AI Drafter 
TaxTMI 
TaxTMI 
2023 (5) TMI 964
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Ruling, the expression 'GST Act' would be a common reference to both CGST Act and TGST Act. 3. It is observed that the queries raised by the applicant fall within the ambit of Section 97 of the GST ACT as it involves determination of the liability to pay tax on goods or services and classification of goods or services. The Applicant enclosed copies of challans as proof of payment of Rs. 5,000/- under SGST and Rs. 5,000/- under CGST towards the fee for Advance Ruling. The Applicant has declared that the questions raised in the application have neither been decided nor are pending before any authority under any provisions of the CGST/TGST Act' 2017. The application is, therefore, admitted after examining it and the records called for and after hearing the applicant as per section 98(2) of TGST Act' 2017. 4 BRIEF FACTS OF THE CASE: 4.1 The applicant M/s. PES Engineers Private Limited Hyderabad are engaged in the construction of various types of Power Projects. They have entered into agreements with Singarenni Collieries Company Limited (SCCL) for "Design, Manufacture, Test, Deliver, Install, Complete & Commission and to conduct guarantee test of certain facilities viz., Fue....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on goods 7.5% Upon dispatch 52.5% Upon receipt 20% On Achievement of intermediate milestone 5% On successful completion 10% Total: 100% The advance of 5% plus 7.5% is computed on Rs. 339,21,28,225/- is recovered progressively from tax invoices issued for supply of goods under the contract. 4.5 The applicant avers that as can be seen from both the contracts there is a clear cut demarcation of activities of supply of goods and supply of services. Hence, according to the applicant each contract has to be independently assessed for the purpose of GST. According to the applicant since, the Advance of 5% and 7.5% is specifically given against supply of goods under the First Contract, the Applicant is entitled for the benefit of Notification No.66/2017 Central Tax, dated: 15th November, 2017. Hence, this application. 5. The applicant has submitted Statement of relevant facts having a bearing on the question(s) raised as detailed below: 1. The Applicant, M/s PES Engineers Pvt.Ltd., having principal place of business at 1st Floor, Pancom Chambers, 6-3-1090/1/A, Somajiguda, Rajbhavan Road, Hyderabad - 500082, Telangana are engaged in constru....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ystem supplied earlier by the FGD vendor shall be supplied by the contractor. Compressed oxidation air shall be blown through the slurry in the oxidation tank, to oxidize the Calcium sulfite to gypsum. The oxidation system may be either grid sparge type or lance jet type or Jet Air Sprayer or any other proven system as per the practice of the FGD vendor. Clean gas from the absorber shall be taken to the Wet Chimney, to be provided by the Contractor, through three stage mist eliminators. Provision shall be made for facilitating operation of unit with FGD bypass through existing stack. All modifications required including providing bypass damper is included in the scope of the Contractor. Limestone to the absorbers of the units shall be supplied by a wet limestone grinding system, common for both the units. Limestone shall be fed to the Limestone day silos which in turn will feed the Limestone to wet ball mill through a gravimetric feeder. The classified limestone slurry from the mills shall be stored in two (2 no) limestone slurry storage tanks to be provided by the contractor, from where the slurry shall be pumped to the individual absorbers by d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....required fineness available from the wet ball system shall be stored in limestone slurry tanks. From limestone slurry tank, the limestone slurry shall be pumped to individual absorber by means of dedicated limestone slurry transfer pumps. v. Gypsum handling system : In the de-sulphurisation process, a by-product Gypsum is generated in liquid form. The liquid form of Gypsum generated in the Absorber is pumped into the gypsum handling system to transform it into crystal form. The main equipment includes for Gypsum Handling System is gypsum hydro cyclones, vacuum belt filters, vacuum pumps, filter water system etc., vi. Wastewater treatment and disposal System : The FGD system produce a small amount of wastewater. The main task of the wastewater treatment plant is to adjust the pH and to remove the heavy metals and suspended solids. The waste water collected in the waste water tank of FGD system shall be provided with adequate treatment with lime as reagent and then disposed to existing ash handling system. vii. Chimney : Reinforced Cement Concrete (RCC) Chimney will be of cylindrical in shape with 18.0 m diameter and 150 m height. Treated flue gas from the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... required to indicate the item-wise sub totals of Schedule-1 in E-Tender Site. 2. Unless stated otherwise a 'set' means items or sub-items required for each type/size range of the assembly/sub-assembly, required for complete replacement in one unit. It is further, intended that the assembly/sub-assembly which have different orientation (like left hand or right hand, top or bottom), different direction of rotation or mirror image positioning or any other reasons which result in maintaining two different sets of the spares to be used for the subject assembly/sub-assembly, these shall be considered as different types of assembly/sub-assembly. 3. Wherever quantity has been specified as percentage (%), the quantity of mandatory spares to be provided by the Contractor shall be the specified percentage (%) of the total population required to meet the specification requirements. In case the quantity of Mandatory Spares so calculated to be fraction, the same shall be rounded off to next higher whole number. Item Description Qty. Unit Unit rate (INR) Total Ex-works (India) Price (INR) 4. Wherever the quantities have been indicated for each type, si....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nder: SCHEDULE-6 PAGE 1 OF 1 FLUE GAS DESULPHURISATION SYSTEM (FGD) PACKAGE FOR SINGARENI THERMAL POWER PROJECT STAGE-I (2 x 600 IFB N./Tender No. : E0119O0413 Dated: 29.01.2020 Bidder's Name and Address : PES Engineers Private Limited, 1st Floor, Pancom Chambers, 6-3-1090/1/A, Schedule No. 6 : Goods and Services Tax (GST), applicable on Schedules - 1, 2 & 3, not included in bid price. The details of Goods and Services Tax (as on seven (07) days prior to the last date for submission of price bids) S. No. Bid Price Component Amount on which GST applicable (in INR) Total GST payable (in INR) 1 Ex-Works-Main Equipment (Schedule-1) 3,39,21,28,225.00 61,05,83,081.00 2 Ex-Works-Mandatory Spares (Schedule-1) 15,86,96,057.00 2,85,65,290.00 3 Type Test charges (Schedule-1) 55,45,661.00 9,98,219.00 4 F&I-Main Equipment (Schedule-2) 3,64,50,501.00 65,61,090.00 5 F&I-Mandatory Spares (Schedule-2) 19,83,701.00 3,57,066.00 6 Erection - Main Equipment (Schedule-3) 52,27,05,139.00 9,40,86,925.00 7 Civil Works (Schedule-3) 1,56,41,48,015.00 28,15,46,643.00 8 Training charge....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Section- VII - Bank Guarantee Form for Advance Payment. (iii) Submission by the Main Contractor of an unconditional Bank Guarantee(s) towards Performance Security(s) in respect of all Contracts all initially valid upto ninety (90) days after the end of Defects Liability Period of all equipment covered under Contract. However, in case of delay in Defect Liability Period, the validity of this Bank Guarantee shall be extended by the period of such delay. The proforma of Bank Guarantee is enclosed in Section- VII-Form of Performance Security. (iv) In case Deed of Joint Undertaking by the Contractor alongwith his Associate/Collaborator forms part of the Contract then submission of an unconditional Bank guarantee from such Associate/Collaborator towards faithful performance of the Deed of Joint Undertaking for an amount specified in the deed and initially valid upto ninety (90) days after the end of Defect Liability Period of all equipment covered under the Contract. However, in case of delay in Defect Liability Period, the validity of this Bank Guarantee shall be extended by the period of such delay. The proforma of Bank Guarantee(s) shall be as enclosed in Section-VII....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Percent (1%) of Ex-works price component of the Contract Price shall be released on Completion of erection of Absorber system. 2. One Percent (1%) of Ex-works price component of the Contract Price shall be released on Completion of erection of Fan and Ducting System. 3. One Percent (1%) of Ex-works price component of the Contract Price shall be released on Completion of erection of Limestone Handling and Crushing System. 4. One Percent (1%) of Ex-works price component of the Contract Price shall be released on Completion of erection of Gypsum Handling system. 5. One Percent (1%) of Ex-works price component of the Contract Price shall be released on Completion of Chimney. (V) Ten Percent (10%) of Ex-works Price Component of the contract price on Successful Completion of Initial Operation including all associated auxiliaries and ancillary works of entire Flue Gas Desulphurization System and issue of Completion Certificate by the Project Manager and successful completion of Guarantee Tests of entire Flue Gas Desulphurization System and issuance of Operational Acceptance Certificate by the Project Manager. In case of more than one units in a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o-rata basis upon completion of Civil Works including Structural works (if any) corresponding to the respective equipment and its certification by the Project Manager. (v) Wherever intermediate milestone events at (IV) above are applicable unit wise, the payment shall be made on pro-rata basis for each unit. The terms for payment of Mandatory Spares and Recommended Spares are mentioned in para B of the Appendix. Payment for Local Transportation is mentioned at para No C of the Appendix and the terms of payment for Installation Services are mentioned in para No D of the Appendix. The terms of payment for Civil Works are mentioned in Para No E. Terms of payment for Structural Work portion, including the cost of materials, Fabrication & Erection are mentioned in Para F. Amount linked to Safety Aspects and compliance to Safety Rules are mentioned in Para G. For the purpose of the application, terms of payment in Para A are only relevant. 6 QUESTION RAISED: 1) Whether the applicant is required to pay GST on "initial advance" of 5% and "interim" advance of 7.5% on Ex works value of goods supplied under "First Contract Agreement" dated 9th February, 2022 with M/s. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s supply of goods or services made or agreed to be made for a consideration. Thus the factum of supply would be initiated once the agreement is entered into between the supplier and recipient and such agreement is for consideration. Section 12(2)(a) of CGST Act' 2017 states that the liability to pay tax on goods shall arise at the time of supply, which is the date of issue of invoice by the supplier or the last date on which he is required, under section 31, to issue the invoice with respect to the supply; The applicant contended that he is liable to pay tax on goods at the time of supply, which is the date of issue of invoice and not on the date on which he receives advance payments for those goods. 8.3 The issue to be decided in this case is whether the entire supply which involves two separate contracts however a single bidding document, has to be treated as a composite supply of which the principal supply is the second contract which is a 'works contract' or both the contracts have to be treated as separate transactions for which the 'time of supply' and 'rate of tax' to be levied would differ as per the provisions of the CGST Act' 2017. 8.4 As stated by applicant t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o be named as co-insured. The first contract thus involves supply of Goods as defined under Section 2(52) of CGST Act' 2017 which states goods as every kind of movable property with some exceptions. The supply of Plant and Equipment (including Type Test Charges) and Mandatory Spares are still not installed or fixed to become a permanent structure before they are brought to the applicant premises and hence they're movable which makes them to be classified under the category of Goods. The Applicant will issue tax invoices for supply of goods under the First Contract by mentioning respective HSN codes applicable for individual items and will pay GST by applying the rate of GST specified for these items as and when they are supplied and as per time of supply in terms of provisions of Sec 12 of the CGST / TSGST Act, 2017. 8.6 The Notification of Award of Second Contract was issued by M/s SCCL vide Ref.No. CRP/MP/01/E0119O0413/FGD/5577 dated 28/12/2021.The scope of work under the Second Contract is "Inland Transportation of the main equipment, inland transit insurance, unloading at site, storage, erection, civil works, Safety aspects/Compliance to Safety Rules and other services insur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rvices being undertaken as part of two separate contracts. While the supply emanating from First Contract is a supply of goods i.e the Flue Gas Desulphurization (FGD) system, Limestone and gypsum handling system, items related to chimney and the spares related to above parts etc. The supply under second contract is primarily a service of Transportation, Insurance, Unloading At Site, Storage, Erection, Civil Works, Safety Aspects/Compliance To Safety Rules, Testing, Commission and Conducting Guarantee Tests of the items/goods supplied under First Contract. We find that there is no dispute on the nature of supply by each of the above-mentioned Contracts. The bone of contention is whether the supplies are to be termed as a composite supply or not. For a supply to be consider as a composite supply, its constituent supplies should be so integrated with each other that one cannot be supplied in the ordinary course of business without or independent of the other. Section 2(30) of the CGST Act, 2017 defines "composite supply" as follows:- "composite supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the property in goods used in execution of works contract must be transferred during the execution of contract. In the present case the appellant under the first contract supplies goods available ex-works and loads them on to the mode of transport. The moment the Applicant raises tax invoice for the supply of goods and endorse the despatch documents, the title of the goods passes on to SCCL. Thus the property in the said goods does not remain with the respondent but the same is transferred to supply recipient and while execution of the works contract vide the second contract the property in the said goods was with the recipient. Since the transfer of property in the said goods is not taking place during the execution of the Works Contract Service the value thereof cannot be included in the Works Contract. Further at the same time the applicant will use certain accessories and parts for execution of Works Contract under second contract and value thereof is admittedly included for the reasons that the property in the said good was transferred only during execution of works contract service. Therefore, there is a clear distinction between goods property of which is transferred prior ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he bid document itself which was offered by the service recipient put a clear condition that two separate contracts need to be entered into i.e. one for supply of service and other for supply/sale of goods therefore, both the contracts are separate contract and cannot be clubbed together. 6.8 As per the definition of the Works Contract Service one of the condition is that the property in goods used in execution of works contract must be transferred during the execution of contract. In the present case the appellant while clearing the transmission towers from their factory issued the sale invoices accordingly, the property in the said goods does not remain with the respondent but the same was transferred to service recipient and while execution of the works contract service the property in the said goods was with the recipient. Since the transfer of property in the said goods is not taking place during the execution of the Works Contract Service the value thereof cannot be included in the Works Contract Service. At the same time the respondent have used certain accessories and parts for execution of Works Contract Service and value thereof was admittedly included for the re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(1958) 9 STC 353 = 2015 (330) E.L.T. 11 (S.C.) • Hindustan Aeronautics Ltd. v. State of Karnataka, (1984) 1 SCC 706 • Builders' Assn. of India v. Union of India, (1989) 2 SCC 645 • State of Karnataka v. Trans Global Power Limited - (2015) 77 VST 509 • Reliance Infrastructure Ltd. v. Deputy Commissioner - 2015 VIL 60 CAL • Ishikawajma-Harima Heavy Industries Ltd. v. Director of Income-tax, (2007) 3 SCC 481 = 2007 (6) S.T.R. 3 (S.C.). 6.11 In the above judgments one common issue has been considered that there can be two separate contracts, that is one for sale and another for Works Contract Service as in the present case the value of goods sold, property of which in goods has already been passed on, cannot form part of the value of the second contract i.e. Works Contract. 6.12 The Contention of the revenue is that it is necessary to enter a single indivisible contract is contrary to the principle that there are more than one way for performing an act. It is for parties concerned to choose the method and manner. In this regard the Hon'ble Supreme Court in CIT v. Motors and General Stores (P) Ltd., (1967....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nts and State have now power to levy sales tax on value of materials in execution of works contract."[Para 101(viii)]. 8.15 Commissioner Vs. Essar Projects (India) Ltd., 2014 (36) STRJ 153 (SC); the Apex Court held that, "....The Appellate tribunal in its impugned order has held that a contract has to be interpreted in a manner from the apparent tenor of the agreement and apparently it has to be accepted as the real state of affairs. The Tribunal further held that both the contract dated 24-08-2007 for supply of equipment's and construction of works has to be treated as distinct and separate contracts and value of supply contract cannot be added to the value of construction contract for the purpose of Service Tax Liability." 8.16 In view of above discussion, we summarize as follows:- • The scope of works/supply undertaken under the individual contracts are entirely independent and specific to that contract and are not associated with other contract.  Contract agreement document itself, in this case, had put a condition that there are two separate contracts that need to be entered into i.e. one for supply of service and other for supply/sale of go....