TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 784
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....es supporting the original advance ruling have changed. 4. Advance Ruling obtained by the applicant by fraud or suppression of material facts or misrepresentation of facts, shall render such ruling to be void ab initio in accordance with Section 104 of the Act. 5. The provisions of CGST Act, 2017 and DGST Act, 2017 are pari-materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the DGST. Act and vice-versa. 1. M/s. NEC Corporation India Private Limited. A-31, 1st Floor, Lajpat Nagar, Part-II, New Delhi. 110024. (hereinafter referred to as 'The applicant'), having GSTIN 07AACCN3496J124 have filed an application for Advance Ruling under clauses (a) & (b) of Section 97(2) of CGST Act 2017 read with Rule 104 of CGST Rules. 2. Statement of Facts: (i). The Applicant is engaged in providing solutions and services in multiple areas including public safety. private network, retail. IT. engineering services etc. Recently, the Applicant was awarded a contr....
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.... Applicant has furnished the functional architecture of surveillance system and various components (on page 20-24 of the application) as follows: Functional Architecture of Surveillance System under Delhi Safe City Project (vi). As indicated in the diagram above, surveillance system shall have below components: (a) Cameras - Under the project approximately 10,000 CCTV cameras are to be installed on designated poles which will be permanently fixed to the ground. CCTV will be sharing real time feeds with the field units involved in redressing women's safety-related situation of distress (such as police patrol vans like Prakhar vans. emergency police station officers, beat patrolling personnel, emergency response vehicles, etc.). (b) Other field devices - Other field devices to be setup as a part of overall surveillance system includes: * Poles with cantilevers/ arms which will act as permanent structures to house cameras and other devices etc. and will be affixed to the ground: * industrial grade switches; * Optical Fibre Cable (OFC) network for providing connectivity to the surveillance system. The OFC will be fixed line network which will be permanently laid down unde....
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....ore the same qualifies to be an immovable property. It is submitted by the Applicant that the service of setting up of surveillance system will qualify as works contract services as per Section 2(119) of Central Goods and Service Tax Act, 2017and that the said project has been awarded to the Applicant with an intent to establish surveyance system which will help Delhi Police in providing security to general public and it is expected that once installed. the surveillance system shall function for distant future. (viii). The scope of work of the Applicant under the contract entered into with CDAC comprises of the following two activities to be carried out by the Applicant for CDAC: (i) Implementation of surveillance system; and (ii) Operation and maintenance of the surveillance system. (ix). As regards the implementation of surveillance System. the contract entered by the Applicant with CDAC specifies that it is for implementation, operation and maintenance of surveillance system. Surveillance system comprises components such as cameras. poles with cantilevers/ arms which will act as permanent structures to house cameras and other devices etc. IP phones, work stations, monitors....
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....etc. (x). Further, in respect of the operation and maintenance of the surveillance system, the Applicant is required to maintain and manage all hardware and software forming part of the surveillance system during the contract period (3 years as mentioned in the application). This would typically include repair and maintenance of hardware and software and ensuring that the surveillance system continues to function as per the agreed parameters. Functions to be performed by NEC under operations and maintenance phase include rendering following activities: * Preventive, repair maintenance and replacement of surveillance system; * Provide a centralized help desk and Incident Management Support till the end of contractual period recurring refresher trainings for the users and Change Management activities: * Monitoring of Network Connectivity (provided by service provider) as per service level and report the non-compliance: * Helpdesk management for operations and maintenance: * Submit quarterly reports; * Adhere to defined SLAs etc. 3. Details of the Questions on which Advance Ruling is requested: (i). Preface of Question No. 1 - The subject RFP bid submission last date wa....
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....equipment or structures, whether pre-fabricated or otherwise; (d). The specific inclusion of composite supply of works contract, including original works (which means erection, commissioning or installation of plant, machinery or equipment or structures) under Clause 3(vi) of Notification 11/2017-Central Tax Rate, rendered the eligibility to avail the rate of 12% in respect of works to be executed under the project. (e). The clause 3(vi) of the mentioned notification was amended by notification number 22/2021-Central Tax (Rate) dated 31 December 2021, wherein the words "Governmental Authority and Government Entity' were removed from SI. no.3(vi) of the notification. Subsequent to the notification. with effect from 1 January 2022 the CGST rate of 6% has been prescribed for services provided only to union territory or a local authority by way of construction. erection, commissioning. installation, of a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession. Relevant extract of notification is provided as under : (1) in column (3),in the heading "Description of Service", in items (iii). (vi), (....
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....placement of defective parts with spare parts to ensure smooth functioning of the Surveillance system; * SLA reporting etc. (c). Composite Supply has been defined as 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. In the present case. NEC is providing more than two supplies involving goods and services being provided under single contract, where principal supply being for setting up of surveillance system which is works contract. (d). In the present instance. the NEC would be required not only to set up the surveillance system, it would also be required to ensure functioning of such surveillance system for a specific period. In almost all the Government Contracts or other EPC contracts, the scope of supply invariably includes the operation and maintenance services. The operation and maintenance services are integral to erection. installation and commissioning of a plant and machinery since without operation and maintenance. the very pur....
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....Government authority 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; (THIS ENTRY WAS AMENDED TO REMOVE "A GOVERNMENTAL AUTHORITY OR GOVERNMENT ENTITY" WITH EFFECT FROM 01 JANUARY 2022 AND THEREAFTER THIS ENTRY WAS OMITTED WITH EFFECT FROM 18 JULY 2022) 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 (THIS CONDITION WAS OMITTED W.E.F. 01.01.2022). xii) Construction services other than (i), (ia). (ib), (ic). (id). (ie). (if), (iii). (iv), (v), (va), (vi). (vii). (viii), (ix) (x) and (xi) above (THIS ENTRY WAS AMENDED BY WAY OF DELETION OF STRIKED THROUGH PART, WITH EFFECT FROM 18 JULY 2022) 9% 6. Comments of the Jurisdictional Officer (CGST): (i). Finding & Observations: (a). Works....
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....principal supply" means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary. (iv). As per the Annexure 1: Bill of materials, the NEC corporation has submitted the item wise unit rate of each of the major nature of supplies such as: 1. Integrated command. control, communication and compute center at PHQ Delhi (C4i) -A. Hardware Component. 2. Integrated command. control, communication and Compute center at PHQ Delhi (C4i)-B. Software Component. 3. District Command, Control & communication center at 16 district Headquarters (C31). 4. Local Monitoring Center at 182 Police Stations, 5. Mobile Command Control Vehicle (MCCV) - for 02 Vehicles, 6. Data Center- A. Server B. Storage C. Networking D. Security E. NOC F. Non IT Component 7. Near Disaster Recovery Center-Hardware, 8. Field Devices, 9. Operations & Management Indicative Technical Manpower-MSI can give price of manpower in each head as per the requirement in Phase I, Phase II, Phase III. Phase IV and to meet the SLA, 10. Operation power charges, 11. Training and Change Mana....
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.... the earth" (xi). With respect to second question: Whether the operation and maintenance services post implementation would qualify as composite supply of works contract? (xii). The Taxability of operation and maintenance services post implementation will qualify as composite supply, considering the supplies are naturally bundled and supplied in conjunction with each other in the ordinary course of business and goods being a principal supply. (xiii). Further, in following similar matters Government of Maharashtra (in short "GOM") Authority for Advance Ruling has already decided and determined the tax: * In the application of Allied Digital Services Ltd In the application of Allied Digital Services Ltd., GOM has decided vide letter no.GSTARA-90/2018-19/B-159 dated 19.12.2018 that that comprehensive 'CCTV based City Surveillance System' can be termed as immovable property and execution of the contract for the same should be a composite supply of works contract as defined in Section 2(119) of the GST Act. The term "original works" as defined in Notification 12/2017-Central Tax (Rate) dated 28 June 2017 was not discussed in this case to reach at the conclusion regarding rate of ta....
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....y as composite supply of works contract? (xii). The Taxability of operation and maintenance services post implementation will qualify as composite supply, considering the supplies are naturally bundled and supplied in conjunction with each other in the ordinary course of business and goods being a principal supply. (xiii). Further, in following similar matters Government of Maharashtra (in short "GOM") Authority for Advance Ruling has already decided and determined the tax: * In the application of Allied Digital Services Ltd In the application of Allied Digital Services Ltd., GOM has decided vide letter no.GSTARA-90/2018-19/B-159 dated 19.12.2018 that that comprehensive 'CCTV based City Surveillance System' can be termed as immovable property and execution of the contract for the same should be a composite supply of works contract as defined in Section 2(119) of the GST Act. The term "original works" as defined in Notification 12/2017-Central Tax (Rate) dated 28 June 2017 was not discussed in this case to reach at the conclusion regarding rate of tax however, the said aspect was covered by GOM later vide order dated 28.03.2019 in Sterlite Technologies Ltd. * In the applicatio....
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....ply, implementation. operation, and maintenance of a surveillance system under the Delhi Police's Safe City project. CDAC, an autonomous government entity under the Ministry of Electronics and IT (MeitY), leads R&D and projects in IT and electronics to strengthen national technology. (ii). The surveillance system includes the supply, installation, and commissioning of hardware and software such as: CCTV cameras, poles with cantilevers for mounting, IP phones. servers, UPS units, ICCC platform with GIS, dashboards, alarm management, big data analytics, Automatic Vehicle Location System, video analytics for 2,500 cameras, face recognition, license plate recognition, and networking equipment. The objective of the project is to enable monitoring of public places, generate real-time alerts on potential threats to women's safety. and provide immediate technology-driven assistance. (iii). In respect of the said Project. the scope of work of the Applicant is as follows: * Establish Data Centre serving as Integrated Command, Control, Communications & Compute center. * Set up Command and Control centres at district and police station levels. * Install and commission field devices l....
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....3(vi) of notification number 11/2017-Central Tax (Rate), the rate of GST applicable on the Implementation as well as operation and maintenance works under the project would have necessarily changed and that changed rate of GST applicable on Implementation as well as operation and maintenance works is being sought to be clarified through this Advance Ruling application. (e). In this instant context. GST is levied as per charging Section 9 of the CGST / DGST Act. 2017 on supply of goods or services or both. The term "Supply" is defined under Section 7 of the CGST / DGST Act. 2017 and its ambit is further explained by Section 7(1A) of the CGST / DGST Act. 2017 read with Schedule II to the CGST / DGST Act. 2017 wherein specific activities are either classified as supply of goods or services. In the Schedule II. Entry No. 6(a) hold relevance which provides that composite supplies of works contracts shall be treated as supply of services. The term "works contract" is defined under Section 2(119) of the CGST / DGST Act. 2017 to mean a contract for building. construction. fabrication. completion, erection, installation, fitting out, improvement. modification. repair, maintenance, renovati....
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....business or profession, was subject to GST @ 12%. Thereafter, with effect from 18 July 2022, Serial no. 3(vi) was deleted, thus raising the question that what would be the rate of GST applicable on Composite supply of works contract provided to such specified bodies by way of construction, erection. commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works with effect from 01 January 2022 and subsequently from 18 July 2022. (h). Accordingly, the issues for discussion in the present case are as follows: (i). Whether operation and maintenance services post implementation would qualify as composite supply of works contract and what would be applicable rate of GST on activities undertaken by the Applicant in respect of Operation and Maintenance of the surveillance system for Delhi Police under a Contract with CDAC, in light of the amendments in Serial No. 3 (vi) of the notification 11/2017-Central Tax (Rate) dated 28 June 2017 with effect from 01 January 2022 and subsequently with effect from 18 July 2022. (ii). Whether the promisee of the Applicant i.e. Delhi Police and CDAC fall under the....
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...., on the over all, a supply to set up a comprehensive CCTV based city surveillance system. In this view of the matter. we are convinced that various supplies as contemplated by the contract constitute composite supply as defined under section 2 (30) of the CGST/DGST Act, 2017. 2. Definitions.- In this Act, unless the context otherwise requires .-- (30) "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 packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply; (k). As a corollary of above finding. the next issue to be decided by us is whether this composite supply is 'Works Contract' as defined in clause (119) of section 2 of the SGST/CGST Act. Section 2(119) reads: works contract means a contract for building. construction, fabrication, Completion, erection, installation,....
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....f annexation" over the "extent of annexation", by determining the degree or mode of annexation and object of annexation while seeing the permanency of annexation as the assaying factor. (iii). Analysing the facts of the present case along with the aforesaid judgments, it emerges that the purpose of setting up a surveillance system, is long term and the intention is not to dismantle it after use and set it up elsewhere. In other words, the object of annexation is to render permanence to the structure. The cantilever poles and all the electronic devices / hardware act in unison and the whole system is set up for a long term or indefinite usage (unless it becomes dysfunctional or obsolete). Applying ratio of Indian Oil and Duncan's case wherein great emphasis was placed on object of annexation and intention of parties, it would emerge that the surveillance system should qualify as "immovable property". (I). From the above discussion, it emerges that the setting up or implementation of the surveillance system should qualify as a "works contract" under Section 2(119) of the CGST / DGST Act. 2017. Secondly, such setting up or implementation of the surveillance system falls within the ....
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....2(69) of the GST Act, 2017 for the purposes of GST law. (o). Accordingly, such contracts were initially covered under Clause 3(vi) of Notification No. 11/2017-Central Tax (Rate) dated 28 June 2017, which prescribed a concessional GST rate of 12% (6% CGST + 6% SGST) for works contract services provided to the Central Government, State Government, Union territory, local authority, Governmental Authority, or Government Entity. However, changes were introduced through Notification No. 22/2021-Central Tax (Rate), effective 1 January 2022, which removed Governmental Authorities and Government Entities from the list of eligible recipients under Clause 3(vi). Further, Notification No. 3/2022-Central Tax (Rate) dated 13 July 2022 omitted Clause 3(vi) entirely from the rate notification with effect from 18 July 2022, thereby eliminating the concessional tax rate category for such works altogether. As a result of these legislative changes, any works contract services delivered by the Applicant to CDAC shall now fall under Clause 3(xii) of the same notification instead of clause 3(vi) under which the rate was 12% prior to aforesaid legislative changes w.e.f. 01st January. 2022. Consequently, ....
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....o a recipient which consists of two or more taxable supplies of goods or services or both. which are naturally bundled and supplied in conjunction with each other in the ordinary course of business. In such a scenario, one of the supplies must constitute the principal supply around which the other supplies are ancillary or incidental. In the case of this surveillance system project. Applicant's contractual responsibilities encompass a range of both goods (hardware components) and services (installation, maintenance, management, and integration). All these are supplied under a single, indivisible contract. The principal supply in this arrangement is the setting up of the surveillance system-a works contract service involving erection and commissioning of fixed infrastructure and equipment. The obligation to then operate and maintain the system for a fixed term is intrinsically connected and naturally bundled with the initial installation; it cannot be separated from the principal works contract for practical purposes. It is also noteworthy that within the industry, it is standard practice-particularly in government and Engineering, Procurement, and Construction (EPC) contracts-to cl....