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2022 (1) TMI 304 - AAR - GSTClassification of supply - Works contract - divisible supply or not - agreement entered between the applicant and KMC, Establishment of District Meter Areas, Construction Works and Operation & Maintenance - agreement entered between the applicant and KMC be treated as single contract for composite supply of DB and O&M or not - taxability under GST regime - input tax credit - HELD THAT:- It appears that the scope of work includes inter alia supply, laying, installation and commissioning of distribution network with HDPE pipe (noted in para 2.6) along with operation and maintenance. The contract has been divided into two phases i.e., (i) Design & Construction Phase and (ii) O&M Phase. However, completion of first phase of the contract i.e., Design & Construction Phase shall entitle the contractor to apply for certificate of sectional completion only as referred to in clause 32.1 of the GCC - the instant contract is to be treated as a single contract for composite supply of DB and O&M which qualifies as ‘works contract’ as defined in clause (119) of section 2 of the GST Act. Further, as per Para 6 (a) of Schedule II to the GST Act, works contracts as defined in clause (119) of section 2 shall be treated as a supply of services. So, the instant supply shall be treated as supply of services. Taxability of supply - HELD THAT:- The applicant has made the instant composite supply of works contract to Kolkata Municipal Corporation which is a local authority in terms of definition under clause (69) of section 2 of the GST Act. Further, the works contract, as it appears from the scope of work, involves installation and maintenance of pipeline for water supply. We therefore find that the instant composite supply of works contract gets covered under entry serial number 3(iii) of the Notification No. 20/2017- Central Tax (Rate) dated 22.08.2017 and therefore shall attract tax @ 12%. The instant contract shall be treated as an indivisible single contract thereby the O&M contract cannot be held to be independent of DB supply. Moreover, though the term ‘pure services’ has not been defined under the Act, a bare reading of the description of services as specified in the aforesaid entry denotes that supply of services which does not involve any supply of goods can be regarded as pure services - the O&M contract, if it were treated to be an independent supply, wouldn’t qualify as pure services rather the same shall be held as works contract as defined in clause (119) of section 2 of the GST Act.
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