TaxTMI 
TaxTMI 
2025 (6) TMI 579
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....ceived from the contactor can be claimed by MSETCL? If ITC can be claimed by MSETCL, then whether ITC can be claimed in the period in which the running bill is received or on the receipt of the final invoice/completion of entire work? d. What shall be the value of supply at a particular moment when consideration is received? 3. In case, the deposit obtained from the end users becomes excess on the final completion of the works and the excess amount is refunded back to the Dedicated Consumers, then whether credit can be claimed for the purposes of GST liability in respect of the said amount? This question is asked because the works get completed even after a lapse of 2-3 years. 4. In case, the deposit obtained from the Dedicated Consumers falls short on the final completion of the works and if such amount is recovered from the end user, then whether we shall be liable to pay GST on the same and if yes, then what shall be the time of supply in this case? This question is asked because the works get completed even after a lapse of 2-3 years. a. Transaction One: Shifting/Height raising of Transmission Towers/Lines, belonging to MSETCL through a contractor on the reque....
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....nies in the state: The company carries out the construction and maintenance of Extra High Voltage (EHV) network to cater the Transmission of Electricity between the generation and distribution companies in the state of Maharashtra, The EHV Substations & EHV Lines are constructed as per the State Transmission Utility (STU) Plan and approval of Maharashtra Electricity Regulatory Commission (MERC). Such assets are capitalized for the compounded value of the total cost incurred including and cost. The construction activities are carried out through the outside agency i.e. contractors appointed by MSETCL as per the rules and regulation of MSETCL the contractors are reimbursed with the total cost of construction (including GST). The MERC allows MSETCL Return on Equity (ROE) and Operation & Maintenance (O&M) charges on asset constructed as per the regulatory framework of MERC in the form of tariff for transmission services which is borne by electricity consumer (i.e., general public) of Maharashtra State: 1.4 Construction and maintenance of Extra High Voltage (EHV) network for customers/users as per their requirements: MISETCL executes such works/services for the customers/users ....
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....d Consumers. In this case, the supervision charges plus GST on Supervision Charges are calculated are collected from the respective user thru a Demand Note. Charges, other than the supervision charges are paid by the end user to the contractor directly. Therefore, in this scenario, we are of the view that there is no supply of services by MSETCL (other than supervision) and hence no question of any GST liability on the same. The following are the works carried by the company on ORC basis as per the requirement of respective dedicated user. 1.7 In this business model, the contracts are of following types: 1.7.1 Sub-type One: Shifting/Height raising of Transmission Towers/Lines: i. Nature of contract: in this case, the concerned Dedicated Consumers for their project works like Construction/ Widening of Highways, laying of Railway Networks. etc .; approach the MSETCL for shifting of transmission towers/lines. As transmission tower lines that belongs to MSETCL, the ORC Consumer for their project work approach the MSETCL for shifting of Transmission Tower Lines that belongs to MSETCL. For example, NHAI approaches the MSETCL for shifting/ height raising of the existing ....
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.... for construction of the new bay towards dedicated/uninterrupted power supplies for their IT Set-up. ii. Consideration: The respective ORC Consumer makes remittance (Deposit) of cost of construction of new transmission / electrical bay along with supervision charges to MSETCL. iii. Execution of contract: MSETCL further award the contract to the contractor for construction of new transmission / electrical bay by floating a tender. iv. Consideration paid to contractor: Contractor raises Running Account Bills, including GST as per stages of completion of work. v. Capitalization of property in assets: After the completion of work the Asset so created is adjusted against the remittance received from dedicated user/consumer. The Asset is capitalized in the MSETCL books at Re 1. 1.7.4 Sub-Type Four: Existing asset available with MSETCL (like express feeder, bay etc.) is allotted to the Dedicated Consumers for its dedicated use. i. Nature of contract: In this case, the existing Asset (like bay etc.) available as a spare with MSETCL, is allotted to the Dedicated Consumers for their demand for its dedicated use by respective consumer. For examp....
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...., 2017. As per separately given Heading 9954 (Installation services) 995461 Electrical installation services including Electrical wiring & fitting services, fire alarm installation services, burglar alarm system installation services. As per separately given 995461 1. special trade installation services involving the installation of basic electrical wiring circuits or fittings in buildings and other construction projects; As per separately given 995461 2. electrical wiring and fitting services for emergency power supply systems; As per separately given 995461 3. electrical services arising from the installation of appliances; As per separately given 995461 4. installation services of meters; installation services of fire alarm systems; As per separately given 995461 5. installation services of burglar alarm systems at the construction site; As per separately given 995461 6. installation services of all types of residential antenna including satellite antenna; As per separately given 995461 7. installation services of cable television....
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....ed (MSETCL) is a leading State Transmission Utility in the Country. MSETCL owns and operates largest Electricity Transmission System in the State. The Company is a wholly owned corporate entity of Maharashtra Government incorporated on 31st May, 2005 after reconstruction and trifurcation of erstwhile Maharashtra State Electricity Board. (MSEB). Business Models 1. Transmission of Electricity 2. Construction and maintenance of Extra High Voltage (EHV) Network for transmission of electricity-(Generation to Distribution as per MERC guidelines) 3. Construction and maintenance of Extra High Voltage (EHV) Network for transmission of electricity-(for Customer as per specific requirement.) Model-1 Outright Contracts- Consideration received from the dedicated consumer in ORC has two components i.e. Cost of the work (advance deposit on estimated basis) and the Supervision charges (15% of the estimated cost). Model-2 Supervisory basis Transaction Type 1: Shifting/Height Raising of transmission Tower/Lines belonging to MSETCL through a contractor on the request of the 'Dedicated Consumer' such as Railways, National Highway Authority of India, etc. on receipt of paymen....
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....cription *Rate of Tax 99542 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 As per separately given Heading 9954 (Construction services) Composite supply of works contract as defined in clause 119 of section 2 of Central Goods and Services Tax Act, 2017. As per separately given Heading 9954 (Installation services) 995461 Electrical installation services including Electrical wiring & fitting services, fire alarm As per separately given installation services, burglar alarm system installation services. 995461 1. special trade installation services involving the installation of basic electrical wiring circuits or fittings in buildings and other construction projects; As per separately given 995461 2. electrical wiring and fitting services for emergency power supply systems; As per separately given 995461 3. electrical services arising from the installation of appliances; As per separately given 995461....
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....ntractor would be available to the recipient, whatever is the business of the recipient. This is because works contract in respect of plant and machinery comes within the exclusion clause of the negative list and ITC would be available when used in the course or furtherance of business. d. What shall be the value of supply at a particular moment when consideration is received? Comments - Valuation of a works contract service is dependent upon whether the contract includes transfer of property in land as a part of the works contract. In case of supply of service, involving transfer of property in land or undivided share of land, as the case may be, the value of supply of service and goods portion in such supply shall be equivalent to the total amount charged for such supply less the value of land or undivided share of land, as the case may be, and the value of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply. Explanation. - For the above purpose, "total amount" means the sum total of,- (a) consideration charged for aforesaid service; and (b) amount charged for transfer of land ....
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.....25 to Notification No. 12/2017-Central Tax (Rate) dated 28.6.2017, transmission of electricity by a electricity transmission or electricity distribution company/utility is exempted from tax. Thus, the basic function of transmission of electricity carried out by the applicant is exempted from GST. 4.2 We find that the applicant has raised certain questions, based on the various business models followed by them. In order to examine whether the services provided by the applicant are taxable or not and whether it can be treated as a supply, it is necessary to understand the business model of the applicant. The two types of business models enumerated by the applicant are as under:- a. Outright contracts:- Here the customer provides a contract to the applicant which is then handed over by the applicant to sub-contractors. The applicant charges the cost of the contract + 15% supervisory charges for the said contract. The cost of the contract is recovered as a deposit and the supervisory charges are booked to the profit and loss account. b) Supervisory Basis: Here, the contract is between the Consumer and the contractor and the role of the applicant is only that of a ....
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....ETCL for shifting of Transmission Tower Lines that belongs to MSETCL. For example, NHAI approaches the MSETCL for shifting/ height raising of the existing Transmission Lines/towers or shifting of Transmission Lines/Towers towards widening/construction of roads. ii. Consideration from recipient of services. The respective ORC Consumer make remittance (Deposit) of cost of shifting diversion along with supervision charges to MSETCL. iii. Execution of contract: MSETCL further award the contract to the contractor for shifting/diversion of Transmission Tower Lines by floating a tender. iv. Capitalization of property in asset: After the completion of work the Asset so created is adjusted against the remittance received from dedicated user/consumer, The Asset is capitalized in the MSETCL books at Re. 1. It is seen from the nature of the contract that in this case, the transmission towers and lines have already been laid out by the applicant and the customer approaches the applicant for shifting of the transmission tower lines or raising the height of the towers for widening / construction of roads etc. We find that the said services are neither services of tra....
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....ement must be an independent arrangement in its own right. Such arrangement or agreement can take the form of an independent stand-alone contract or may form part of another contract. Thus, a person (the first person) can be said to be making a supply by way of refraining from doing something or tolerating some act or situation to another person (the second person) if the first person was under an obligation to do so and then performed accordingly. 4.5 Therefore, we find that the said services provide by the applicant would be aptly Hovered under the service of agreeing to do an act for a consideration and therefore such services would be classifiable under 999792. The decision with respect to the various questions which arise in light of the aforesaid findings are as under :- a) What shall be the time of supply? Since no specific contract details are available, we find that in general, the time of supply shall be the time prescribed under Section 13 of the CGST Act, 2017. b) What shall be the HSN/SAC Code and rate of GST for such "supplies"? The service would be covered under the services of agreeing to do an act for a consideration and wo....
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....the service provided by the sub-contractors to the applicant for construction of an immovable property, can be covered under the definition of plant or machinery. Under the circumstances, it would not be possible to give any decision as to whether the input tax credit would be available to the applicant. However, on the basis of general understanding, if the activity of construction is in respect of plant and machinery, input tax credit would be available. If the activity of construction is in respect of any immovable property, that does not satisfy the definition of plant and machinery laid down in the Explanation under Section 17 of the CGST Act, 2017, no input tax credit would be available to the applicant. If input tax credit can be availed, it will be on the basis of the running bills raised by the sub-contractors. d. What shall be the value of supply at a particular moment when consideration is received? The value of supply shall be the value as determined under Section 15 of the CGST Act, 2017. 4.6 Transaction Type 2: Construction of EHV Substations and EHV Lines for dedicated user of Dedicated Consumers by MSETCL through a contractor on the request of Dedicated ....
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....an activity incidental or ancillary to the transmission of electricity and therefore the said services would be covered under S.No.25 A of the Notification No. 12/2017 dated 28.6.2017 (as amended by Notification 8/2024 Central Tax (Rate) dated 10.10.2024). Ongoing through a sample contract provided by the applicant we find that such type of work involves the following work :- a) establishment of traction substation along with gantry foundation, equipment foundation, control room, meter room, cable trench, RCC road, metal spreading and GI pipeline, chain link fencing and gantry foundation etc. b) Construction of DCDC Line across a length of 9.6 Km along with end bays between two sub stations. c) Conversion of existing conductor with equivalent HTLS conductor. d) Metering CT, PT, Isolator. e) PLjCC & FOTE equipment, OPGW 9.6 Km or actual. f) 220V & 48V battery and battery charger. g) Suitable ABT metering arrangement capable of measuring Four Quadrant Reative Energy alongwith AMR facility with integration to control Center at SLDC. h) Establishment of SCADA for remote end control and monitoring alongwith real tim....
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....ely to happen in an unplanned or subordinate conjunction with something else. Similarly word 'ancillary' has been defined as under: Oxford Dictionary - provide necessary support to the main work or activities of an organization. - In addition to something else but not as important. Cambridge Dictionary: providing support or help. Dictionary.com - supporting, secondary, subsidiary The reading of all above definitions establishes that any activity, which supports the main activity or necessary to carry out the principal activity, is an activity or transaction incidental or ancillary to the principal activity. Such activities are not the main activity but supporting activities. We find that setting up of a EHV Sub Station and EHV Lines are major activity of creating basic infrastructure for the purpose of transmission of electricity. It is sine qua non and a non-negotiable activity for the purpose of transmission of electricity without which the transmission of electricity safely and in the required quantity is not possible. Under the said circumstances, it is not possible to term such activity as incidental or ancillary activity but suc....
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....n 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 any other form) is involved in the execution of such contract. Further, we find that the service provided by the applicant is in the nature of assuming overall responsibility for the successful completion of a construction project on behalf of a client, including organizing the design, requesting tenders, performing management and control function falling under Heading 998339 .. Such services are chargeable to 18% GST (9% SGST + 9% CGST). c) Whether ITC on the running bills received from the contactor can be claimed by MSETCL? If ITC can be claimed by MSETCL, then whether ITC can be claimed in the period in which the running bill is received or on the receipt of the final invoice/completion of entire work? The issue of admissibility of input tax credit is covered under the provisions of Section 16 and 17 of the CGST Act, 2017. Subject to the fulfilment of all the conditions laid down under Section 16, the applicant would be entitled to avail the ITC if it is not restricte....
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.... as to whether the input tax credit would be available to the applicant. However, on the basis of general understanding, if the activity of construction is in respect of plant and machinery, input tax credit would be available. If the activity of construction is in respect of any immovable property, that does not satisfy the definition of plant and machinery laid down in the Explanation under Section 17 of the CGST Act, 2017, no input tax credit would be available to the applicant. If input tax credit can be availed, it will be on the basis of the running bills raised by the sub-contractors. d. What shall be the value of supply at a particular moment when consideration is received? The value of supply shall be the value as determined under Section 15 of the CGST Act, 2017. 4.8 Transaction Type 3: Construction of New Transmission Bay/Express Feeder for dedicated use of consumer by MSETCL through a contractor on the request of Dedicated Consumers on receipt of payment of consideration in the form of adjustable deposit. We find that the nature of service as informed by the applicant is as under:- i. Nature of contract: in this case, concerned Dedicated Consumer....
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....the activities covered under S.No. 25A of the Notification 12/2017 dated 28.6.2017 covers minor activities which are incidental or ancillary to the transmission. They involve functions to support the business of the dedicated consumer, which are minor in nature such as testing, repair, shifting of meters etc. Major activities such as setting up separate dedicated infrastructure to provide electricity does not form a part of the activities envisaged under Sr.No.25A. Such activities of setting up and construction of a Feeder Bay are major infrastructural development activities which are neither incidental nor ancillary but are primary task of a transmission company. The activity of transmission cannot be safely and successfully concluded without these critical infrastructures. Providing such infrastructure, constructing the same after conducting., feasibility study and enabling construction of such infrastructure is the primary function of the applicant and it cannot be termed as incidental or ancillary activity. Therefore, we find that the provisions of S.No.25A of Notification No. 12/2017 dated 28.6.2017, as amended, from time to time, would not be applicable to the services provid....
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....ication, 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 any other form) is involved in the execution of such contract. Further, we find that the service provided by the applicant is in the nature of assuming overall responsibility for the successful completion of a construction project on behalf of a client, including organizing the design, requesting tenders, performing management and control function falling under Heading 998339. Such services are chargeable to 18% GST (9% SGST + 9% CGST). c) Whether ITC on the running bills received from the contactor can be claimed by MSETCL? If ITC can be claimed by MSETCL, then whether ITC can be claimed in the period in which the running bill is received or on the receipt of the final invoice/completion of entire work? The issue of admissibility of input tax credit is covered under the provisions of Section 16 and 17 of the CGST Act, 2017. Subject to the fulfilment of all the conditions laid down under Section 16, the applicant would be entitled to a....
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.... or machinery. Under the circumstances, it would not be possible to give any decision as to whether the input tax credit would be available to the applicant. However, on the basis of provisions of law, if the activity of construction is in respect of plant and machinery, input tax credit would be available. If the activity of construction is in respect of any immovable property that does not satisfy the definition of plant and 2 machinery laid down under Section 17 of the CGST Act, 2017, no input tax credit would be available to the applicant. If input tax credit can be availed, it will be on the basis of the running bills raised by the sub-contractors. d. What shall be the value of supply at a particular moment when consideration is received? The value of supply shall be the value as determined under Section 15 of the CGST Act, 2017. 4.10 We find that one of the issues raised by the applicant is whether they can be treated as a pure agent of the recipient of service as they recover only the cost which is incurred for construction of the EHV Substations, shifting of transmission towers and feeder bay and if there is any excess recovered, the same is returned ba....
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....to exclude the cost incurred by the applicant for providing the services to the customer, from the value of the services, as a pure agent, the applicant should qualify as a pure agent. For the said purpose, all the conditions laid down for being eligible as a pure agent should be fulfilled. a) The first condition is that the supplier acts as a pure agent of the recipient of the supply. A pure agent means a person who enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both. b) The second condition is that he neither intends to hold nor hold any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply. c) The third condition is that he does not use for his own interest such goods or services so procured. d) The fourth condition is that he receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account. 4.11 From the facts of the case presented before us, we find that the applicant does not fulfill ....
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....ansfer of asset: Needs clarity on these issues. Whether it is renting of immovable property? Cost of asset is recovered from customer, how is the asset valued? Is the asset transferred to the consumer? From the nature of the activity, it is seen that the applicant has already constructed a feeder bay which is not used by any dedicated user. When a new user seeks electricity from the applicant for a particular period of time, they allot the spare feeder bay to the said consumer for a specified duration. For the said purpose, they recover the cost of the already constructed feeder bay as charges for the infrastructure required for dedicated supply of electricity. It can be seen that the said activity of allotment of a feeder bay for a specified period is in the nature of renting out of immovable property for use by a consumer for a specified period. Though the applicant is silent about the transfer of asset, it is seen that the asset was already on the books of the applicant and that the allotment of the feeder bay is only for a specified period. The applicant is silent about who will maintain the said asset, whether it will be run by the applicant or the consumer, but taking i....
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....able property includes renting, letting, leasing, licencing or other similar arrangements of the immovable property. Such activity is a service and is subject to GST. It is classifiable under heading 997212 which includes services such as rental or leasing services concerning industrial property by owners and is chargeable to GST @ 18% i.e. (9%CGST + 9%SGST). c) Whether ITC on the running bills received from the contactor can be claimed by MSETCL? If ITC can be claimed by MSETCL, then whether ITC can be claimed in the period in which the running bill is received or on the receipt of the final invoice/completion of entire work? Not applicable in this type of transaction. d). What shall be the value of supply at a particular moment when consideration is received? The value of supply shall be the value as determined under Section 15 of the CGST Act, 2017. 4.14 Another issue raised by the applicant is that in cases where, the deposit obtained from the end users becomes excess on the final completion of the works and the excess amount is refunded back to the Dedicated Consumers, then whether credit can be claimed for the purposes of GST li....
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....ty of the supplier shall be permitted, if the incidence of tax and interest on such supply has been passed on to any other person. if applicant fulfill the conditions mentioned in section 34(2), he is eligible to take credit of such credit notes issued failing which no credit can be availed. 4.16 Another issue raised by the applicant is in cases where, the deposit obtained from the Dedicated Consumers falls short on the final completion of the works and if such amount is recovered from the end user, then whether the applicant shall be liable to pay GST on the same and if yes, then what shall be the time of supply in this case. The applicant claims that some time, estimate given and amount received from the Dedicated Consumers falls short on the final completion of the works and if such amount is recovered from the end user then question raised by the applicant that whether we shall be liable to pay GST on the same. We find that to claim additional amount, Applicant will have to issue debit note to Dedicated Consumer. As per section 2(38), "debit note"means a document issued by a registered person under sub-section (3) of section 34. The provisions of Section 34 (3) and (4)....
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....vered under the services of agreeing to do an act for a consideration and would be classifiable under Heading 999792 and chargeable to 18% GST (9% SGST + 9% CGST). c. Whether ITC on the running bills received from the contactor can be claimed by MSETCL? If ITC can be claimed by MSETCL, then whether ITC can be claimed in the period in which the running bill is received or on the receipt of the final invoice/completion of entire work? Answer: Not answered due to generic nature of the question. d. What shall be the value of supply at a particular moment when consideration is received? Answer: Value of supply shall be the value determined under Section 15 of the CGST Act, 2017. 1(b) Whether the following works undertaken by MSETCL can be termed as "supply" to the Dedicated Consumers? b. Construction of EHV Substations and EHV Lines for dedicated user of Dedicated Consumers by MSETCL through a contractor on the request of the end users on receipt of payment of consideration in the form of adjustable deposit. Answer: Yes. 2(b) If the works are decided as "supply, then: a. What shall be the time of supply? ....