TMI Blog2018 (11) TMI 1349X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in a Work Contract (Composite supply) to a Governmental Authority - The rate of tax in given service shall be determined in accordance with the Notification No 11/2017-CT (Rate) dated 28.06.2017, as amended from time to time. In the given contract if the value of supplied goods is below 25% of the total value of the composite supply, then the rate of tax would be Nil as per entry number 3A of Notification No 12/2017-CT (Rate) dated 28.06.2018. Further, if in the duration of contract the applicant crosses the benchmark of 25% value of goods then the rate of tax will shift from Nil to 12% as per Notification No 11/2017-CT (Rate) dated 28.06.2017 as amended from time to time. Ruling:- In the given contract, the activity of O & M of Fluoride Control Project on ESCO Model and O &M work by the applicant is being undertaken for a Government Department. If the value of supplied goods under this contract is below 25% of the total value of the composite supply, then the rate of tax would be Nil. Further, if in the duration of contract the applicant crosses the benchmark of 25% value of goods then the rate of tax will shift from Nil to 12%. - AAR No. RAJ/AAR/2018-19/22 - - - Date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of main activities under ESCO model and make the model successful. c. Thus, based on above facts and concept such contract shall be a single supply and cannot be treated as distinct supplies. Since all the conditions of composite supply are satisfied, it is a composite supply. d. Further, since composite supply of works contract has been specifically classified as supply of service under Schedule Il, it should be first analysed whether the contract can be classified as a works contract or not. e. The scope of work involves Pump House/ Replacement/ refurbishment/ repair/ rehabilitation of existing pump sets, switchgears, mechanical and electrical equipment, capacitor banks etc. Repair/ remodel of pump foundation according to new pump sets or as per requirement. Extension of pump house if required to remodel the configuration of pump sets or as per site condition. The supply and installation of new pumping machinery and other equipments shall be done as per best engineering practice. f. The operation and maintenance work shall be carried out of all the electrical and mechanical instruments, pumping machinery etc. g. The pumping station and its surround ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proposed activity, it is implied that the given work is a contract for improvement of the pumping system under the Fluoride control project, wherein transfer of property in goods in the form of new pumping machinery and mechanical/electrical equipment shall be involved in the execution of such contract. k. That 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. l. Now whether a supply is a works contract or not is dependent on whether the plant or device or property is a movable or immovable property. To decide whether a property is movable or immovable, the given terms have not been defined under the Act and hence the reliance needs to be placed on other laws and judicial precedents. m. Under the General Clauses Act 1897 the term immovable property has been defined under Section 3(26) as immovable property shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk campus. Remodelling of pump foundation and extension of pump house, replacement of fittings/fixtures and painting of all permanent structures like pumping station building etc. are involved in the contract. 2. 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 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 for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration. 3. The terms and scope of the contract combines ESCO Model and O M work. That the activities under ESCO model 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering etc. to the switchyard stuff thrice during the entire contract period. Storage Tanks (CWR) He shall also be responsible for painting, color/ white washing, distempering etc. to the CWR, compound wall, store etc thrice during the entire contract period. Headwork Campus Contractor shall maintain whole campus neat and clean by removing unwanted trees, bushes, vegetation etc, pruning of trees watering to sapling and maintenance of lawn/ garden, plantation of new trees and saplings, illumination in the whole campus, maintain all internal and service roads, proper drainage system etc. SCADA The scope of work includes design the system based on re-engineered processes and best fit automation interventions to get transparent real time data and remote monitoring. O M work The scope of work of O M contract includes operation and maintenance of rising mains of RWSS/Clusters, OHSR and water treatment plant at Baghera. 5. It is understood based on the scope of work detailed above that ESCO model requires improvement of the whole water supply system involving pump houses, pumping stations, transmission lines, switchyards, storage tanks and headwor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and services together is compulsory. Thus, based on above facts and concept we find that the contract shall be a single supply and cannot be treated as distinct supplies. Since all the conditions of composite supply are satisfied, it is a composite supply. 13.Now, under Notification No 12/2017-CT (Rate) dated 28.06.2018, under entry number 3A, an exemption from GST has been provided for composite supplies which is reproduced as under:- 3A Chapter 99 Composite supply of goods and services in which the value of supply of goods constitutes not more than 25 per cent, of the value of the said composite supply provided to the Central Government, State Government or Union 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 243 G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. Nil Nil Thus according to said entry in the notification, in case of composite supply of goods or services if the value of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Heading 9954 (Construction services) CGST Rate % SGST Rate % IGST Rate % Remarks (iii) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied to the Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of, - (a) a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958); (b) canal, dam or other irrigation works; (c) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal. 6 6 12 Provided that where the services are supplied to a Government Entity, they should have been procured by the said ..... 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