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2019 (11) TMI 1365 - AAR - GSTClassification of supply - supply of Engineering, Procurement & Construction (EPC) contract for establishment of Integrated Cryogenic Engine & Stage Test facility (ICET) - composite supply or not - natural bundling of services - Establishment of Fluids Servicing System (FSS) - principal supply or not - taxable at 5% GST vide notification No. 45/2017 -Central Tax (Rate) dt 14th November, 2017 or not - If Principal Supply taxable at 5%, whether the entire transaction in the contract is taxed as per the rate applicable to Principal Supply? HELD THAT:- The applicant is awarded contract by IPRC to Establish Integrated Cryogenic Engine & Stage Test Facility at Mahendragiri in the capacity of Prime Contractor - it is seen that the applicant supplies Goods and Services as required in the contract. It is to determine if the supply of goods and services by the applicant under contract to IPRC can be considered as a composite supply. In the case at hand, the applicant supplies civil electrical and Air conditioning system, structural and Mechanical system, Facility Fluid System, safety and Fire protection system, Instrumentation, control and data acquisition system - the whole contract for 'Establishment of an Integrated Cryogenic Engine & Stage Test Facility' at ISRO Propulsion Complex (IPRC), Mahendragiri is a composite contract as various supplies of goods and services are naturally bundled together. In the case at hand, the applicant has a contractual obligation to supply the materials and also to erect the civil electrical and Air conditioning system, structural and Mechanical system, Facility Fluid System, safety and Fire protection system, Instrumentation, control and data acquisition system. Such erection and installation is to be done to the Integrated Cryogenic Engine & Stage Test Facility' by means of civil works. It involves the transfer of ownership of these equipment, instruments, consumables, civil and electrical goods involved in the erection, construction and installation of these systems. The Integrated Cryogenic Engine & Stage Test Facility itself is an immovable structure erected at the site in Mahendragiri. Hon'ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD VERSUS SOLID & CORRECT ENGINEERING WORKS & ORS. [2010 (4) TMI 15 - SUPREME COURT] has held that the machine is fixed by nuts and bolts to a foundation not because the intention was to permanently attach it to the earth but because a foundation was necessary to provide a wobble free operation to the machine. An attachment of this kind without the necessary intent of making the same permanent cannot, in our opinions constitute permanent fixing, embedding or attachment in the sense that would make the machine a part and parcel of the earth permanently. Applying the above to the case at hand, the erection of the Systems at site makes the system a permanent fixture, i.e. immovable property. Thus it is clear that in the case at hand, the applicant supplies materials and in conjunction provides the service of erection of the Systems into at the Integrated Cryogenic Engine & Stage Test Facility making all the systems together as an immovable property - Therefore, the whole contract for 'Establishment of an Integrated Cryogenic Engine & Stage Test Facility' at ISRO Propulsion Complex (IPRC), Mahendragiri at ISRO Propulsion Complex (IPRC), Mahendragiri is also a 'Works Contract'. The present supply is a composite supply to be treated as a supply of services. As it is a supply of service, Notification No.45/2017-Central Tax (ate) dated 14.11.2017 and corresponding SGST notification G.O. (MS) No. 161, dated 14.11.2017 which provides for concessional rate of tax for a supply of goods is not applicable. The applicable rate of tax for this supply which is a supply of service will be the rate of tax of applicable for this supply of works contract.
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