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2020 (3) TMI 1041 - AAR - GSTClassification of supply - pure supply of goods or pure supply of services? - street lighting activity under the Energy Performance Contract dated 05.12.2016 - works contract - Composite Supply of goods and services or not - rate of tax - benefit of exemption under entry 3 or 3A of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 - time of supply. Whether the activity of the applicant herein amounts to supply of goods or supply of services and then the time of supply of the said supply? HELD THAT:- The terms of the contract that the contract involve more than two taxable supplies such as supply of LED lights, fixtures & other equipment, their installation, commissioning, operation & maintenance etc., We also find that the impugned supplies of goods and services are in conjunction with each other in the ordinary course of business and hence the impugned transaction satisfies the ingredient of composite supply, as defined under Section 2(30) of the CGST Act 2017. In the instant case, the tender is for “Implementation of ESCO project” which includes Supply, Installation, Operation and Maintenance of LED Street Lights”. Hence the predominant and principal factor is to supply and install LED street lights, on the existing street light poles and then to perform the activity of day to day management of the said LED street lights by operating & maintaining such equipment to achieve energy savings. Thus the day to day operation & maintenance of the LED Street lights can only take effect after the supply and installation of the said LED street lights. Without installation, there can be no day to day management in the form of operation & maintenance of LED street lights. In view of the above, the principal supply in the impugned transaction is that of supply of goods i.e. LED street lights. The impugned transaction consists of supply of goods and services, made in conjunction with each other in the ordinary course of business; supply of goods / services are naturally bundled; the contract becomes a composite supply where the principal supply is that of goods and the supply of service is incidental / ancillary to such supply of goods. It is an undisputed fact that the Notification No. 12/2017-CentraI Tax (Rate) dated 28.06.2017 is related to the exemptions of the intra-state supply of services. The Notification is applicable to the composite supplies of goods & services, where the principal supply is that of services. In the instant case, it is already concluded, in the preceding paras, that the impugned supply is a composite supply, principal supply being that of the goods. The consideration, in the instant case, is being received by the Applicant on monthly basis, in terms of energy savings fee, as agreed upon by both the parties. The said consideration is for the composite contract comprising supply of LED street lights, installation & commissioning of the same and also maintenance of the said installed LED Street Lights, the principal supply being the supply of LED street lights i.e. goods. The impugned contract, in the instant case, is a composite supply where the principal supply is supply of goods. It is an accepted fact that the consideration is received on monthly basis; invoice is raised on energy savings; value of such invoice is equal to 90% of the energy savings. It is pertinent to mention here that the energy savings are directly related to the functioning and quality of the LED Street lights etc., i.e. the goods supplied by the applicant - Therefore, the applicant receives the consideration, through the contract period i.e. 7 years, on a monthly basis, on the energy’ savings. Applicable rate of tax - HELD THAT:- The rate of tax applicable on this transaction is 12% (CGST-6% & SGST-6%), in terms of Sl. No. 226 of Schedule II to the Notification No. 1/2017-CentraI Tax (Rate) dated 28.06.2017, as amended. Further, the applicant is not entitled to the benefit of exemption under entry 3 or 3A of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017, as amended, as the impugned supply is not that of pure services. The instant transaction amounts to a composite supply, with supply of goods being principal supply and hence the impugned question is redundant - The time of supply is the date of invoice and the consideration is equal to the value of the invoice, the GST rate being 12%.
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