TaxTMI 
TaxTMI 
2024 (7) TMI 356
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....e applicant by fraud or suppression of material facts or misrepresentation of facts, shall render such ruling to be void ab initio in accordance with Section 104 of the Act. 5. The provisions of both the Central Goods and Services Tax Act and the Tamil Nadu Goods and Services Tax Act (herein referred to as an Act) are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Services Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Services Tax Act. M/s. Tamil Nadu Generation and Distribution Corporation Limited, 144, NPKRR Maaligai, Anna Salai, Mount Road, Chennai - 600002 (hereinafter called as 'the Applicant') is engaged in the generation and distribution of electricity. They are registered under GST Act with GSTIN 33AADCT4784E1ZC. They have filed an application seeking Advance Ruling on the following,- 1) What is the value of the "Deposit Contribution Works" that must be adopted by this Applicant on the Self Execution Schemes for the purposes of paying applicable taxes under the Central Goods and Services Tax Act, 201....
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....Nadu Goods and Services Tax Act, 2017 (hereinafter referred to as "TNGST Act') and Integrated Goods and Services Tax Act, 2017 (hereafter referred to as 'IGST Act'). As a Registered Person, the Applicant has been filling appropriate statements/returns and discharging applicable Goods & Services Tax (hereinafter referred to as 'GST') under the aforesaid Goods & Service Tax Enactments (hereinafter referred to as 'GST Acts'). While doing so, on certain heads of receipts like sale of power (HSN 27160000), Electricity Distribution service (SAC 996912) the Applicant has been claiming exemption/non-liability. While for certain other receipts like wheeling charges, cross subsidy surcharges, etc., the Applicant has been discharging applicable GST liability. The present application for Advance Ruling is however restricted to only the question of extent of liability or otherwise under the GST Acts on charges received by the Applicant for 'Deposit Contribution Works' (DCW), that too only in relation to 'Self-Execution Scheme'. In other words, the present application for Advance Ruling is only on the question of value of taxable supply that will have to b....
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....r charges if applicable to the Applicant. As stated above, the present application for Advance Ruling is only relating to the extent of GST liability that this Applicant will have to discharge on the charges received for DCW i.e. only question of valuation. This question for Advance Ruling is also being raised without prejudice to the stand of this Applicant before the Hon'ble Madras High Court that this Applicant does not have any liability to pay any GST on the DCW charges that it receives. 5. Following is the Modus Operand! adopted by the Applicant for charging and receiving consideration for DCW in the case of Self-Execution Scheme. a) Any person like for instance, National Highway Authority of India (NHAI), Tamil Nadu State Highways Authority, Local Bodies in Tamil Nadu such as Corporation, Municipalities, Town Panchayat, Chennai Metro Rail Limited (CMRL) etc who require shifting of service/line, structure and equipments in Connection with their Works/Public Works approach this Applicant for permission for such shifting. b) That is followed by a joint site inspection by the Applicant and the concerned parties as aforesaid. c) Thereupon o....
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....e cases of self-execution, although this Applicant has no privity of contract with the Vendors of its Customers, this Applicant retains title in the structures/equipment/materials and goods which are purchased by its Customers after they arc erected/installed by the said Customers on their own in accordance with the requirements of section 12 and 54 of Electricity Act 2003. 6. The Applicant thus states that in the end analysis the contracting parties executing the self-execution schemes are liable to pay to this Applicant only the "Establishment and Supervision Charges." & other charges if applicable. Although the estimate provided to them captures a gross/net amount, such estimates also make it clear that the only contractual obligation/debt that such contracting parties have to pay and discharge to pay to this Applicant only the "Establishment and Supervision Charges." & other charges if applicable. Nothing more, nothing less, of course with the applicable GST. The only amount which the Applicant thus charges for and receives is "Establishment & Supervision Charge" & other charges if applicable along with the GST from the contracting party undertaking the Self-Execution ....
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....ks/Public Works approach this Applicant permission for such shifting. b) That is followed by a joint site inspection by the Applicant and the concerned parties as aforesaid. c) Thereupon, on the basis of item no. 17 of the proceedings bearing No (per) TANGEDCO Proceedings (F3) No. 71 dated 29.06.2011, relating to delegation of powers to Officers, the concerned Authority, depending upon the amount involved, provides the sanction for such shifting along with an estimate of charges for the shifting on the basis of model estimate approved by the Board of the Applicant. While, the estimate would cover all costs including the cost of assets as part of the Gross/Nett on the consumer side, it also importantly made it clear that for the actual amount payable by the party in question to this Applicant is mostly towards "Establishment and Supervision Charges. In occasional cases involving charging of other non-uniform charges like labour, transport, material, etc., the actual amount payable by the party in question will also include the other charges apart from "Establishment and Supervision charges". The applicable GST on the same is also set out. d) If the party i....
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....alue on the amount for the Deposit Contribution Works." 3.2 The Joint Commissioner (ST), Intelligence - II has also remarked that no proceeding relating to the question raised by the applicant is pending in her jurisdiction. 3.3 The Centre Authority vide letter dated 26.01.2024 stated that there are no pending proceedings on the issues raised in the Advance Ruling Application. Regarding the comments on the issue involved, they stated as below: "All transaction (both Goods and Services) between TANGEDCO and TANTRANSCO are for the purpose of transmission and distribution of electricity. The Deposit Contribution Works (DCW) is like a works contract for erection of Transmission and Distribution Equipment in respect of consumer. Depository Contribution Works is classifiable under SAC 99873 and the applicable rate of tax is CGST 9% as per Notification No. 11/2017-C.T. dated 28.06.2017. The value adopted by the Applicant for Deposit Contribution Works for the purpose for discharging applicable GST appears to be restricted to Establishment and Supervision charges and other charges, if applicable for TANGEDCO." PERSONAL HEARING 4.1 The Applicant, was given an o....
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....than the 'Establishment and Supervision Charges', to which the AR replied that apart from 'Establishment and Supervision Charges' the applicant also charges "Other charges, if any', which normally includes charges towards 'Additional Metres', other appliances, etc., in some cases, if necessary. 4.5 The members further enquired whether any contract or an agreement in respect of DCW is entered into by the applicant with the consumers, to which the AR replied that no formal contracts or agreements are entered in such cases, and that the DCW gets initiated on the basis of requests received from the consumers. 4.6 Then the members requested the AR to provide sample copies of invoices raised on the consumers. The AR stated that they normally do not raise invoices, but that an Estimate/Advice is raised on the consumers specifying the amount payable to them, alongwith other conditions which may be specific and which may differ in relation to the individual cases. He also undertook to furnish a few sets of such estimates along with accompanying documents within a weeks' time, along with another brief additional submission to the case. 4.7 Mr. Sriprak....
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....39;, and other miscellaneous charges, if any, are required to be capitalized for accounting purposes. 4.10 When the members enquired about the GST amount charged at 18% on the material, contingencies, storage, labour, etc., that is figuring in the estimate worksheet, the AR explained that the GST at 18% is not charged on the consumer, but that the same is only an entry added to the material and labour cost, so as to arrive at the overall cost of shifting the structure, which in turn paves the way to arrive at the 'Establishment and Supervision Charges'. In finality, the AR reiterated that under the 'self execution mode', only the 'Establishment and Supervision Charges' and other miscellaneous charges, if any, arc charged and collected from the consumers, and that the entire cost towards the materials and labour are borne directly by the consumers, as the applicant has no privity of contract with the supplier of such materials/services. DISCUSSION AND FINDINGS: 5.1 . We have carefully considered the submissions made by the Applicant in their application, submissions made during the personal hearing and the comments furnished by the Centre and Stat....
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....cost relating to such shifting. However, in cases of DCW under "Self-execution Scheme", the consumers have to incur all costs for shifting of service/lines/structure and equipment, including costs of equipment/materials, except "Establishment and Supervision Charges" and other charges, as applicable. That is to say, in cases of self-execution, the Contracting parties/Consumers are required to pay to the Applicant, only the "Establishment & Supervision Charges" and other charges, if applicable, and that they on their own have to directly incur the cost of shifting the equipment including the cost of equipment. 5.5 Accordingly, once the applicability of GST on 'DCW' charges stands settled, as of now, as admitted by the applicant, the crucial question that lies before us is to determine the value on which GST is liable to be discharged by the applicant, specifically in relation to DCW under "Self-execution Scheme", i.e., whether GST is payable on the "Establishment and Supervision Charges" and other charges charged by the applicant, or, on the entire cost involved in the shifting process including the cost incurred directly by the Contracting parties/Consumers. 5.6 In this r....
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....terials/services to the customer of this applicant, as a result of which they are not liable to pay any such amounts to any such suppliers, within the meaning of Section 15 (2) (b) of the CGST/TNGST Acts. iv) Although the order of the Authority for Advance Ruling, reported in 2019 (28) G.S.T.L 614 (A.A.R.-GST) (In Re : Rajasthan Rajya Vidyut Prasaran Nigam Limited) holds otherwise, that order is erroneous for the following reasons, viz., a) The Authority in the said case had used the words, liable to pay but which has been incurred by the recipient by reason of, or in connection with the new infrastructure created". As these words are absent in Section 15 (2) (b) of the CGST/TNGST Acts, the authority has undertaken a process of legislation and not interpretation, which is an impermissible exercise. b) The liability of the applicant under the Electricity Act, 2003, in respect of Transmission Lines/Grid has been telescoped into Section 15 (2) (b) of the CGST/TNGST Acts. The liability under the Electricity Act is completely different and unconnected with the liability conceived by 15 (2) (b) of the CGST/TNGST Acts which alone impacts valuation under the GST ....
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.... 1,12,740/- (Rupees One lakhs twelve thousand seven hundred and forty only) Further, under the "REPORT TO ACCOMPANYING THE ESTIMATE', the following extracts relevant to the issue in question, are noticed, viz., GENERAL REPORT As per the request of the Highways department, work shall be carried out by the Highways with payment of necessary Establishment and supervision charges only to TANGEDCO. MAIN FEATURES Consumer Side 1. 1 No : Existing Distribution Transformer IE SS V WO KVA/22 KV now proposed to be dismantled and re-erected at new location. 2. 4 Nos : Existing RSJ pole now proposed to be dismantled at loc E, E1 & E5. 3. 0.195 KM : Existing HT/LT as HT 3 Phase 3 wire 22 KV line with ACSR 7/7.409 mm(3) & LT 3 Phase 4 wire line ACSR 7/2.59 mm(4) now proposed to be dismantled. 4. 0.187 KM ; Now proposed HT/LT as HT 3 Phase 3 wire 22 KV line with AAAC 7/3.15 mm(3) & LT 3 Phase 4 wire line ACSR 7/2.50 mm(4). HTREGULATION: With in limit LT REGULATION: Within limit 5.9 It could be seen from the above that the shifting of the Distribution Transformer along with HT/LT lines to a new....
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.... request of the highways department. 5.11 Further, from the estimates furnished, it was observed that apart from the 'Establishment and Supervision Charges' which has been booked as capital expenditure by TANGEDCO vide DCW A/c. Code No. 47-601, the other part of the estimate cost involving material, labour, transportation, etc., have also been booked as capital expenditure by TANGEDCO vide DCW A/c. Code No. 14-695 & 14-696, whereby it amounts to capitalization of expenditure in the books of accounts of TANGEDCO. Accordingly, when enquired as to whether the overall expenditure towards shifting is met initially by TANGEDCO and later reimbursed by the consumer, the authorized representative during the second hearing held virtually on 21.01.2024, stated that under the 'self execution mode', the cost of shifting the transformer, pole, etc., including the material part and the installation part are not incurred by TANGEDCO, as they have no privity of contract with the supplier of such materials /services, and that the same are borne by the consumer directly. As specified in the first page of the estimates concerned, it is only the 'Establishment and Supervision Cha....
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....s, whereby the DISCOMs claim for reimbursement of material cost and installation expenses incurred by them from the customer who had requested for such shifting. Whereas, under the 'self execution mode' of DCW, the entire work with materials are arranged by customers and installation work is done by the contractors engaged by the customers. In this case the role of the DISCOM is limited to supervision only for which a fee is charged from the customers. It is therefore felt that the comments as referred above, may apply to DCW' but not to DCW - Self execution mode", as it has failed to appreciate the difference between the two modes of transaction involved in the instant case. Further, it has been stated that "the valuation of supply includes all service and goods supplied to the recipient should be taken as the supply comes under composite supply and consideration". It is seen that TANGEDCO is neither the supplier nor the recipient of service, ..and, .the works contract service involved in the demolition, shifting, construction, and installation of the service line is provided by a thirty party contractor and is received by the customer under whose request the service l....
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.... the CGST Act, 2017, "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, only is liable to be included in the price actually paid or payable for the goods or services or both. As it is clear that no such supply of goods or service flows from TANGEDCO to concerned party, except the service relating to supervision of the work carried out, the instant case does not get covered under Section 15 (2) (b) of the CGST Act, 2017. 5.15 In this regard, we find that the Order No. 09/AAAR/2023 dated 16.08.2023 passed by the Appellate Authority for Advance Ruling, Uttar Pradesh in the case of M/s. Purvan chai Vidyut Vitran Nigam limited, discusses the very same issue as in para 9.2 of the said order, that reads as below:- "9.2 We find that the appellant has adopted two modes for installation of electric lines (also called deposit work) to the designated locations as per requirement of the customers. One is where the entire material and installation work is arranged by the appellant on behalf of the customers and work is done in the supervision of the appellant. The appellant claims for reimbursement of ....
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....etion of project. We find that there is no such provision stipulated under GST Act and this condition is unwarranted and having no legal backing as argued by the appellant." Inspite of the appeal in the said case to remove the specific condition imposed, it may be noticed that both the orders, that of the Authority for Advance Ruling, Uttar Pradesh, and the Appellate Authority for Advance Ruling, Uttar Pradesh, are on the same page in so far as it relates to the issue in question, i.e., GST is payable only on the supervision charges, in cases where the value of materials and cost of execution of work for installation of electric lines are borne by the recipient of sendee and the service provider charges supervision fee only. 5.17 Likewise, we observe that in the case of M/s. National Highways Authority of India (NHAI), the Authority for Advance Ruling, Uttar Pradesh, in its Ruling No. UP ADRG-17/2022 dated 8.12.2022, has ruled that the work done by the applicant (NHAI) in shifting the transmission lines for the widening of road under the supervision of Madhyanchal Vidyut Vitaran Nigam Ltd., (MWNL) does not come under the definition of 'Supply' as per section 15 (2) (b....