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2020 (7) TMI 351 - AAR - GSTDetermination of liability - classification to pay GST - reimbursement received by the Applicant under the Contract from the Customer towards Lost in Hole/Damage Beyond Repair of equipment/tool (in short equipment) during execution of the services mentioned in the Contract - HELD THAT:- By virtue of powers vested under Sub-Section (3) of Section-7 of the CGST Act, 2017, the Government, on recommendations of the Council, specify by a notification, the transactions that are to be treated as ‘supply of goods and not as a supply of services’ or ‘a supply of service and not as a supply of goods’. Further, under sub-section (2) of the Section-7 ibid {notwithstanding anything contained in sub-section (1)}, the activities or transactions specified in Schedule-III shall be treated neither as supply of services nor a supply of services. It is observed that the activities of the applicant (on which they sought advance ruling) under the subject contract did not figure in the list of activities or transactions as notified in Schedule-III. Therefore, the subject activity or transaction shall constitute a supply under sub-section (1) of Section-7 of the Act ibid in as much as the said activity or transactions is for a consideration and in the course of or furtherance of business - In case of damage of the equipment or tools, such reimbursement shall be repair cost (subject to maximum of the cost of equipment/tools to be reimbursed in case of the same were lost) and whereas in case of loss of equipment or tools, the amount to be reimbursed shall be the amount limited to original cost (F.O.B nearest port) reduced by depreciation at the rate of 10% per year to be proportioned for each completed month or part thereof subject to maximum depreciation of 50%. The equipment/tools are tangible and movable. The amount of reimbursement of equipment/tools which are damaged beyond repair or loss is at an agreed depreciated value of the Original FoB Price of such equipment/tools. Going by the methodology and by nature of the equipment/tools, the activity of reimbursement towards Lost in hole/Damage Beyond repair of equipment /tools is rightly classifiable as ‘Supply of Goods’ in terms of Section-7 of the CGST Act, 2017. Depending upon the nature of actual goods involved in the subject activity, their classification is as per HSN notified for the goods and the Classification Rules made in this regard. Accordingly, the provisions relating to chargeability and levy of GST under the CGST Act and the Rules made there under as applicable to the supply of goods will apply. Thus, the reimbursement received towards LIH equipment is to be considered as a supply as per Section 7 of the CGST Act, 2017 and hence, liable to GST - The reimbursement received towards LIH equipment is classifiable as ‘Supply of Goods’ in terms of Section-7 of the CGST Act, 2017. Depending upon the nature of actual goods involved in the subject activity, their classification is as per HSN notified for the goods and the Classification Rules made in this regard. Accordingly, the provisions relating to chargeability and levy of GST under the CGST Act and the Rules made there under as applicable to the supply of goods will apply.
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