TaxTMI 
TaxTMI 
2023 (12) TMI 890
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....CEEDINGS [U/s 98 of the Chhattisgarh Goods & Services Tax Act, 2017 (hereinafter referred to as CGGST Act, 2017)] M/s Hitachi Energy India Limited, 1st Floor, No. OP-05, C246/6, Vallabh Nagar, Near Sant Gyaneshwar School, Raipur, Chhattisgarh, 492001, a registered unit having GSTIN-22AARCA9513E1ZR, has furnished an application in form ARA-01 under section 97 of the Chhattisgarh Goods & Services Tax Act, 2017 seeking advance ruling as to (i) Whether the supply of services made by the Applicant under Fifth Contract is composite supply with principal supply of goods under the Third Contract? (ii) Whether the supply of services of transportation, freight and insurance under the 'Fifth Contract' provided for the goods supplied by the Applicant is in the nature of Business Support Services and shall be chargeable to tax at specified rates?. The above said ARA-01 application dated 08.06.2023 complete in all respect along with the relevant challans was received on 28.06.2023. 2. Facts of the case: - 2.1. As informed by the applicant in the instant ARA-01 application, they are a company inter alia engaged in manufacture and supply of electrical equipment of various capacities de....
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....in respect of the goods supplied under First Contract and Third Contract). 2.6. As per the Fifth Contract, the applicant has been entrusted with the responsibility of delivery of goods at the site of installation. For this, the applicant engaged transporters who issued consignment notes and raised invoices to the applicant for such transportation of goods. The applicant discharged the GST liability under reverse charge mechanism on the amounts paid by them to the transporters. 2.7. As per the terms of the Contract, the Applicant raised invoices on PGCIL for 'F&I' or 'Freight and Insurance' along with the taxes under SAC 996793. 2.9. However, the GST component of the said invoices was not reimbursed by PGCIL as they are of the view that the same is exempt in terms of SI. No. 18 of the Notification 12/2017-CT (Rate). That, the applicant bore the cost of the differential GST on their own account and duly deposited the same to the Government in a timely manner. 2.10 PGCIL responded to the correspondences of the applicant vide letter dated 22.03.2018 wherein it was stated that PGCIL did not share the understanding of the applicant that supply of goods and Freight & Insurance....
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....which are naturally bundled together in the ordinary course of business one of which is a principal supply. In the present case, it is clear that it is normal industry practice that the goods to be supplied are to be delivered at site and freight and insurance are to be paid as natural consequence. Thus, the supplies are bundled together and the services so performed are ancillary and necessary for the supply of goods, making the same the principal supply. iii. That, since the applicant fulfils the conditions laid down by virtue of Section 2(30) of the CGST Act, 2017, the services of local transportation, insurance and freight for supplying goods, should be considered as a composite supply, with the principal supply being supply of goods. iv. That, the rulings cited below are also squarely applicable wherein in similar circumstances, it has been held that incidental supplies of transportation, freight and insurance made by the applicant should be treated as being provided in conjunction with the principal supply of supply of goods, which was the intention of the parties of the Contract as well: • In Re: Aditya Birla Nuvo Limited reported at 2019 (29) ....
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....THE 'FIFTH CONTRACT' IS IN THE NATURE OF BUSINESS SUPPORT Services and shall be chargeable to tax i. Notwithstanding the aforesaid submissions, the applicant has also expressed their view that the services of transportation, freight and insurance being provided under the Fifth Contract are in the nature of Business Support Services and hence, do not warrant exemption under SI. No. 18 of the Notification No. 12/2017-CT (Rate) dated 28.06.2017, which only covers services by way of transportation of goods. ii. That, to undertake the transportation of goods, the applicant has engaged third party vendors who are performing the said service. Since the applicant is not performing the services but only arranging 'or the same, the applicant is providing business support services. iii. That, the said activity is akin to managing logistics of the goods and hence, would be considered as a business support service herein and shall be covered under SAC 998599 as 'business support services not elsewhere specified'. Reliance has been placed on Emerald System Engineering Limited v. Commissioner of Service Tax reported at 2016 (43) S.T.R. 545 (Tri.-Mumbai). 4. Personal ....
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....sions for implementing the CGST Act and the Chhattisgarh GST Act, 2017 [hereinafter referred to as "the CGST Act and the CGGST Act"] are similar and thus, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the CGGST Act, 2017. Now we sequentially proceed to discuss the issues involved in the ruling so sought by the applicant and the law as applicable in the present case. 6. Section 96 of CGST Act, 2017, Authority for advance ruling, stipulates as under: - Subject to the provisions of this Chapter, for the purposes of this Act, the Authority for advance ruling constituted under the provisions of a State Goods and Services Tax Act or Union Territory Goods and Services Tax Act shall be deemed to be the Authority for advance ruling in respect of that State or Union territory. Section 97(2) of CGST Act, 2017 stipulates that: - The question, on which the advance ruling is sought under this Act, shall be in respect of- (a) classification of any goods or services or both; (b) applicability of a notification issued under the provisions of thi....
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....;ीएसटी/मु.लि./1075 dated 17.8.2023 in the subject matter has opined that the instant transaction attracts 18% GST under composite supply in terms of Notification no. 11/2017-CT(Rate). On a careful reading of the contract dated 25.1.2017 between the JV (of M/s ABB AB Sweden and M/s BHEL) with Power Grid Corporation of India Ltd. (PGCIL) it is seen that, in the present context, the contractual obligation between the aforesaid JV and PGCIL is for setting up and delivering 800 KV, 6000 MW HVDC terminals for establishing the transmission link for transmitting electricity from Raigarh, Chhattisgarh to Pugalur, Tamil Nadu. Before getting into the issues raised by the applicant in the instant application, we would like to mention here in no uncertain terms that the rulings made here in the instant case in hand is applicable only to the impugned activity of the applicant of "setting up and 800KV, 6000 MW HVDC terminals for establishing the transmission link for transmitting electricity from Raigarh", falling within the Geographical jurisdiction of the State of Chhattisgarh. From the details furnished by the applicant in the instant....
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.... Pugalur covering 1800 km link. The capacity of the HVDC system is 6,000 megawatts. The JV has appointed the applicant as their associate for the purpose of executing the Third Contract, i.e., on-shore supply of goods and the Fifth Contract, i.e. providing services including local transportation, insurance and other incidental services in respect of the goods supplied under First Contract and Third Contract and installing, commissioning of equipment, civil works, etc. for the goods supplied under First Contract, Second Contract and the Third Contract. 9.1 It has been informed by the applicant that at the time of the execution of the Contracts, they were functioning under the name of M/s. ABB India Limited and that with effect from 01.12.2019, the Power Grids business of ABB India Limited stands transferred to M/s. ABB Power Products and Systems Limited as a going concern. The Bengaluru bench of the Hon'ble National Company Law Tribunal ("NCLT") has sanctioned the said Scheme vide its order dated November 27, 2019. Accordingly, all the contract(s)/ statements of work/ purchase orders/ arrangements in relation to ABB India Limited's Power Grids business stands transferred to ABB P....
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....rth Contract' - On-shore Services Contract (with BHEL) - performance of all services inter alia local transportation, insurance and other incidental services (including post clearance, etc.) taking delivery of equipment / materials including supervision of the erection of the supplies made under Second Contract, under the scope of BHEL as per the division of work indicated in the JV Agreement. 1 (v) 'Fifth Contract' - On-shore Services Contract (with Applicant) - performance of all services inter alia local transportation, insurance and other incidental services, taking delivery of equipment / materials to be supplied under the 'First Contract' and 'Third Contract1 under the scope of ABBAB and Applicant, respectively, and unloading, handling, storage, erection including civil works, testing and commissioning of various equipment / materials to be supplied under the 'First Contract', 'Second Contract' and 'Third Contract', under the scope of ABBAB, BHEL and Applicant as per the division of work under the JV agreement. It has further been informed by the applicant that the Contract stipulated a separate Contract price for each of the five Contracts along with break-up of ....
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....nsportation, freight and insurance along with GST and GST component has not been acknowledged and the payments have not been released. 9.3 We find that the applicant has in support of their understanding on the nature of transaction and applicable rate of GST expressed their opinion that the services of transportation, insurance and freight supplied under the Fifth Contract are not exempted by virtue of the Notification No. 12/2017-CT (Rate) dated 28.06.2017 and the supply of the said services should be considered to be in the nature of composite supply, with the principal supply being supply of goods under the First and Third Contract. The applicant has also pleaded that the services of transportation are not being provided in isolation and that the applicant is providing the services of local transportation and allied services under the fifth Contract, which is linked to the overall execution of the Project, which comprises of four other contracts. It was thus their view that the services of transportation, freight and insurance are reasonably expected to be provided by the applicant to PGIL and that the said services are necessary for the goods to be supplied at the site, as ....
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....vices, activities treated as supply under Schedule II and activities specified in Schedule I even if made without consideration. 10.1 From the copy of on shore services contract agreement dated 25.1.2017 and other documents furnished by the applicant as also from the details available in public domain it is pretty clear that the work being undertaken by the applicant, is a tower package involving construction, erection and commissioning of the said +/-800 KV, 6000 MW HVDC terminals at Raigarh, Chhattisgarh and Pugalur, Tamil Nadu associated with HVDC Bipole link between Western region (Raigarh, Chhattisgarh) and Southern region (Pugalure, Tamil Nadu)- North Trichur. The scope of the work allotted to the applicant for the aforesaid tower package being on-shore Supply Contract [ex-works supply of equipment and materials including mandatory I availability spares from within India, type testing under the scope of Applicant as per the division of work indicated in the JV agreement, required for the complete execution of the Project] and on-shore Services Contract [performance of all services inter alia local transportation, insurance and other incidental services, taking delivery of ....
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....available in respect of the works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service. Thus, ITC for works contract also stands restricted and can be availed only by, one who is in the same line of business and is using such services received for further supply of works contract service. From the definition, a work shall be treated as Works Contract if that work is done for land or earth or for immovable property and there is transfer of property in goods involved in the execution of such contract. Immovable property by its very definition means that it cannot be moved and cannot be detached or dismantled from the land or earth and further that dismantling of the same would render it defunct / redundant. Immovable property would include in its ambit land and the things which are attached to or embedded in the land such as buildings, bridges etc. Whether the particular property is an immovable property or not is subject to the peculiar facts of each case. Hon'ble courts have pronounced various judicial pronouncements laying down certain criteria ....
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....Correct Engineering Works [2010 (252) ELT 481 (S.C)]. The relevant extract of the said judgement at para 22 & 23 is reproduced hereunder for ready reference. Paras - 22 & 23 (relevant extract): 22. The English law attaches greatest importance to the object of annexation which is determined by the circumstances of each case. One of the important considerations is founded on the interest in the land wherein the person who caused the annexation possesses articles that may be removed without structural damage and even articles merely resting on their own weight are fixture only if they are attached with the intention of permanently improving the premises. The Indian law has developed on similar lines and the mode of annexation and object of annexation have been applied as relevant tests in this country also. Para-23 (relevant extract): 23. The courts in this country have applied the test whether the annexation is with the object of permanent beneficial enjoyment of the land or building........................ Hon'ble Court in the aforesaid case was thus of the opinion that the "attachment in order to qualify the expression attached to ear....
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....gned tower package which in turn establishes that the same is not to be moved / shifted, thereby certifying its immovability. We thus come to the considered conclusion that the said +/-800 KV, 6000 MW HVDC terminals at Raigarh, Chhattisgarh from Raigarh (C.G) constructed, erected and commissioned by the applicant is therefore, an immovable property. 10.3 Coming to the aspect of "Composite supply", we would first like to get in to the definition of Composite supply which stands defined under Section 2 (30) of the CGST Act, 2017 as under: "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 both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply; Illustration. - Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply; As already discussed in the preceding para, the work being undertaken by the applicant is a tower package involvin....
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....e contracts will result in breach of the Fifth Contract, leading to the conclusion that the intention of the parties is to treat all contracts as part of one transaction and cannot be executed independently. Thus, there hardly remains any doubt that the services of transportation, insurance and freight merits treatment as being the part of such composite supply of works contract service. Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended from time to time, lastly amended vide Notification no. 3/2022-Central Tax (Rate) dated 13.7.2022 at Sr. no. 3 prescribes the applicable rate of tax on construction services. For the sake of brevity, the relevant text of the same is reproduced hereunder. 11.1 Rate of GST on intra-State supply of specific services with Service Code Tariff (SAC) Government of India Ministry of Finance (Department of Revenue) Notification No. 11/2017-Central Tax (Rate) New Delhi, the 28th June. 2017 G.S.R.(E).- In exercise of the powers conferred by sub-section (1), [sub-section (3) and subsection (4)] ] of section 9, sub-section (1) of section 11, sub-section (5) of section ^15[,]2 sub-section (1) of section ^16[and ....
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....ated services, in respect of offshore works contract relating to oil and gas exploration and production (E&P) in the offshore area beyond 12 nautical miles from the nearest point of the appropriate base line. ...... ........ (ix) Omitted (x) Composite supply of works contract as defined in clause (119) of section 2 of the Madhya Pradesh Goods and Services Tax Act, 2017 provided by a sub-contractor to the main contractor providing services specified in item (vii) above to the Central Government, State Government, Union territory or a local authority ...... ........ (xi) Services by way of house-keeping, such as plumbing, carpentering, etc. where the person supplying such service through electronic commerce operator.......... ...... ........ (xii) Construction services other than (i), (ia), (ib), (ic), (id), (ie), (if), (vii), (viii), (x) and (xi) above. Explanation. - For the removal of doubt, it is hereby clarified that, supply by way of services specified at items (i), (ia), (ib), (ic), (id), (ie) and (if) in column (3) shall attract state tax prescr....
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.... other waterworks 15 995423 General construction services of long-distance underground/ overland/ submarine pipelines, communication and electric power lines (cables); pumping stations and related works; transformer stations and related works 16 17 .... ........ ....... .............. .... ........ ....... .............. Further, the 'Explanatory Notes to the Scheme of Classification of Service', indicate the scope and coverage of the Scheme of classification of service and is a guiding tool for classification of services, the Explanatory notes to SAC 995421 are as follows: EXPLANATORY NOTES TO SCHEME OF CLASSIFICATION OF SERVICES UNDER GST' Preface The Scheme of Classification of Services adopted for the purposes of GST is a modified version of the United Nations Central Product Classification. 2. The Explanatory notes for the said Scheme of Classification of Services is based on the explanatory notes to the UNCPC, and as recommended by the committee constitute for the purpose, is annexed. ....
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....CGGST @9%), being services other than the one specified at SI. No. 3 therein at column 3 (under "Description of service") at (i), (ia), (ib), (ic), (id), (ie), (if), (vii), (viii), (x)and (xi). 11.5 In the aforesaid context, we would also like to cite reference to CBIC circular no. Circular No. 177/09/2022-TRU from F. No. CBIC-190354/176/2022-TRU dated 3/8/2022 on the subject "Clarifications regarding applicable GST rates & exemptions on certain services". The said circular issued consequent upon examination of various issues by the GST Council in the 47th meeting held on 28th and 29th June, 2022, has inter-alia clarified at Sr. no. 17 "regarding supply of service of construction, supply, installation and commissioning of dairy plant on turn-key basis", that the same constitutes a composite supply of works contract service and that with effect from 18.07.2022, such works contract services would attract GST at the rate of 18% in view of amendment carried out in notification No. 11/2017- Central Tax (Rate) vide notification No. 03/2022-Central Tax (Rate). Although the said circular is regarding the construction, supply, installation and commissioning of daily plant on turnkey basi....