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2021 (12) TMI 886 - AAR - GSTClassification of supply - composite supply or not - Naturally bundled goods or not - combined service of setting up of Wet Limestone FGD plant and operation & maintenance - applicability of entry no.3(iv)(e) of the Notification No.11/ 2017-Central Tax (Rate) dated 28.06.2017 - applicable GST rate and SAC/ HSN - HELD THAT:- “Composite Supply” is defined under section 2(30) of the CGST Act 2017 to mean “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.” - The concept of ‘naturally bundled’ supplies is not defined under CGST Act 2017. However Education Guide issued by CBEC (now CBIC) in the year 2012 refers ‘Bundled service’ to mean a bundle of provision of various services wherein an element of provision of one service is combined with an element or elements of provision of any other service or services. Though this reference is given with respect to bundled service it can be extended to bundled supplies in the GST regime. The applicant is involved in supply two services i.e. Setting up of FGD plat and O&M of the said plant, one at a time - the service of Setting up of FGD plant, which is in the nature of turnkey project / EPC contract and examine whether setting up of the said plant qualifies to be a composite supply of works contract or not. In the instant case, the setting up of FGD plant includes civil works (tanks & silo works, Mill Building, MCC building etc.), Equipment foundation works, duct works, installation works (mechanical / electrical) etc., Thus the applicant has undertaken erection, installation & commissioning of FGD plant, which is permanently fastened to earth and hence the said plant becomes immovable property. Construction, supply of relevant goods, assembly, commissioning of such immovable structure qualifies as a ‘works contract’ service - the tender Notification & the Job order reveal that the FGD plant is primarily meant for the control of emission of Sulphur Dioxide, Nitrogen Oxide and other items as per the notification dated issued under the Environment Protection Act, 1986. Thus the said plant is meant for control of emission of hazardous gases. The service of setting up of FGD plant gets covered under the aforesaid entry 3(iv)(e), subject to the condition that the plant has to be a pollution control or effluent treatment plant and should not be located as a part of a factory. In the instant case, the FGD plant is integrated to the thermal power plant and hence we proceed to examine whether the thermal power plant amounts to a factory or not - the FGD plant is meant for the purpose of reducing emission of Sulphur Dioxide gas present in the flue gas coming out at the time of generation of thermal power, which is hazardous to the environment. Thus, the said plant is a type of pollution control device, which is useful for the control of air pollution by reducing emission of Sulphur Dioxide gas generated in the thermal power station. Both the conditions i.e. the FGD plant is a pollution control plant and is not located as part of a factory, are fulfilled and hence the applicant’s service i.e. setting up of FGD plant, which is a composite supply of works contract service, is squarely covered under tariff heading 995429, is entitled for the benefit of the entry No.3(iv)(e) of the Notification No.11/2017-Central Tax (Rate) dated 28.06.2017, thereby attracting GST at the rate of 12%. Classification of the O&M services of the FGD plant - Applicable rate of GST - HELD THAT:- The applicant, during the O&M contract period of 3 years, is responsible for achieving emission norms as notified by the Ministry of Forest and Climate Change with the optimum utilization of energy and consumption of limestone. Further, the applicant is also responsible for appointing experienced service engineer, supervisor etc. for proper operation and maintenance of the FGD plant during the O&M period. The supply of O&M of the FGD plant is the service covered under “Business Support Service”, falling under SAC 998599, as “Other Support Services not elsewhere classified”. Entry No.23 of the Notification 11/2017-Central Tax (Rate) dated 28.06.2017 covers support services falling under SAC 9985 and the impugned service of O&M of the FGD plant is covered under entry number 23(iii) attracting GST @ 18%.
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