2019 (10) TMI 481 - AAR - GST

Supply of Works Contract or not - Composite Contract - contract entered into with DMRC for supply, erection, installation, commissioning and testing of UPS system - rate of tax - Sr. no. 3(v) of N/N. 11/2017-C. T. (Rate), as amended w.e.f. 25.1.2018? - HELD THAT:- From a perusal of the Agreement submitted by the applicant, it is found that even though the contract is for Supply, installation, testing, and commissioning, etc., of Uninterrupted Power Supply System for Signalling, Telecommunication and Automatic Fare Collection System for the Mass Rapid Transport System of DMRC there is a provision for separate consideration for supply of goods and services. Even though the applicant has bifurcated the work into supply of goods from their Maharashtra GST registered premises and supply of services from their New Delhi GST registered office and accordingly raising separate invoices on DMRC for supply of goods and supply of services, we find that the contract has been entered into, by the applicant’s Maharashtra office and not by their New Delhi GST registered office - Thus we are taking up the contract as one contract for which agreement has been entered into, by DMRC and the applicant situated in Maharashtra.

Works Contract or Composite Supply? - HELD THAT:- The applicant first despatches the goods to DMRC under an Invoice and E-Way Bill. Thus the title in property of the said goods are transferred as soon as the delivery is completed. It is only thereafter that installation, etc takes place. We agree with the applicant’s contention that the contract for supply of UPS system to DMRC does not qualify as a ‘works contract’ under Section 2(119) of the CGST Act since the installed UPS system cannot be said to result in the emergence of an immovable property - Hence Works contract will be treated as service and tax would be charged accordingly.

In the subject case UPS is not as immovable property as it can be dismantled and moved to a different location without any damage - it is found from the submissions and agreement that the contract is considering a clear demarcation of goods & services to be provided by the applicant. Now we have to decide whether the supplies are naturally bundled & in conjunction with each other as required by the definition of composite supply.

In the contract submitted by the applicant the major part of the contract is supply of goods. i.e. UPS Units, etc. These goods are delivered to the client by the applicant and such goods that are supplied are used by the applicant to provide services of installation, testing and commissioning of the substations. Without these goods the services cannot be supplied by the applicant and therefore, the goods and services are supplied as a combination and in conjunction and in the course of their business where the principal supply is supply of goods. Thus there is a composite supply in the subject case.

The principal supply in this case is a supply of goods and therefore the GST will have to be paid on the goods at the appropriate rate after classification under the appropriate heading - The principal goods in the subject case is UPS units which are most important for the applicant to render supply as per the contract.

Thus, the contract entered into with DMRC for supply, erection, installation, commissioning and testing of UPS system do not qualify as a supply of works contract under Section 2(119) of the CGST Act.