TaxTMI 
TaxTMI 
2024 (10) TMI 934
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....24, Yojna Central Spine, Gyan Vihar, University Road, Mahal Road, Jagatpura, Jaipur-302017, Rajasthan (hereinafter "the applicant") is fit to pronounce advance ruling as they have deposited prescribed Fee under CGST Act, and it fails under the ambit of the Section 97 (2) (a) given as under: (b) applicability of a notification issued under the provisions of the Act (e) determination of the liability to pay tax on any goods or services or both A. SUBMISSION OF THE APPLICANT (in brief):- 1.1 M/s. Technocraft Construction Private Limited is engaged in providing works contract services of laying, jointing, testing and commissioning of sewer system and all ancillary works along with Design, construction, supply, installation, testing and commissioning (Civil, Electrical, Mechanical and Instrumentation and other necessary works) of SPS, MPS and 10 MLD capacity STP based on SER process With provision of 1 year defect liability and there after 10 years O&M for Kotputli town. Jaipur District, Rajasthan. 1.2 That in month Of April 2023,Municipal Council Kotputli, through open competitive bidding system, invited open bids for Sewerage Works for Providing, laying, jointing, testing and c....
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....rals within the area under this contract. It includes providing, laying, jointing, testing and commissioning the sewerage network in Kotputli in such a way that the waste water of the area under contract shall be discharges at the STPs confirming all technical as well as quality standards and construction of STPs on turnkey basis for the designated discharge. The O&M period of all the works under this package shall be 10 years in which the initial first year shall be the defect liability period. 1.8 In view of the above, it appears that the said activity is composite supply of works contract classifiable under HSN code 9954 and taxable at the rate of Nil under Entry No. 3B of Notification No. 13/2023-Central Tax (Rate) dated 19.10.2023. B. INTERPRETATION AND UNDERSTANDING OF APPLICANT ON QUESTION RAISED IN BRIEF) 2.1 Section 9 of the CGST Act, 2017 empower levy of Central GST on intra state supplies of goods and services, the definition is as under: "9. (1) Subject to the provisions of sub-section (2), there shall be levied a fox caned the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human....
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....ich any other supply forming part of that composite supply is ancillary; 2.8 Further, clause 6 of the Schedule II is read as under: The following composite supplies shall be treated as supply of services, namely: - (a) works contract as defined in clause (119) Of section 2; and (b).................. 2.9 The term works contract has been defined under Section 2 (119) ibid as (119) "works contract" means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract; The term movable and immovable property has not been defined under the Act. Interpretation of provisions and applicable concepts 2.10 As per definition cited in Para 2.6 above, the essential conditions for supply to qualify as composite supply can be highlighted as under: (a) Two or more taxable supplies of goods or services or both (b) The taxable supplies should be naturally bundled (c) The taxable supplies should be supplied in....
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....in the ordinary course of business. Other illustrative indicators, not determinative but indicative of bundling of services in ordinary course of business are- *There is a single price or the customer pays the same amount, no matter how much of the package they actually receive or use. *The elements are normally advertised as a package *The different elements are not available separately. *The different elements are integral to one overall supply - if one or more is removed, the nature of the supply would be affected. No straight jacket formula can be laid down to determine whether a service is naturally bundled in the ordinary course of business. Each case has to be individually examined in the backdrop of several factors some of which are outlined above. 2.13 Where a supply satisfies all of the above conditions, it qualifies to be a composite supply and tax liability on composite supply has to be determined accordingly and the constituent supplies should not be viewed separately as distinct supplies. It is important to understand that a supply which comprises a single supply from aa economic point of view should not be artificially split and such fact has been establis....
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....d should be viewed as a composite supply only. 2.15 However, since composite supply of works contract has been explicitly classified as supply of service under Schedule II, tax liability on works contract service has been expressly prescribed. Therefore, the concept of works contract should to be discussed and settled first. 2.16 Works contract in itself is a composite supply in which construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning etc. are involved along with transfer or property in goods. 2.17 However under GST, there is a monumental shift in concept of Works Contract which was prevalent under erstwhile VAT and Service Tax regime. In GST, as per definition of works contract service if construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning is for immovable property only, then it will classify as works contract. Hence it means that aforesaid activities if they are undertaken for a movable property then it will not be works contract service. 2.18 Now whether....
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....e to uphold the contention of the appellant that the machine must be treated as a part of the immovable property of the company. Just because a plant and machinery are fixed in the earth for better functioning, it does not automatically become an immovable property. 2.24 Relying on the aforesaid judgment, the Hon'ble Supreme Court, in the year 2010, in the matter of Commissioner of Central Excise v. Solid and Correct Engg. Works & Ors. (2010 (175) ECR 8 (SC)) 2010-TIOL-25-SC-CX, held that Asphalt Drum/Hot Mix Plants were not immovable property as the fixing of the plants to a foundation was meant only to give stability to the plant and keep its operation vibration free. Further, it was held that the setting up of the plant itself is not intended to be permanent at a given place. The plant can be moved and is indeed moved after the road construction or repair project for which it is set up is completed. Hence, the said plants were held to be movable. Relevant extract of the judgement is reproduced as under for ease of reference: 'Applying the above tests to the case at hand, we have no difficulty in holding that the manufacture of the plants in question do not constitute annexati....
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....manently attached to the earth. 2.27 A composite supply of erection, installation, commissioning etc. of a movable property cannot amount to works contract under GST. 2.28 Where a composite supply is not classifiable as works contract, such composite supply shall be treated as a supply of its principal supply according to Section 8 produced in Para 5 above. 2.29 According to definition of principal supply reproduced in Para 7 above, it Should have following featu res: It should be supply of goods or services which constitutes the predominant element of a composite supply. Any Other supply forming part of that composite supply is ancillary supply. 2.30 Thus which part of a composite supply is the principal supply must be determined keeping in view the nature of the supply involved. Value may be one of the guiding factors in this determination, but not the sole factor. The primary questions that should be asked is what the essential nature of the composite supply is and which element of the supply imparts that essential nature to the composite supply. Some decisions passed by European Court of Justice to explain the concept, scope and limitations of Natural Bundling, Princip....
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.... then, whole transaction amounts to 'service' even if element of goods is also involved - Predominance is to be determined considering extent, duration, usefulness and cost of various elements, economic essence and intention of parties [In favour of revenue] 2.31 Thus the principal supply in a composite supply should be determined on the basis of above principle of predominance and for the purpose of taxability, the composite supply should be treated as a supply of such principal supply. TRANSACTION-Sewage system and O&M 2.32 The terms and scope of the contract combines installation of the sewerage system Model and O&M work. That the activities under sewerage system installation and O&M contract are so closely linked in a manner that they form a single indivisible supply. The driving factors are: A single tender has been floated for installation of sewerage system and O&M Contract where the preamble of scope specifies that the contract combines providing, laying, testing, commissioning of sewerage system and O&M work. The nature of contract is such that installation of sewerage system is the main service and the other services under O&M contract combined with such service ar....
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....ning sewer line laid at less than 0.9 mts depth. The encasing shall also be done where sewer line passing through submerged areas and in hilly terrain having hard rock with steep slope and lesser depth. Manhole chambers Shall be constructed/assembled simultaneously with the laying of sewers as per drawing and detailed specification. Any data or information received by the Contractor; from the department or otherwise, shall not relieve the Contractor from his responsibility for the design and execution. Suitable shoring and shuttering designs will be got approved from the for all excavations and the shoring and shuttering will be provided. Arrangements for dewatering (well points or small pumps) of the soil as required will have to be maintained during the work. The lines laid will be hydraulically tested from manhole to manhole as soon as laid. The contractor shall have to conduct hydro-testing of the sewer line laid and the manholes constructed immediately after laying / construction. The contractor will be responsible for procuring the sewer pipes, man hole frames and covers and other materials as required as per specifications, to maintain their safe custody and for ....
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.... cash, deferred payment or other valuable consideration. 2.42 According to definition of works contract, the supply of goods and services are done by the supplier simultaneously which is for immovable property. Hence in works contract supply of goods and services together is compulsory. 2.43 Once the given supply is a works contract, it is clear that by virtue of entry 6 (a) Of the Schedule-II it is a supply of service only. The next matter of consideration is classification and exemption. In Notification No. 13/2017-CT(Rate), relevant entries for supply of service for the given case are- (1) (2) (3) (4) (5) "3B Chapter 99 Services provided to a Governmental Authority by way of- (a) water supply; (b) public health; (c) sanitation conservancy: (d) solid waste management: and (e) slum improvement and upgradation Nil Nil"; 2.44 That from above, it has already been deduced that services supplied by the applicant is a service i.e. works contract service. The same is for sewerage system installation and commissioning. Hence it is clearly a service by way of sanitation conservancy. Thus it gets classified under the clause (c) of the above entry 3B of NN 13/2023-CT (....
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....ted to municipality under Article 243W. 2.47 In the given case, the work has been awarded by the Municipal Council which has been formed under Rajasthan Municipalities Act 2009. Thus it has been constituted under the Act which has been framed by the State Government. The Section 5 of the said Act is read as under 5. Establishment and incorporation of Municipality,- (1) In every transitional area, there shall be established a Municipal Board and every such Municipal Board shall be a body corporate by the name of the Municipal Board of the place by reference to which the Municipality is known and shall have perpetual succession and a common seal and may sue or be sued in its corporate name. (2) In every smaller urban area, there shall be established a Municipal Council and every such Municipal Council shall be a body corporate by the name of the Municipal Council of the city by reference to which the Municipality is known and shall have perpetual succession and a common seal and may sue and be sued in its corporate name. (3) In every larger urban area, there shall be established a Municipal Corporation and every such Municipal Corporation shall be a body corporate by the name ....
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....2346;()सहा.आ./एच-II/2024-25/807 dated-09.04.2024 are as under:- Question on which advance ruling is sought: Whether the activity of providing, laying, jointing, testing, and commissioning of sewer system and all ancillary works is exempt under entry 3B of the NN 13/2017-CT (Rate) dated 28-06-2017 Comments: 1. For the sake of clarity, the entry at S. No. 3 with respect to Notification no. 12/2017-CentraI Tax (Rate) dated 28th June 2017, entry at S. No. 3A inserted vide notification no. 2/2018-Central Tax Rate dated 25-1-2018 and entry at S. No. 3B were inserted vide notification no 13/2023-Central Tax (Rate) dated 19-10-2023 are reiterated here below: Sl.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (percent) Condition (1) (2) (3) (4) (5) 3 Chapter 99 Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, Government or Union territory or local authority aa[***] by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any fu....
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....do not fall under the category of services. 5. Even for the sake of arguments, if it is considered that the work awarded to the applicant falls under the category at S.No. 3B, then the Said interpretation will not be consistent with the category at S.No. 3A, wherein it has clearly been specified that the composite Supply of goods and services, the value of supply of goods Should not constitute more than 25 per cent of the value of the said composite supply, The entry at S. No 3 and 3Aare also required to be kept in mind while interpreting the entry at S.No. 3B and from these entries, it is amply clear that composite supply of goods and services, the provisions of entry at S. No. 3A are more relevant instead of 3B. 6. The applicant has himself admitted in the last para of the "Statement of Relevant facts having a bearing on the Questions raised" that the activity of applicant is a composite supply of works contract." Therefore, the applicability of provision of services in entry at S. Nov 3B appears not to be appropriate. 7. In the para 5 of the "Statement of Relevant facts having a bearing on the Questions raised", applicant has submitted that the applicant was clear up to 19....
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....f Sewage Pumping Stations, Up-gradation of effluent of existing Sewage Treatment Plant with provision for treated waste water reuse including I year defect liability with 10 years O&M for towns under package AMRUT-2.0/RAJ/SEWERAGE-21 for KOTPUTLI Rajasthan. 3) The applicant has made a contract agreement on 24.07.2023 With Municipal Council KOTPUTLI, for Providing, laying, jointing, testing and commissioning of sewer system and all ancillary works along with Design, construction, supply, installation, testing and commissioning (Civil, Electrical, Mechanical and Instrumentation and Other necessary works) of SPS, MPS and 10 MLD capacity STP based on SBR process with provision of year defect liability and there after 10 years for Kotputli town, Jaipur District, Rajasthan. 4) We take up the contentions placed before us. we see that the applicability of GST on the aforesaid awarded work to the applicant, the applicant was clear up to 19th October 2023, that it was liable to pay tax on the same. However vide notification no 13/2023-CT (Rate) dated 19.10.2023, an amendment has been brought on NN 12/2017-CT (Rate) dated 28.06.2017, wherein the exemption notification for applicability of G....
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....ng, Laying, Jointing, Testing and Commissioning of sewer system (lateral, branch and main sewers outfall etc.) for Kotputli town and all ancillary works, including construction of Manholes, Property connections, 5 nos. SPS, upgradation of effluent of existing 20 MLD ASP STP and restoration of roads etc. at the Town specified in the BDS with defect liability of 1 year with O&M for 10 years. The work proposed has been surveyed, based on which a bill of quantities has been prepared as provided in the G-Schedule/H-Schedule/Price Schedule. The contractor is fully responsible for carrying out the work including commissioning of the system with respect to technical feasibility and quality standard and scope of work will cover the following but not limited to. (2.4) (iii) The contractor will be responsible for procuring the sewer pipes, man hole frames and covers and other materials as required as per specifications, to maintain their safe custody and for proper installations, (2.19) (iv) The O&M period of all the works under this package shall be 10 years in which the initial first year shall be the defect liability period. The annual/yearly O&M charges shall be fixed and as specified....
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....other taxes and duties on Materials, works or services in respect of this Contract shall be payable by the Contractor according to Law in effect. ii) The Contractor shall deposit royalty and obtain necessary permit for supply of the red earth, moorum, sand, chips, bajri, stone, kankar, etc. from local authorities. The liability, if any, on account of quarry fees, royalties, octroi and other taxes and duties in respect of materials actually consumed on the Works, shall be borne by the Contractor. iii) If pursuant to or under any Law, notification or order any royalty, cess or the hike becomes payable to the Government of India and does not at any time become payable by the Contractor to the State Government/ Local authorities in respect of any Material used by the Contractor in the Works then in such a case, it shall be Lawful to the Government of India and it will have the right and be entitled to recover the amount paid in the circumstances as aforesaid from the dues of the Contractor. iv) In respect of goods and Materials procured by the Contractor, for use in Works under the Contract, VAT will be paid by the Contractor himself but in respect of such goods manufactured and ....
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....ion territory or local authority [or a Governmental authority [or a Government Entity] by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. Nil Nil 3B Services provided to a Governmental Authority by way of - (a) water supply; (b) public health; (c) sanitation conservancy; (d) solid waste management; and (e) slum improvement and upgradation. Nil Nil] a) The entries at Sr. No. g and 3A of exemption Notification No. 12/2017-CT(R) dated 28.06.2017 exempt supply of pure services and composite supplies (goods component 25% or less) supplied to Central Government, State Government or Local Authority, by way of any activity in relation to Municipal or Panchayat functions under Article 243G or 243W of the Constitution. b) Prior to 1.1.2022, the exemption entries covered services supplied to Governmental authority and Governmental entities also. c) Vide notification no 13/2023-CT (Rate) dated 19.10.2023, an amendment has been brought on NN 12/2017-CT (Rate) dated 28.06.2017, wherein in the ex....
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....it enacted by the Rajasthan State Legislature in the Sixtieth Year of the Republic of India, as follows: CHAPTER I 1. Short title, extent and commencement. - (1) This Act may be called the "Rajasthan Municipalities Act, 2009". (2) It extends to the whole of the State of Rajasthan, excluding cantonment areas therein. (3) It shall come into force on such [date] as the Sate Government may, by notification in the Official Gazette, appoint. 2. Definitions. - In this Act, unless the context otherwise requires,- (i)........ (ii) (iii) (iv) (v) (xiii) "Municipality" means a Municipal Corporation, Municipal Council, and a Municipal Board in existence at the time of commencement, or constituted in accordance with the provisions of this Act; 9) In view of above definitions and legal provisions, KOTPUTLI Municipal Council is coveted under the definition of Local Authority. In the instant case, the applicant is providing services to KOTPUTLI Municipal Council which is a local authority as discussed above. 10) Now, before discussing the insertion entry 3B vide Notification No. 13/2023-central Tax (Rate) dated 19.10.2023, it is imperative to discuss the background and Minut....