TaxTMI 
TaxTMI 
TaxTMI 
2025 (6) TMI 914
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.... and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST Act. 1. FACTS AND CONTENTION - AS PER THE APPLICANT: 1.1 Applicants registered office at Flat no. 501, Plot no. 65, 5th Floor, Sharda Terraces, CBD Belapur, Navi Mumbai, Thane, Maharashtra, 400614, is engaged into the business for the provision of works contract services to its service recipients. 1.2 In the instant contract in hand, the applicant received a purchase order bearing reference no. SHAR/VAST/2018E099350101 dated 07.05.2019 from Satish Dhawan Space Centre SHAR (for the sake of brevity, hereinafter referred to as "contractee") for erection, testing and commissioning of Rail tracks meant for handling assembled staged rockets from Assembly Building to Launch pad as per the said agreed order. The said rail tracks being the civil structures are classifiable under immovable property. 1.3 Satish Dhawan Space Ce....
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.... of bank guarantee valid till erection, commissioning and acceptance by CLIP plus 60 days. b) 70% of erection cost against pro-rata progress at site duly accepted by CLIP. c) 10% of erection cost after successful commissioning and acceptance by CLIP. Copy of the above-mentioned purchase order is enclosed with this application. 2. STATEMENT CONTAINING APPLICANT'S INTERPRETATION OF LAW 2.1 The Relevant provision under the GST Law: - 2.1.1 Given that the subject contracts are one composite indivisible contract disguised as two independent contracts - one for supply of items and other for services rendered for erection & commissioning of Rail Tracks & Allied System of the turnkey project, it is pertinent to analyses the provision of GST Laws to determine GST liability on the composite contract: According to the section 8 of Central Goods and Services Tax Act, 2017 The tax liability on a composite or a mixed supply shall be determined in the following manner, namely: (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply, and (b) ... where the term "composite supply" has been define....
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....t 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. * Notification No. 24/2017-Central Tax (Rate) dated 21 September, 2017 read with Notification No. 46/2017-Central Tax (Rate) dated 14th November, 2017 provides that Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, provided to the Central Government, State Government, Union Territory, a local authority or a Governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other Original works meant predominantly for use other than for commerce, industry, or any other business or profession would fall under Entry 3 (vi) (a) with HSN Code 9954 attracting GST @ 12%. 2.1.3 However, if the erection & commissioning contract is held to be independent of the supply of items contract, the former shall be considered as a pure service extended to a government entity and hence would be considered as a supply under Entry 3(xii) of Notific....
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....nd therefore it is necessary to examine through case laws whether the subject contracts are two separate independent contracts or they are, in reality, one composite indivisible contract disguised as two independent contracts - one for supply of items and other for services rendered for erection & commissioning of Rail Tracks & Allied System of the turnkey project. 2.1.5 Where parties enter into distinct and separate contracts, one for the transfer of material for monetary consideration, and the other for payment of remuneration for services and for work done, there are - ordinarily. Two agreements, though there is a single instrument embodying them. (State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. (64) 1959 SCR 379: AIR 1958 SC 560). In such cases the transaction would not be one and indivisible, but would fall into two separate agreements. (Hindustan Aeronautics Ltd. v. State of Karnataka (65) (1984) 55 STC 314 (SC): State of Himachal Pradesh v. Associated Hotels of India Ltd., (66) (1972) 29 STC 474: (1972) 1 SCC 472: AIR 1972 SC 1131] (five judges). If there are two independent contracts, namely, purchase of the components from a dealer, it would be a contract for sale....
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.... and Toubro Ltd. (70 supra). 2.1.8 In turnkey projects, the same person is entrusted with the responsibility of procuring material, and of erection and installation of equipment. The contractors' obligations, under both the supply and erection contracts, would cease only after the turnkey project becomes operational, and after final payment is made both for supply of material and for erection and installation of equipment. Existence of a cross-fall breach clause, or a clause which enables the owner to terminate the supply contract for breach the erection contract and vice versa, would mean that, while the contracts are ostensibly two separate contracts-one for supply of material and the other for rendering works and services, they are, in fact, one single indivisible contract. The goods supplied to the owner, under the supply contracts, are tailor-made goods, and cannot be bought off the shelf. Such goods cannot, ordinarily. be sold to another except for their use in turnkey projects of a similar nature. The functions relating to the supply of material, and rendering services of erection and installation, are integrally connected and are interdependent. 2.1.9 Furthermore, clauses....
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....ile the contracts are ostensibly two separate contracts - one for supply of materials, and the other for erection and commissioning of the Rail Tracks, they are, in fact, one single indivisible contract. The contracts, is tailor made supply, and cannot be bought off the shelf. Such service cannot, ordinarily, be supplied to another except for in turnkey projects of a similar nature. 2.2.3 The Client being Satish Dhawan Space Centre SHAR is aware of such interdependence of the two contracts. Although awarded under the same PO and two-part tenders signed for execution, clauses under both of them make it abundantly clear that notwithstanding the break-up of the contract price, the contract shall, at all times, be construed as a single source responsibility contract and the Gantrex shall remain responsible to ensure execution of both the contracts to achieve successful completion and handing over of the facilities. 2.2.4 Composite nature of the contract is further clear from the clause that defines satisfactory performance of the First Contract (supply of materials) upon completion of erection & Commissioning phase in Second Contract. The client has not contracted for erection & comm....
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....ontractee") for supply and erection, testing and commissioning of Rail tracks meant for handling assembled staged rockets from Assembly Building to Launch pad as the said agreed order. The said rail tracks being the civil structures are classifiable under immovable property. As per the said purchase/work order the affiliate being M/s. Gantrex SPRL, registered office address at Rue du Commerce 19, Rue de Commerce Nivelles, 1400, Brabant Wallon, Belgium was responsible for execution of the supply of the enlisted items in the work order to the contractee at an agreed rate. Whereas the applicant was responsible for the erection & commissioning part. of the items supplied by its affiliate to the contractee at an agreed price of Rs. 2,21,84,000/- including GST @18%. The said contract spreads over a period of 13 months where the first leg of the contract i.e. supply of items by the affiliate spreads over first 04 (four) months and the remaining 09 (nine) months are for the delivery of erection & commissioning service. Contention of taxpayer over applicability of tax rate @18%: As per the purchase order dated 02.05.2019, it is clearly mentioned that "The PO value for erection and commissi....
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....une,2017 [(vi) [Composite supply of works contract as defined in clause (119) of section 2 of the Telangana Goods and Services Tax Act, 2017 [other than that covered by items (i), (ia), (ib), (ic), (id), (ie) and (if) above] 27, provided] 28 to the Central Government, State Government, [Union territory or a local authority] 29] 30 by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of - (a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession; rate of tax applicable is 12%. Comment by this office: Notification No. 11/2017-Central Tax New Delhi, the 28th June, is amended several times. It notifies in serial number 3 that, [(vi) [Composite supply of works contract as defined in clause (119) of section 2 of the Telangana Goods and Services Tax Act. 2017 [other than that covered by items (i), (ia), (ib), (ic), (id), (ie) and (if) above] 27, provided] 28 to the Central Government, State Government, [Union territory or a local authority] 29] 30 by way of construction, erection, commissioning, installation, compl....
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....it note'. when a tax invoice is issued, and the same is required to be amended to reduce the tax liability mentioned in it, the supplier can issue a credit note. A supplier can issue a credit note against a Tax Invoice on or before 30th September of the next financial year or the date of filing of annual return pertaining to the Tax Invoice, whichever is earlier" Also, the time limit to avail Input Tax Credit ("ITC") in respect of any invoice or debit note under Section 16(4) of the CGST Act, through any return in FORM GSTR 3B filed upto November 30, 2021 for the Financial Years 2017-18, 2018-19, 2019-20 and 2020-21, was November 30, 2021. In the instant case, if the change in rate is applied and tax is reduced, the due date of issuing credit note and availing ITC thereon is already over. As mentioned in the purchase order dated 02.05.2019, two supplies are mentioned separately and tax invoices are raised separately by M/s. Gantrex SPRL for material supply and by M/s. Gantrex India Crane Rails Pvt Ltd for erection and commissioning to SHAR which indicates that the two supplies are not naturally bundled but are two individual supplies. Both are different supplies and none of them ....
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....t Wallon, Belgium for supply of Rails. Fish plates and clips. In the same order, the work of erection and commissioning of the rail track was awarded to the applicant i.e. M/s. Gantrex India Crane Rails Pvt. Ltd. The work comprises of erection and commissioning of rail tracks meant for handling assembled staged rockets from Assembly Building to Launch Pad. 5.2. Ongoing through the purchase order/work order, we find that the order has been divided into two portions i.e. one for supply of goods and one for providing service of erection and commissioning. The contract for the first portion for supply of goods has been awarded to M/s. Gantrex SRP, Belgium while the work of erecting and commissioning of the rail tracks has been given to the applicant. We find that Section 2 (30) of the CGST Act, 2017, defines Composite Supply as under: - "composite supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. Illustration: Where goods are ....
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....a service are ancillary. d) 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. We find that in order to qualify as a composite supply, the supply has to be made by a taxable person. In the instant case, the goods are being supplied by an overseas entity and the service is being provided by a different entity and therefore both the supplies cannot be combined together to classify the service provided by the applicant as a composite service. 5.4. The definition of "works contract" given under Section 2 (119) of the CGST Act, 2017, read with para 6(a) of Schedule II of the Act, clearly denotes that works contract is a composite supply of services which shall fulfill both the following conditions: - i) the supply shall be in relation to immovab....
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....ince no goods are supplied by the applicant, consequently, no goods are transferred from and therefore, it can be held the supply of service by the applicant does not involve transfer of property in goods. In view of the said fact, we hold that the service provided by the applicant to SDSC would not qualify as a works contract service. We find that as per Para 4.3.2 of the Tender Document, Supplier shall provide all supervision, labour, tools, machines, cranes, equipment, scaffolding, rigging material and incidental material such as bolts, wedges, anchors, etc. required to complete the works. Supplier shall also provide at his own cost all such consumables like oxygen - acetylene gas, welding rods, grinding wheels, temporary supports, shims etc. required to complete work. We find that such goods like oxygen-acetylene gas, welding rods, grinding wheels etc., are consumables which get consumed in the process of the completion of the process of erection and commissioning. The property in such goods are not transferred from the applicant to the client in any form. In this regard, we place reliance on the decision of the Apex Court in Gannon Dunkerley & Co. v. State of Rajasthan & Other....
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.... 3 9954 vi) Composite supply of works contract as defined in clause (119) of Section 2 of the Central Goods and Services Tax Act, 2017, provided to the Central Government, State Government, Union Territory, a local authority a Government Entity by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of (a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession; 6 (Provided that where the services are supplied to a Government entity, they should have been procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union Territory or local authority as the case may be. We find that the classification under S. No. 3 (vi) (a) of the Notification No. 11/2017-Central Tax (Rate) dated 28.6.2017 would not be applicable in the present case as the supply of services of erection and commissioning by the applicant would not qualify as a composite supply of works contract service. 5.7 We find that the services provided by the applicant in the present case is pure service o....