RECENT ADVANCE RULINGS IN GST (PART-12)

[Dr. Sanjiv Agarwal]

Advance rulings are important in any tax law as it provides a forum for clarification and possible interpretation of statutory provisions. Moreover, it conveys the legislative intention from the revenue’s view point. Provisions of advance ruling are contained in section 95 to 106 of CGST Act, 2017 and State / UT GST enactment. Rules 103 to 107 of also provide for forms, manner, certification etc.

The Authority for Advance Rulings (AAR) have been set up in all the states and we have now over 300 advance rulings on different issues already pronounced by various State Authorities. The appellate mechanism for filing appeals against AAR rulings is also in place and we have about twenty five such appellate orders confirming or modifying the AAR orders. One major issue presently being faced is about multiple authorities (equal to number of States), each pronouncing a ruling of its own even if the matter is covered by some other State AAR’s rulings.  Even the orders from Appellate Authority for Advance Ruling have also started pouring in and we have over two dozen Appellate Orders from AAAR. There are situations where we may have different rulings on same question(s) by different AARs. GST Council / Cabinet has now approved (on 23.01.2019)  to have a Centralized Appellate Authority for Advance Ruling under GST that would decide on cases where there are divergent orders at the State level.

The summary of few more recent advance rulings pronounced by State Advance Ruling Authorities are discussed hereunder but these needs to be read in the background of the question involved:

Advance ruling on concessional rate of tax

In the instant case the assessee is engaged in supply of goods like scientific and technical instruments, it has made application before the Authority for Advance Ruling on the question that whether the supplies made to Sri Hari Kota High Altitude Range (SHAR),/Satish Dhawan Space Centre, located at Sri Hari Kota, Andhra Pradesh, were eligible for concessional rate of tax as per the Notification 45/2017-Central Tax (Rate), dated 14th November, 2017, and 47/2017-Integrated Tax (Rate), dated 14th November, 2017.

The subject Notification gives concessional rate of duty to specific goods, when supplied to Public funded research institution other than a hospital or a University or an Indian Institute of Technology or Indian Institute of Science, Bangalore or a National Regional Engineering College, subject to specified conditions.

The Authority for Advance Ruling ruled that SDSC (SHAR) is covered under the institution mentioned in the Notification, however the goods intended, to be supplied by the assessee does not fall under the said Notification, therefore, concessional rate shall not be applicable for assessee. [In Re: C.R. Enterprises.  (2018) 6 TMI 464; ].

Advance ruling on taxability of cold storage of agricultural produce

The assessee made application before the Authority of Advance Ruling to seek advance ruling on whether all cereals, pulses, spices, copra, jaggery (gur), groundnuts (with or without shell), groundnut seeds, turmeric dried and ginger dried (soonth), cashew, almond, kismis, jardalu, anjeer (fig), date, ambli foal are covered under the definition of 'Agriculture Produce' as defined under Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 and if yes, then whether the taxability of said goods if they are received for storage either in bulk packing or small or retail packing with or without name or brand name which is not registered under the Trade Mark Act, 1999 and where no further processing is done or such processing is done which does not alter its essential characteristics but makes its marketable for primary market.

The Authority for Advance Ruling ruled that pulses (commonly known as 'dal') (de-husked or split), jaggery, processed dry fruits such as processed cashew nuts, raisin (kismis), apricot (jardalu), fig (anjeer), date, tamarind (ambali foal), shelled groundnuts/groundnut seeds, and copra are not agriculture produce as defined under Notification No. 11/2017-Central Tax (Rate). 'Cereal' on which any processing is done as is not usually done by a cultivator or producer will fall outside the definition of agriculture produce.

Processed spices including processed turmeric and processed ginger (soonth),are not agriculture produce as defined under Notification No. 11/2017-Central Tax (Rate). However, groundnuts with shell, turmeric and ginger on which no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics, but make it marketable for primary market would fall within the definition of agriculture produce.

Whole pulse grains such as whole gram, rajma etc. and 'cereal ' on which no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market, fall under the definition of agriculture produce as defined under Notification No. 11/2017-Central Tax (Rate). [In Re: Guru Cold Storage (P.) Ltd.  (2018) 6 TMI 622; ].

Advance ruling on taxability of charges for maintenance of forest road

The assessee was a Regional Forest Officer (Forest Division Dehradun) and sought an advance ruling on the question whether GST is leviable on the “Marg Sudharan Shulk” and “Abhivahan Shulk” charged by Forest Division Dehradun from the non-government, private and commercial vehicles engaged in mining work in lieu of use of forest road. The said mining is being undertaken at “Saung” and “Jakhan Rivers” falling under the jurisdiction of Forest Division Dehradun under the supervision of “Van Vikas Nigam” after getting necessary approval from Environment Ministry, Government of India.

“Marg sudharan shulk” is charged and collected by applicant from non-government, private and commercial vehicles engaged in mining work in lieu of use of forest road, for maintenance of forest road.  ““Abhivahan Shulk”” is charged and collected by assessee in respect of forest produce carried out by a person i.e. a person who desires to obtain forest produce is required to be registered with the forest department after paying applicable fee, the said “Abhivahan Shulk” is charged on the basis of quantum and quality of forest produce and the said forest produce must be accompanied with a transit pass issued by forest authorities in this regard.

Thus, the Authority for Advance Ruling ruled that “marg sudharan shulk” is nothing but toll charges collected by the assessee from the users for using forest road and the said toll charges are being used for the maintenance of forest road. Therefore we conclude that no GST is leviable as on date on the said “marg sudharan shulk” charged and collected by the applicant. Further, “Abhivahan Shulk” cannot be termed as toll tax and rather is a form of consideration received by the applicant in lieu of services provided to the person for carrying forest produce and since the services provided by the assessee are not mentioned in the list of exempted services, the applicant is liable to pay GST @ 18% on the said “Abhivahan Shulk” under Service Code 9997 and to be treated as “other services”.

*The AAAR has confirmed the ruling vide Order dated 20.03.2018 and reported in (2018) 9 TMI 1647 (AAAR- Uttarakhand) and (2018)  [In Re: Divisional Forest Officer, Dehradun (2018) 6 TMI 430;  ].

Advance ruling on taxability of supply of solar power generating system

The assessee was an unregistered taxpayer engaged in erection and supply of solar power generating system under an agreement with his customers. He made application before the Authority of Advance Ruling seeking clarification on some issues which resolved by Authority as follows:

S.No	Issues	Ruling
	Whether supply of solar power plant under ‘Turnkey EPC Contract’ and Other EPC Contract’ is supply of ‘solar power generating system’ under Entry 234 of Schedule I of the Notification No. 1/2017-Integrated Tax (Rate), Entry 234 of Schedule I of the Notification No. 1/2017-Central Tax (Rate), both dated 28 June, 2017 and Entry 234 of Schedule I of the Notification No. 1/2017-State Tax (Rate), dated 29 June, 2017?	Scope of work in respect of “Turnkey EPC Contract” and ‘‘Other EPC Contract” includes civil works, procurement of goods and erection and commissioning. Accordingly, “Turnkey EPC Contracts” and ‘‘Other EPC Contracts” are not getting covered under supply of ‘solar power generating system’.
	Whether supply of solar power plant under ‘Supply Contract’ is supply of ‘solar power generating system’ under Entry 234 of Schedule I of the Notification No. 1/2017-Integrated Tax (Rate), Entry 234 of Schedule I of the Notification No. 1/2017-Central Tax (Rate), both dated 28 June, 2017 and Entry 234 of Schedule I of the Notification No. 1/2017-State Tax (Rate), dated 29 June, 2017 where the assembly, erection, and commissioning of the solar power plant is undertaken by the Applicant under a separate contract?	It depends upon the terms and conditions of the agreements as to whether the split of contract is an artificial and colourable device to avoid the legitimate tax or the requirement of the contractee demands separation of contract for better execution. In case the contract is an artificial split, the Clarification for Issue 2 (two) is applicable. In other case the rate of tax applicable for the supply of goods subject to condition of eligibility of being “device and parts” of the solar power generating system attracts 5% rate of tax as per Entry 234 of Schedule I of Notification No 1/2017-Central Tax (Rate), dated 28th June, 2017. And the supply of service attracts at the rate specified thereon in Notification No. 11/2017-Central Tax (Rate).
	Whether supply of solar power plant under ‘Supply Contract’ is supply of ‘solar power generating system’ under Entry 234 of Schedule I of the Notification No. 1/2017-Integrated Tax (Rate), Entry 234 of Schedule I of the Notification No. 1/2017-Central Tax (Rate), both dated 28 June, 2017 and Entry 234 of Schedule I of the Notification No. 1/2017-State Tax (Rate), dated 29 June, 2017 where the assembly, erection, and commissioning of the solar power plant is undertaken by a third party contractor?	In this scenario, the goods are supplied by one contractor, and the services were supplied by the other contractor. Therefore the rate of tax applicable for supply of goods as long as it satisfies the condition of being “device and parts” of the solar power generating system attracts 5% rate of tax as per Entry 234 of Schedule I of Notification No. 1/2017-Central Tax (Rate), dated 28th June, 2017.
	Whether supply of solar power plant under ‘Balance of Plant Supply Contract’ is supply of ‘solar power generating system’ under Entry 234 of Schedule I of the Notification No. 1/2017-Integrated Tax (Rate), Entry 234 of Schedule I of the Notification No. 1/2017-Central Tax (Rate), both dated 28 June, 2017 and Entry 234 of Schedule I of the Notification No. 1/2017-State Tax (Rate), dated 29 June, 2017?	The nature of transaction falls under composite transaction as both the goods and services are naturally bundled. Even though the primary commodity has been supplied by the customer, the ancillary goods for the purpose of service are to be supplied by the applicant only. The principle supply in this context is supply of service and the ancillary goods supplied are in conjuction with the services provided. Hence the rate of tax applicable in such transaction is liable at the rate as per the Entry 25 of 25 (Heading 9987) of Notification No. 11/2017-Central Tax (Rate), dated : 28th June, 2017, and attracts 18% rate of tax.
	Whether contract for assembly, erection, and commissioning of the plant undertaken by the Applicant under a separate contract would be a service contract liable to be taxed under Service Heading 9954?	The referred contract doesn’t fall under the ambit of SAC 9954, but falls under the Entry 25 of 25 (Heading 9987) of Notification No. 11/2017-Central Tax (Rate), dated : 28th June, 2017, and attracts 18% rate of tax.
	Whether the time of supply of power plant shall be determined under Section 31(4) of the CGST Act/SGST Act read with Section 12(2) thereof?	Yes

[In Re: Dinesh Kumar Agarwal  (2018) 8 TMI 1546 ; ].

 (Some more to follow …..)