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2022 (2) TMI 824 - AAR - GSTLevy of GST - Works contract or not - service of transportation of goods by road to be provided by the company under one of its contracts - HELD THAT:- The scope of work is Erection, Procurement and commissioning package, for 1x660 MW Harduaganj TPS Extn. II Thermal Power Station and all the contracts were awarded to the applicant in response to a single tender notification. Apart from this, all the contracts are linked by a 'cross fall breach clause' which means that a breach in one contract will automatically be classified as a breach of the other contract. Thus, the 'cross fall breach clause' provides the recipient M/s UPRUVNL an absolute right to either terminate all the contracts or claim damages accordingly. The 'cross fall breach clause', settles unambiguously that supply of goods, their transportation to the contractee's site, delivery and related services are not separate contracts, but only form parts of an indivisible composite works contract supply, as defined under Section 2 (119) of the CGST Act, 2017. The composite nature of the contract is clear from the facts that first Contract and second contract cannot be performed satisfactorily unless the goods have been transported and delivered to the contractee's site as per third contract. The 'cross fall breach clause', settles unambiguously that supply of goods, their transportation to the contractee's site and related services of insurance, unloading and handling at site, installation including civil work, testing etc. are not separate contracts, but only form parts of an indivisible composite supply of goods and services with single source responsibility - it is seen that the supply of the goods and the supply of services are inextricably linked with each other. The contract awarded in substance and essence is a composite contract as defined in section 2(30) of the C.G.S.T. Act, 2017 for supply of goods and services. The Contracts involve two supplies, one for the supply of goods and the other for the supply of services. The contracts fulfill the conditions of the 'composite supply' as the supply of goods and services are naturally bundled in the sense that both the goods and services may require to fulfill the intention of the buyer in completion of the contract. The supply of goods and services are provided as a package and if one or more is removed, the nature of the supply would be affected - Even if the considerations for two taxable supplies are separately quoted or there is single consideration for two supplies, both types of scenarios are covered under composite supply till the conditions as mentioned above for composite supply are fulfilled (i.e. naturally bundled supplies and one being principal supply and other ancillary supply to principal supply). The entire transaction of providing the goods and the services is naturally bundled and hence this is clearly a case of composite supply of goods and supply of services. Whether the contracts/agreement is a 'works contract as defined in clause (119) of section 2 of the CGST Act, 2017 or otherwise? - HELD THAT:- It is seen from the nature of contract which envisages installation, which involves civil works to erect the structure for execution of the project in its entirety. It is an entire system comprising of a variety of different structures which are installed after a lot of prior work which involves detailed designing, ground work. Further foundations in cement concrete, cement concrete walls as well as cement concrete structures are to be constructed during the execution of the project - The object of annexation, as said earlier, cannot be to make it movable from one place to the other. Hence considering the scope of the work, it can be concluded that completion of the installation, erection of the total project is resulting into immovable property wherein transfer of property in goods is involved. What can be seen is that when machines are embedded with no visible intention to dismantle them and they are intended to be used for a fairly long period of time, they are 'immoveable property' - the total project assigned to the applicant is nothing but composite supply of works contract as envisaged under Section 2 (119) of CGST Act, 2017 and the entire contract is a supply of services as per entry 6(a) of schedule II of the GST Act and liable to GST @ 18% as per entry at Sr. no. 3(ii) of the Notification No. 11/2017 of Central Tax (Rate) dt. 28/06/2017 and corresponding notification under the UPGST Act.
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