AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (7) TMI 980
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.... and activities and hence, can be termed as a divisible contract. 5. The applicant further contends that in terms of notification No. 66/2017-CT dated 15.11.2017, the Central Government has exempted payment of GST at the time of receipt of advances in case of goods, effective from 15.11.2017; that in their case, contract agreement Part-I pertains to supply of goods and contract agreement Part-II, pertains to supply of services; that they do separate billing for supply & erection; that it is a purely divisible contract; that no GST is payable on advance received against supply at the time of receipt of advance in terms of the notification, ibid; that they have received an interest bearing advance against supply by providing Bank Guarantee for 110% of advance received, which can be treated as corporate credit facility [loan] from the client. 6. The applicant has raised the below mentioned questions, seeking an advance ruling viz,- (i) Notification No. 66/2017 will applicable for turnkey contract? (ii) Is GST payable on advance received against supply portion in Turnkey contract.. ? (iii) Identification of rates for supply and service separately under single contract can be re....
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.... payment of tax on advances received does not appear applicable in the present case. Discussion and findings 10. At the outset, we would like to state that the provisions of both the CGST Act and the GGST Act are the same except for certain provisions. Therefore, 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 GGST Act. 11. We have considered the submissions made by the applicant in their application for advance ruling as well as the submissions made during, the course of personal hearing. We have also considered the issue involved, the relevant facts & the applicant's submission / interpretation of law in respect of question and the additional submission on which the advance ruling is sought. 12. Before adverting to the submissions made by the applicant, we would like to reproduce the relevant provisions and notification for ease of reference: * CGST Act, 2017 Section 2 (119) (119) "works contract" means a contract for building, construction, fabrication, completion, erection, installation, fitting out. improvement, modification, repair, maintenance, renovati....
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....the amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, he the date of issue of invoice relating to such excess amount. Explanation .-For the purposes of clauses (a) and (b)- (i) the supply shall be deemed to have been made to the extent it is covered by the invoice or. as the case may be. the payment: (ii) "the date of receipt of payment" shall be the date on which the payment is entered in the books of account of the supplier or the date on which the payment is credited to his bank account, whichever is earlier. * Notification No. 66/2017-CT dated 15.11.2017 GSR. (E):- In exercise of the powers conferred by section 148 of the Central Goods and Services Tax Act, 2017 (12 of 2017) (hereafter in this notification referred to as the said Act) and in supercession of notification No. 40/2017-Central Tax. dated the 11th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R 1254(E).dated the 13th October, 2017, except as respects things done or omitted to be done before such supercession, the Central Government, on the recommendatio....
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....rk is Supply, Installation, Testing and Commissioning of 11 KV medium Voltage Covered Conductor (MVCC) with Us Accessories in Morbi and Part of Kachchh Districts (Anjar Circle) in PGVCL under Revamped Reforms-Based and Results-Linked, Distribution Sector Scheme is to be executed on turnkey basis, the scope of which includes survey, network design supply manufacturer's quality assurance, testing (where specified/ required), transportation, storage, erection, including all civil structural works, site, testing, commissioning of all items & materials including ad associated activities though not exclusively specified herein and are required for the completion and satisfactory performance of the entire works as intended. The above said works are to be executed in the predefined phase manner work to achieve targets as per Action Plan of RDSS. * Contract Agreement 14. The applicant, as is evident, has sought ruling on three questions, which has been vaguely framed. Ruling is sought on whether the contract can be read as a divisible contract; whether GST is payable on advance received and whether the notification no. 66/2017, which is reproduced supra, is applicable to a turnkey co....
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....o be supplied under the contract agreement part-1 involves movement and/or installation at the site, the place of supply shall be the location of the goods at the time when movement of the goods terminates for delivery to the recipient, or moved to the site for assembly or installation, in terms of section 10 (1) (a) & (d) of the IGST Act, 2017. Thus, contract agreement part-I is not a complete contract, unless tied up with contract agreement part-II. This is more so since any default or breach under the contract agreement part-II, shall automatically be deemed as a default or breach of contract agreement part-I [refer article 5 of the contracts]. 19. Black's Law Dictionary defines that "a severable contract, also termed as divisible contract, as a contract that includes two or more promises each of which can be enforced separately, so that failure to perform one of the promises does not necessarily put the promises in breach of the entire contract". In the present context, supply of goods, their transportation to PGVCL's site, supply, installation, testing and commissioning and related services are not separate contracts, but are parts of an indivisible composite works co....
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....ervice in the context of work rendered, it has been treated as works contract. 39. The essential characteristics have been elucidated by a three-Judge Bench in Larsen and Toubro (supra) thus: - "As the very title of Article 366 shows, it is the definition clause. It starts by saying that in the Constitution unless the context otherwise requires the expressions defined in that article shall have the meanings respectively assigned to them in the article. The definition of expression "tax on sale or purchase of the goods" is contained in clause (29-A). If the first part of clause (29-A) is read with sub-clause (b) along with latter part of this clause, it reads like this: "tax on the sale or purchase of the goods" includes a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made. The definition of "goods" in clause (12) is inclusive. It includes all materials, commoditie....
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.... it is condign to state that four concepts have clearly emerged. They are (i) the works contract is an indivisible contract but, by legal fiction, is divided into two parts, one for sale of goods, and the other for supply of labour and services; (ii) the concept of "dominant nature test" or, for that matter, the "degree of intention test" or "overwhelming component test" for treating a contract as a works contract is not applicable; (iii) the term "works contract" as used in Clause (29A) of Article 366 of the Constitution takes in its sweep all genre of works contract and is not to be narrowly construed to cover one species of contract to provide for labour and service alone; and (iv) once the characteristics of works contract are met with in a contract entered into between the parties, any additional obligation incorporated in the contract would not change the nature of the contract. 23. Moving on to the next issue raised by the applicant as to whether GST is payable on advance received and whether the notification no. 66/2017-CT dated 15.11.2017 is applicable for turnkey contract? Having held that it is a works contract, falling within the ambit of section 2 (119), ibid, we find....