AI Drafter 
TaxTMI 
TaxTMI 
2024 (10) TMI 1097
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....Construction Private Limited, Shop No B/NS/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 falls 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):- M/s. Technocraft Construction Private Limited is engaged in Replacement of old and damaged existing sewerage system along with laying of new sewerage system and all ancillary works along with Design, construction, supply, installation, testing and commissioning (Civil, Mechanical, electrical, instrumentation & other necessary works) of Sewage Pumping Station/MWP (if any), Sewage Treatment Plant based on SBR Process with provision for treated waste water reuse including 1 year defect liability and 5 years O&M for towns under package AMRUT-2.0/RAJ/SEWERAGE-13 for Bikaner, Rajasthan. 1.2 That in month of May 2023, Rajasthan Urban Drinki....
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....age network with STPs executed under AMRUT Mission and RUIDP schemes. 1.7 The scope of work is directed to create and commission the main sewers and laterals within the area under this contract. It is also planned to lay house connection sewer line up to the house boundary connected to the manholes so that they are also covered up so that the man hole/road are not damaged later for making the connections. The project also includes house sewer connections by connecting all the Toilets/WCs, bathrooms and kitchen to sewerage network. The 08M 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 a 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 isas under: "9. (1) Subject to the provisions of s....
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....he ordinary course of business, one of which is a principal supply; 2.7 Further, principal supply is defined under Section 2 (90) ibid as (90) "principal supply" means the supply of goods or services which constitutes the predominant element of o composite supply and to which 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 c....
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....nature of incidental or ancillary services which help in better enjoyment of a main service. For example, service of stay in a hotel is often combined with a service or laundering of 3-4 items of clothing free of cost per day. Such service is an ancillary service to the provision of hotel accommodation and the resultant package would be treated as services naturally bundled 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 ....
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....vy of tax. The fact that a single price is charged for all elements is not conclusive. [Para 18] 2.14 Therefore, on the basis of the concept of natural bundling as explained in the Education Guide and judgements quoted above, it would be appropriate to state that if two or more supplies are bundled in the ordinary course of business and comprise a single supply from an economic point of view, such supply should not be artificially split and 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 ....
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....ry owner or a house-holder may purchase a water pump and fix it on a cement base for operational efficiency and also for security. That will not make the water pump an item of immovable property. Some of the components of water pump may even be assembled on site. That too will not make any difference to the principle, The test is whether the paper making machine can be sold in the market. The Tribunal has found as a fact that it can be sold. In view of that finding, we are unable 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 (275) ECR 8 (SC)) 2010-TlOL-25-SC-CX, held that Asphalt Drum/Hot 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 setti....
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....ed was whether a petrol tank, resting on earth on its own weight without being fixed with nuts and bolts, had been erected permanently without being shifted from place to place. It was pointed out that the test was one of permanency; if the chattel was movable to another place of use in the same position or liable to be dismantled and re-erected at the later place, if the answer to the former is in the positive it must be a movable property but if the answer to the latter part is in the positive then it would be treated a permanently 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 features: 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 ancill....
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.... was predominant, whole contract constituted a 'single supply of service' and was liable to service tax [In favor of revenue] Specified descriptions of services or Bundled Service principles of Interpretations Combining various elements into single transaction - If two or more elements are so closely linked that they form a single indivisible economic supply, which can be split only artificially, all those elements constitute a 'single supply' [In favour of revenue] Service - Definition of Predominant element determines classification - If predominant element is service, 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 O&M 2.32 The terms and scope of the contract combines installation of the se....
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....ant departments and local administration and finalize the alignment and also finalize the agency who will work for realigning/removing of the existing works that come in way. Planning the excavation of the relevant sections in such a way that the traffic and access to the houses is still maintained during the work period. If necessary in view of EIC, the excavated material may have to be stored at a suitable place away from the site of excavation and brought back when refilling. The excavated areas should be barricaded so as to prevent accidents. Proper Cement Concrete (M15) encasing shall be done for the reaches of governing 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 ....
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.... the given work should be treated as works contract. 2.41 The given activities undertaken by the applicant are culminating into works contract services. Now works contract service in itself is a composite supply. The same has been defined under Schedule-Il under Entry 6 which is read as under: 6. Composite supply The following composite supplies shall be treated as a supply of services, namely: (a) works contract as defined in clause (119) of section 2: and (b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article human consumption or any drink (other than alcoholic liquor human consumption), where such supply or service is for 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 consi....
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.... weaker sections of society, including the handicapped and mentally retarded; (10) Slum Improvement and upgradation; (11) Urban poverty alleviation; (12) Provision of urban amenities and facilities such as parks, gardens, playgrounds; (13) Promotion of cultural, educational and aesthetic aspects; (14) Burials and burial grounds, cremation, cremation grounds and electric crematoriums; (15) Cattle ponds; prevention of cruelty to animals; (16) Vital statistics including registration of births and deaths; (17) Public amenities including street lighting, parking lots, bus stops & public conveniences. (18) Regulation of Slaughter houses and tanneries. 2.46 From the reading of above, it is clear that at entry no 6, the activity of sanitation conservancy is duly covered. Hence the services as supplied by the applicant are covered in the list of activities which are entrusted 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 f....
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....6.2017, as amended from time to time. APPLICANT'S UNDERSTANDING That in case of above contract the entire work to be awarded shall be composite supply of works contract and the same appears to be classifiable under HSN 9954 and exempt under Entry No. 3B of Notification No 12/2017-CT (Rate) dated 28.06.2018. C. QUESTIONS ON WHICH THE ADVANCE RULING SOUGHT: Q. 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.? D. PERSONAL HEARING In the matter, personal hearing was granted to the applicant on 13.05.2024. Mr. Yash Dhadda C.A. Authorized Representative appeared for personal hearing. He reiterated the submission already made by them. E. COMMENTS OF THE JURISDICTIONAL OFFICER: - Joint Commissioner, State Tax, Circle-H, Zone-Jaipur-Il Divisional Kar Bhawan Jaipur, Rajasthan vide letter क्रमांक:-प()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, l....
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.... the applicability of these entries in isolation or individuality, these are inter-related and the entry at S. No. 3B is only the expanded form of entry no. 3 and 3A and these entries go hand. So, the entry no. 3B cannot be interpreted in isolation. 3. In the referred application of applicant, the applicant was awarded work 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 Sewage Pumping Station/MWP (if any), Sewage Treatment Plant based on SBR Process with provision for waste water reuse including MPS and 10 MLD capacity STP based on SBR process with provision of 1 year defect liability 5 years for towns under package AMRUT-2.0/RAJ/SEWERAGE-13 Bikaner. 4. After having gone through the above scope of work, it is clear that the scope of work ag detailed in the respective bidding documents, letter of intent and contract agreements as provided by the applicant, the work includes supply of goods and services (both), It includes supply of goods like se....
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....er the category of pure services (defined in entry no 3) and his composite supply contains the value of goods more than 25% of the values of composite supply (defined in Entry at S. No. 3A). Now suddenly how the taxpayer can come under the category of services (defined in Entry at S. No. 3B), So, the scope of work carried out by the taxpayer does not fall under the entry at S. No. 3B of notification dated 19-10-2023. In view of above, the said notification no 13/2023-CentraI Tax (Rate) dated 19-10-2023 is not applicable to the work and scope carried out by the taxpayer it) case(s) at hand. F. FINDINGS, ANALYSIS & CONCLUSION: 1) We have carefully examined the statement of facts, supporting documents filed by the applicant along with the application, oral and written submissions made at the time of hearing and the comments of the Jurisdictional Tax Authority. We have also considered the issues involved, on which advance ruling is sought by the applicant, and relevant facts. 2) M/s. Technocraft Construction Private Limited is engaged in Providing, laying, jointing, testing and commissioning of sewer system and all ancillary works along with Design, construction, supp....
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.... 02/2023-24) for Providing, laying, jointing, testing end commissioning of Sewerage System and all ancillary works along with Design, construction, supply, installation, testing and commissioning (Civil, Mechanical, electrical, instrumentation & other necessary works) of Sewage Pumping Station/MWP (if any), Sewage Treatment Plant based on S8R Process with provision for waste water reuse including MPS and 10 MLD capacity STP based on SBR process with provision of 1 year defect liability 5 years O&M for towns under package AMRUT-2.0/RAJ/SEWERAGE-13. The key points of the bidding documents may be categorized under heading scope of work, objective of the project and treatment of taxes marked as and C as under:- a) Scope of work and general specifications (i) The contractor is solely responsible for providing, laying, jointing, testing and commissioning the sewerage network in Bikaner in such a way that the waste water of the area under contract Shali be discharges at the STPs confirming all technical as well as quality standards and upgradation of STP on turnkey basis for the designated discharge as per Tender Document. (2.1) (ii) Providing, laying, jointing,....
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....sewage conforming to the standards specified by the State Government / CPHEEO manual / Ministry of Environment / National Green Tribunal in this case, for discharge of in the water bodies / reuse applications-(3.2) (iii) Treatment Objective: Considering the raw sewage quality and the required treated effluent quality, the process train proposed by the contractor shall achieve the following objectives (3.4) 1. To achieve guaranteed treated effluent quality or even better, 2. To ensure that the upgradation of the treatment process is the most appropriate and state of the art in terms of both efficiency of treatment, performance and operating cost. 3. To ensure that the process is cost effective from both capital and running costs, considering that is power consumed. (iv) For Instrumentation and Electrical works, in general bidder shall follow specification given it subsection. However, design criteria shall be as bidder's design. Bidder shall furnish detailed specification of other equipment not listed in the main bid. The bidder shall ensure compliance of all Governmental regulatory requirements along with those pertaining to the plant co....
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...., 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; On going through the work order awarded to the applicant, as discussed here-in-above, it is clear that in the instant case the applicant is engaged in providing 'works contract services'. The applicant also admits the fact that they are engaged in supply of goods along with services for an immovable property. Thus, the services provided by the applicant are found to be works contract services, where goods along with services are supplied. 7) Now, we examine the exemption notification No. 12/2017-CT(R) dated 28.06.2017 which is reproduced as under: Sl.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate Condition 3 Chapter 99 Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority [or a Governmental authority [or a Government ....
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....ined in clause (d) of article 243 of the Constitution; (b) a "Municipality" as defined in clause (e) of article 243P of the Constitution; (c) a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund; (d) a Cantonment Board as defined in section 3 of the cantonments Act, 2006 (Central Act No. 41 of 2006); (e) a Regional Council or a District Council constituted under the Sixth Schedule to the Constitution; Article 243P in constitution of India In this Part, unless the Context otherwise requires, - (e) "Municipality" means an institution of self-government constituted under article 243Q; 243Q. Constitution of Municipalities. (1) There shall be constituted in every State,- (a) a Nagar Panchayat (by whatever name called) for a transitional area, that is to say' an area in transition from a rural area to an urban area; (b) a Municipal Council for a smaller urban area; and (c) a Municipal Corporation for a larger u....
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....positive list of services under Sr. No. 3 & 3A of notification No. 12/2017-CentraI Tax (Rate). She stated that this issue was discussed in earlier Council meetings and Fitment was asked to examine whether there was a need to prune the list of exempt supplies of pure services or composite supplies by way of activity in relation to functions listed in Articles 243G and 243W of the Constitution of India when supplied to Central Government, State Government or Local authority. However, during previous discussions on the same, states had opined that the list should continue as it exists. She stated that the Fitment Committee had recommended to maintain the existing list of services in 3 and 3A of Notification No. 12/2017-CTR dated 28.06.2017. 5.52 She further stated that prior to 01.01.2022, the exemption also covered services supplied to Governmental authority and Governmental entities also. The Fitment Committee had also recommended to create a new entry to exempt the following five services supplied to Governmental Authority: Water Supply Public health Sanitation Conservancy Solid waste management Slum improvement and upgrada....