TaxTMI 
TaxTMI 
TaxTMI 
2023 (4) TMI 960
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....nafter referred to as applicant ), an unregistered partnership firm under the provisions of the Central / Rajasthan Goods and Services Tax 2017, incorporated with an intention to manufacture and supply Precast Manholes and Rises to various government and non government entities is fit to pronounce advance ruling as it falls under the ambit of the Section 97(2) (b), (e) & (g) given as under: (a) Classification of any goods or services or both (g) Whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term. A. SUBMISSION OF THE APPLICANT: (in brief) 1. M/s Natani Precast LLP (hereinafter referred to as applicant), has been incorporated with an intention to manufacture and supply Precast Manholes and Rises to various government and non government entities. The said supply of precast Manhole requires following inputs / raw materials / consumables for its manufacturing namely: a. Cement, b. Steel (TMT & Bars) c. Coarse Aggregate d. Fine Aggregate/Sand/Dust The applicant submitted that the manufacturing process of said precast Manholes can be....
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....%. Further in accordance with the provisions of Section 9 read with Section 15 of the CGST / RGST Act 2017, the tax is charged on the transaction value as given under Section 15(1) of the Act, subject to certain inclusions and exclusions as given under Section 15(2)/ (3) of the Act. B Interpretation and understanding of applicant on question rose (in Brief) The applicant submitted his interpretation which is under- 1. That according to the charging provision of the GST law under Section 9 of the CGST Act, there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both except the exclusions mentioned therein at such rates as may be notified. The said section also clearly specifies that tax is calculated on the value determined under Section 15 of The Act. 2. That the tax is applicable either on supply of goods or on supply of services. The term goods and services have been defined under Section 2 of the CGST Act 2017 as under a. Section 2(52): goods means every kind of movable properly other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the l....
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.... out by the applicant. 8. That other inputs and consumables shall be used and brought by the applicant and it will be within the scope of the applicant. But the base structure shall be manufactured using the inputs belonging to the recipient only. 9. That on perusal of above it appears that applicant has been engaged to the manufacture the precast manhole by undertaking such activity using the basic inputs which shall be within the scope of the recipient. Those goods (Steel and Cement) shall never be billed to the applicant by the recipient. Hence the process of manufacture shall be carried on goods belonging to the recipient. 10. That in this regard, reference to drawn to the clarification in Circular No. 52/26/2018, dated 9-8-2018 for arriving at the understanding about classification of given activity as supply of goods or supply of service, wherein applicable GST on the bus body building activity is clarified as under : 12.1 Applicable GST rate for bus body building activity: Representations have been received seeking clarifications on GST rates on the activity of bus body building. The doubts have arisen on account of the fact that while GST applicable on job work service....
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....tion value has been defined as price actually paid or payable for supply of goods or services or both. However said price being the transaction value is subject to two conditions that a. Supplier and the recipient are not related b. Price is the sole consideration for the supply. 14. That in given case, it is an undisputed fact that applicant has been approached by the recipient to supply precast manhole. For said supply of pre-cast manhole which are goods, a competitive price has been sought from the applicant. The applicant is expected to execute the order for supply which, if in case is awarded to it, is required to be executed at a price which shall be pre-agreed. 15. That term 'price' is not defined under the Act. The term is defined in Black's Law Dictionary as. "The amount of money or other consideration asked for or given in exchange for something else." Further, consideration is defined under Sec. 2(31) as under: (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 service....
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....nd agreed between the parties shall tantamount to price as mentioned in Section 15(1) of the CGST Act 2017. 19. That hence the rate to be quoted by the applicant and as agreed by the recipient has all the necessary characteristics of price as mentioned under Section 15(1) of the Act. 20. That it is also explained that applicant as supplier and recipient are not related parties as mentioned under Explanation to Section 15 of the CGST / SGST Act 2017. 21. That in fact, the price as mentioned above, is the sole consideration for the applicant to execute the supply of precast manhole. The definition of term consideration as given under Section 2(31) of the Act. It clearly lays down that any payment made in respect of, in response to or for inducement of supply is treated as consideration. In given case of the applicant, except the rate which shall be finalized between the parties, no other amount shall accrue, arise or shall be available at benefit of the applicant. The applicant shall not be entitled for receipt of any money, goods or services as a reward or consideration for the supply of precast manholes. 22. That any consideration, whether monetary or otherwise, should have flo....
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....f levy of tax. 28. That, further for the purpose of levy of tax, the transaction value has to be subsequently adjusted on account of instances as mentioned under Section 15(2) of the CGST / SGST Act 2017. 29. That provisions of Section 15(2) of the Act are read as under (2) The value of supply shall include - (a) any taxes, duties, cesses, fees and charges levied under any law for the lime being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier; (b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both; (c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both al the time of, or before delivery of goods or supply of services; (d) Interest or late fee or penalty for delayed payment of....
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....t be challenged by adding artificially the value which was not agreed between the parties. The contract or the commercial understanding between the parties needs to be read in total and the law needs to be applied on the basis of such commercial understanding. 34. That in fact it has been held in many judgments that the agreement and the conduct of the parties demonstrate the real state of affairs. Precedents which support the same are enumerated as under a) Union of India v. Mahindra and Mahindra [1995 (76) E.L.T. 481 (S.C.)] Ordinarily the Court should proceed on the basis that the apparent tenor of the agreements reflect the real state of affairs. b) M/s. VISA International Limited v. Continental Resources (USA) Limited, [2009 (2) SCC 55], 27. What is required to be gathered is the intention of the parties from the surrounding circumstances including the conduct of the parties and the evidence such as exchange of correspondence between the parties. c) Rajasthan Spg. & Wvg. Mills Ltd. v. Commissioner of C. Ex., Jaipur [2001 (131) E.L.T. 594 (Tri. - Del.)], Transacting parties being fairly big public limited companies bearing responsibility for its end of deal, lease ....
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....the applicant, the Hon'ble Supreme Court in the case of Commissioner v. Bhayana Builders (P) Ltd. - 2018 (10) G.S.T.L. 118 (S.C.) has held that: The value of taxable services cannot be dependent on the value of goods supplied free of cost by the service recipient. The service recipient can use any quality of goods and the value of such goods can vary significantly. Such a value, has no bearing on the value of services provided by the service recipient. Thus, on first principle itself, a value which is not part of the contract between the service provider and the service recipient has no relevance in the determination of the value of taxable services provided by the service provider. 38. That from perusal of above it is clear that value of material which are not agreed to be supplied by the applicant are not required to be included in the value of supply. In fact the Hon'ble Supreme Court in case of Union of India v. Intercontinental Consultants and Technocrafts Pvt. Ltd. - 2018 (10) G.S.T.L. 401 (S.C.) held that Valuation (Service Tax) - Material supplied free by service recipient - Its value cannot be treated as 'gross amount charged' as it is not consideratio....
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.... not be added to the value of such supply because the cost of moulds/dies was not to be incurred by the component manufacturer and thus, does not merit inclusion in the value of supply in terms of section 15(2)(b) of the Central Goods and Services Tax Act, 2017 (CGST Act for short). 1.3 However, if the contract between OEM and component manufacturer was for supply of components made by using the moulds/dies belonging to the component manufacturer, but the same have been supplied by the OEM to the component manufacturer on FOC basis, the amortised cost of such moulds/dies shall be added to the value of the components, hr such cases, the OEM will be required to reverse the credit availed on such moulds/dies, as the same will not be considered to be provided by OEM to the component manufacturer in the course or furtherance of the former's business 42. That on the basis of above, it is clear that even if some material is essential for manufacture and supply of any specific goods, if contractually same are included with the scope of the supplier, then value of said material if supplied free of cost by the recipient then same shall not be included in the transaction value by virtue....
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.... like to discuss the submission made by applicant and will take up the above question for discussion one by one. 2) The applicant M/s Natani Precast, 22 Bajrang Colony Jhotwara Jaipur-302012,Rajasthan) have intention to manufacture and supply Precast Manholes and Rises to various government and non government entities. The main inputs of precast Manhole are 1) Cement, 2) Steel (TMT & Bars), 3) Coarse Aggregate, 4) Fine Aggregate / Sand / Dust. 3) The applicant submitted that the manufacturing process of said precast Manholes can be explained in brief as under-: a. A steel cage as per drawing and size of manhole and rings is prepared. b. Subsequently, the said cage is casted in the molds as per size of manholes and rings c. Afterwards, concrete (combination of cement, coarse aggregate, fine aggregate and water) is prepared and filled in the molds. d. Then after some time, molds are opened for finishing of the product i.e. precast manhole and after finishing the said item is moved for the curing stage. e. After curing of the item, the finished goods are ready for the dispatch as per requirement. 4) The applicant M/s Natani Precast LLP, has recently received request for q....
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....d Rises. Even the manufacturing process submitted by the applicant itself shows that the applicant is engaged in manufacturing of goods ie Precast Manholes and Rises. The Precast Manholes and Rises are movable property; hence we conclude that supply of Precast Manholes and Rises is supply of goods and not a supply of services on the basis of aforesaid findings. 5.5) now, we would like to discuss that whether the stated supply to be made by applicant constitutes any form of job work. As per Section 2(68) of the Act which is read as under-: (68) "job work" means any treatment or process undertaken by a person on goods belonging to another registered person and the expression job worker shall be construed accordingly, We have gone through the BOQ. dated 22.02.2022 with L&T, submitted by applicant wherein it is mentioned that "Please quote your best rates for supply of precast manholes for our kirari project, Delhi FOR site basis and considering steel & cement in L&T Scope", thus we understood that here in this case Precast Manholes and Rises are to be manufactured by applicant on order from recipient wherein main ingredients are supplied by recipient, and applicant will manufactur....
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....Q. dated 22.02.2022 and SCOPE MATRIX FOR SUPPLY OF PRECAST MANHOLE & RISERS, Applicant will not be providing any manufacturing service to recipient. Applicant intended to manufacture and supply goods as per specification of applicant and to maintain that specific standards of goods cement and iron are to be supplied by recipient. 6) Now we would like to examine next both questions which are mingled to each other (i) Whether the price to be charged from the recipient i.e. M/s Larsen & Toubro Ltd by the applicant for supply of precast manhole shall be transaction value in terms of Section 15(1) of the CGST/RGST Act 2017. (ii) Whether the material which are to be made available free of cost by the recipient and are not within the scope of applicant for supply of precast manhole shall form part of the transaction value for the purpose of levy of tax. 6.1) To derive the answers of above questions, we have to read and analysis the Section 15(1) & 15(2)(b) of the CGST / RGST Act 2017 collectively along with definition of consideration. As per section 15(1) :- The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or paya....
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.... to price as mentioned in Section 15(1) of the CGST Act 2017; That in fact, the price as mentioned above, is the sole consideration for the applicant to execute the supply of precast manhole, is not correct as details below- As per Section 15(1) the price is not the sole consideration for the supply of goods as main inputs cement and steel supplied free of cost by the recipient of services, hence condition laid down under Section 15(1) is not fulfilled. Section 15(2)(b) clearly stipulated that the value of supply shall include-any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both. Consideration has been define under Sec. 2(31) as under: 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 Governmen....