the Applicant are classified under SI No. 21(ia) of heading 9983 of the Rate Notification as 'Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both' and attracts GST @ 12% in terms of SI. No. 21(ia) of Rate Notification". 5.12.2 We find that, the applicant has been appointed as a Project Management Consultant to manage the Project right from the detail design ....
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.... for managing the quality control, quality assurance, right from approving the EPC Contractor's Quality Plan and procedures, coordinating/ conducting quality inspections at sub-vendor's/sub-contractor's works, factories, fabrication yards and also at site including construction and commission activities. i. ensure that the EPC Contractor takes timely statutory, legal and environment approvals for timely completion of project. j. To Review and monitor material management of the EPC Contractor continuously starting from engineering till commissioning and handover of the project. 5.12.3 Heading 9983 covers Other professional, technical and business services (except research, development, legal and accounting services). Notification No. 11/2017-CT (Rate) dated 28.06.2017 (Rate Notification) prescribes the tax rate for various services. The relevant Sr. No. 21 of the said Rate Notification is reproduced as under:- Sr.No. Heading Description of Service Rate (per cent) 21 Heading 9983 (Other professional, technical and business services) (i) Selling of space for advertisement in print media. 5 (ii) Other professional, technical a....
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....ociated with exploration, mining or drilling of petroleum crude or natural gas under heading 9983 and 9986. 3.1 The relevant Explanatory Notes for Heading 9983 are as follows: 998341 Geological and geophysical consulting services This service code includes provision of advice, guidance and operational assistance concerning the location of mineral deposits, oil and gas fields and groundwater by studying the properties of the earth and rock formations and structures; provision of advice with regard to exploration and development of mineral, oil and natural gas properties, including pre-feasibility and feasibility studies; project evaluation services; evaluation of geological, geophysical and geochemical anomalies; surface geological mapping or surveying; providing information on subsurface earth formations by different methods such as seismographic, gravimetric, magnetometric methods & other subsurface surveying methods This service code does not include - test drilling and boring work, cf. 995432 998343 Mineral exploration and evaluation This service code includes mineral exploration and evaluation information, obtained ....
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.... mentioned Circular states that the scope of the entry at Sr. No. 21 (ia) under heading 9983 of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 inserted with effect from 1st October 2019 vide Notification No. 20/2019- CT(R) dated 30.09.2019 shall be governed by the explanatory notes to service codes 998341 and 998343 of the Scheme of Classification of Services. The relevant Explanatory Notes are already mentioned in the Circular above and are not reproduced for the sake of brevity. 5.12.7 From a reading of the Circular and the relevant Explanatory Notes to service codes 998341 and 998343 of the Scheme of Classification of Services, it is clear that the impugned services are not covered by the said Explanatory Notes since, the Notes to service code 998341 is restricted to Geological and geophysical consulting services and the Notes to service code 998343 is restricted to Mineral exploration and evaluation and the impugned services cannot be considered as being connected to either Geological and geophysical consulting services or Mineral exploration and evaluation services. 5.12.8 In view of the above it is held that the impugned services are not covered under Sr.....