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2019 (8) TMI 412 - AAR - GSTClassification of goods - Rate of GST - submersible pump sets and accessories - Works contract or not - classifiable under SAC 9954 or otherwise? - Composite supply/principal supply - the supply of submersible pump sets and accessories done with installation, electrification and energisation under Ganga Kalyana scheme to Social Welfare departments of Government of Karnataka meant for various beneficiaries farmers) as notified by the departments and they also provide guarantee and maintenance of installed submersible pump sets till 2 years which is used for irrigational purposes. HELD THAT:- In the instant case, the Applicant's supply involves goods i.e. submersible pump sets and the installation etc, of the same as service. Therefore, the Applicant supplies goods as well as services which are taxable supplies. The contractual agreement between the applicant and the said Corporation requires the applicant to supply the pumps and also install and energise the same. The applicant is, therefore, engaged in two taxable supplies, that of goods and also the service of installation. The service of installation is possible only when the goods (submersible pump sets) are supplied and hence the pre-dominant supply is that of “Submersible Pump Sets” and hence the principal supply in this case is supply of goods i.e. Submersible Pump Sets - Therefore the instant supply squarely falls under the definition of “Composite Supply”. Works Contract or not - HELD THAT:- The recipient (Corporation) prepares the bore wells on their own account. The applicant is not concerned with the same. Bore well is a hole dug in the ground, which enables the underground water to be brought to the surface by means of a pump, The applicant has obligation to supply, install, electrify & energise the submersible pump sets and thereby makes the pump sets functional. The obligation on the applicant is in relation to the effective installation and functioning of the goods supplied by them. The contract governing their supplies does not relate to building, construction, fabrication etc of any immovable property, as envisaged in the definition of works contract. Their supplies (the submersible pumps) are in the nature of movable property. Hence the said activity is not related to the immovable property at any point of the time and hence the said activity does not qualify to be a “Works Contract”. Composite supply - HELD THAT:- In the instant case though the supply is a composite one, it is not a works contract as the said supply is not related to the immovable property. This shows that the first requirement of the Notification is not satisfied. The supplies undertaken by the applicant do not qualify to be considered as works contract. As a result the provisions of the Notification No.11/2017 -Central Tax (Rate) dated 28-06-2017, as amended, are not applicable. Since the first condition/ requirement is not fulfilled compliance with the second condition/ requirement becomes infructuous. The supplies made by the applicant qualify to be treated as a composite supply. The tax liability on a composite supply is governed by Section 8 of the CGST Act 2017. Accordingly the composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply and the applicable GST rate on the composite supply would be the rate of GST applicable to the principal supply. The Applicant's supply does not qualify as “Works Contract”. It is a composite supply wherein the principal supply is that of the supply of goods i.e submersible pumps. The applicable GST rate to the applicant's supply would be the rate applicable on the Principal supply i.e. submersible pump sets.
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