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RECENT ADVANCE RULINGS IN GST (PART-14)

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RECENT ADVANCE RULINGS IN GST (PART-14)
Dr. Sanjiv Agarwal By: Dr. Sanjiv Agarwal
March 23, 2019
All Articles by: Dr. Sanjiv Agarwal       View Profile
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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 350 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 thirty 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 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 same is yet to be notified.

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 classification of development related services

The applicant was awarded a contract by the Jaipur Development Authority for Rejuvenation of Amanishah Nallah (Dravyavati River) including area development on turnkey basis and its operation and maintenance for a period of 10 years.

The assessee made an application before the Authority for Advance Ruling seeking ruling on the following issues: (i) Whether Jaipur Development Authority was covered under the status of Government Authority/Entity, (ii) Whether nature of services provided under the contract would be covered under Sl. No. 3(vi)(a) of Notification No. 11/2017 - Central Tax (Rate), dated 28-6-2017 amended vide Notification No. 24/2017 - Central Tax (Rate), dated 21-9-2017 and further amended with Notification No. 31/2017-Central Tax (Rate), dated 13-10-2017, and (iii) What was the GST rate applicable on sub-contractor leg.

Where assessee was awarded a contract by Jaipur Development Authority for Rejuvenation of “Amanishah Nallah” including area development on turnkey basis and its operation and maintenance for a period of 10 years, it was ruled by AAR that services provided by assessee would be covered under services mentioned at Sl. No. 3(vi)(a) of Notification No. 11/2017 - Central Tax (Rate), dated 28-6-2017 amended by Notification No. 24/2017 - Central Tax (Rate), dated 21-9-2017 and further amended vide Notification No. 31/2017 - Central Tax (Rate), dated 13-10-2017. [In Re: Tata Projects Ltd. (2018) 6 TMI 463; ].

Advance Ruling on GST on vacating the premises (declared service)

The assessee applicant was a tenant in a building premises, owner of which was Future Communications Limited and it entered into an agreement for redevelopment of the said premises with one developer Consequent to the said redevelopment agreement, the applicant was required to vacate the premises to facilitate the redevelopment of the building, by the developer. In the process the applicant had agreed to do an act (vacating the premises) to facilitate the supply of service by the developer to the owner.

As per the agreement, the tenant would continue to pay to the owners the rent in respect of the said old premises till the date on which the owners and the developers handover to the tenants the possession of the said new premises. During the period of construction of the new building, the tenants would make their own arrangement for temporary alternate accommodation and the owners/the developers would pay to the tenants the rent/compensation for the temporary alternate accommodation to be arranged by the Tenants above.

In the event the Developers are unable to handover the possession of the said new premises within 24 months then in that event at the end of the period of 24 months the owners/the developers shall give the post dated cheques to the tenants towards the rent for the period from 25th month to 36th month at the rate provided. In the event the owners and/or the developers were unable to handover the possession of the said new premises to the tenants within 36 months, the owners and the developers would be liable to pay to the Tenants damages.

The Authority for Advance Ruling ruled that amount received by tenant towards alternate accommodation or delayed possession of new premises would be receipt of amounts for doing an act i.e. vacating premises for redevelopment as well as tolerating construction cum redevelopment work till possession of new redeveloped premises and further for tolerating an act of not having completed redevelopment period within time, same would be a 'supply' and therefore, GST to be levied on such amount. [In Re: Zaver Shankarlal Bhanushali  (2018) 7 TMI 227; (2018) ].

Advance Ruling on classification of goods and rate of tax

The applicant sought advance ruling on question as to the applicable HSN Code and GST Tax Rate of a product 'Geared Motor'?

The applicant submitted that they are engaged in supplying 'Geared Motor', which is an assembly product of the 'Electric Motor' and 'Gear Box'. Electric Motor is covered under HSN code 8501 attracting GST at 18 per cent, while Gear Box falls under HSN Code 8483 attracting GST at 28 per cent, however, HSN code and tax rate for product 'Geared Motor' is not provided under law.

The Authority for Advance Ruling ruled that geared motor is an assembly product of Electric Motor and Gear Box and is classified as electric motor under Heading 8501 attracting GST at 18 per cent. [In Re: Power Build (P.) Ltd.  (2018) 6 TMI 515; ].

Advance Ruling on classification of goods

The issue involved in this case pertains to classification of the product 'Steering Unit (Hydraulic Orbital Valve)', i.e., whether the said product falls under Chapter Heading 8481 or 8431 or 8708 of the Customs Tariff Act, 1975.

Tariff Heading 8431 covers 'parts suitable for use solely or principally with the machinery of headings 8425 to 8430' whereas Harvesting Machinery falls under Chapter Heading 8433. Therefore, the product 'Steering Unit (Hydraulic Orbital Valve)' cannot be termed as 'parts suitable for use solely or principally with the machinery of headings 8425 to 8430'. The product 'Steering Unit (Hydraulic Orbital Valve)' also does not merit classification under Tariff Item 8433 9000 as 'Parts' of Harvesting or threshing machinery etc. in view of Note 2(b) of section XVI.

In view of Note 2(a) of section XVI of the Customs Tariff Act, 1975 and Explanatory Notes for 'Taps, Cocks, Valves and similar appliances for Pipes, Boiler Shells, Tanks, Vats or the like, including Pressure Reducing Valves and Thermostatically Controlled Valves' under Tariff Heading 8481 of the Harmonised System of Nomenclature, the product 'Steering Unit (Hydraulic Orbital Valve)' is appropriately classifiable under Tariff Heading 8481 of the Customs Tariff Act, 1975. Further, as the expression 'parts' and 'parts and accessories' under section XVII of the Customs Tariff Act, 1975 do not apply to articles of heading 8481 in view of Note 2(e) of section XVII of the Customs Tariff Act, 1975, and the product 'Steering Unit (Hydraulic Orbital Valve)' is item of Tariff Heading No. 84.81, the said product cannot be considered to be parts of vehicle, as it is excluded from section XVII and, hence, the said product do not fall under Tariff Heading 8708 as 'Steering wheels, steering columns and steering boxes; parts thereof'.

Since the articles of Tariff Heading 84.81 are specifically excluded from section XVII vide section Note 2(e) of the Customs Tariff Act, 1975, the product 'Steering Unit (Hydraulic Orbital Valve)' cannot be considered to be part of the vehicle for the purpose of classification, on this ground also.

It was ruled that the product 'Hydraulic Orbital Valve' is classifiable under Tariff Heading 84.81 of the Customs Tariff Act, 1975 and Goods and Services Tax rate applicable to Tariff Heading 84.81 is applicable to the said product. [In Re: Dyna Automation (P.) Ltd. ; (2018) 6 TMI 426; ].

(Some more to follow …..)

 

By: Dr. Sanjiv Agarwal - March 23, 2019

 

Discussions to this article

 

I was looking for authoritative content on "GST Rulings" and this article accurately explains the concepts relating to the same. It is an understandable, informative and a very well written content piece.

By: Chetan Moga
Dated: March 25, 2019

 

 

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