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2021 (1) TMI 1100 - AAR - GSTClassification of supply - Works Contract Services or not - activities of supply installation, operation and maintenance of Greenfield Public Street Lighting System (GPSLS) carried out by the Applicant - levy of GST under Entry 3(vi) of Notification No. 11/2017-CT(Rate) dated 28 June 2017 (as amended) - inclusion of capital subsidy received/receivable by the applicant in the Transaction Value for the purpose of calculation of GST payable in terms of Section 15 of the CGST Act, 2017 - HELD THAT:- In the agreement submitted by the applicant the major part of the contract is supply of goods. The price of these goods are supplied to the client by the applicant constitutes 98.58% of total contract price. Further we find that the goods that are supplied are used by the applicant to provide services like installation, commissioning and maintenance etc. Without these goods the services cannot be supplied by the applicant and therefore we find that the goods and services are supplied as a combination and in conjunction and in the course of their business where the principal supply is supply of goods. Therefore, the instant supply squarely falls under the definition of “composite supply”. Thus we find that there is a composite supply in the subject case since in the subject case there is no building, construction, fabrication, completion, erection etc of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of the contract - Besides, as per Para 1(c) of Schedule II of the CGST/OGST Act, any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods and not a service. Whether the supply of the applicant falls under the supply of ‘works contract service’? - HELD THAT:- The salient features of the agreement indicate that the obligation on the applicant is in relation to the effective installation and functioning of the goods supplied by them and thereafter, they would undertake the activities of ‘operation and maintenance’ of the same. The contract governing their supplies does not relate to building, construction, and fabrication etc. of any immovable properties, as envisaged in the definition of ‘works contract’. Their supplies are in the nature of movable property i.e. supply of goods which involves ancillary services such as installation, commissioning etc. All these services which are supplied to the clients are nothing but ancillary activities with the main activities of supply of goods. The primary activity of the applicant is therefore, ‘supply of goods’ and not ‘supply of services’. Further, the said activity performed by the applicant 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’. Whether GST is liable to be paid under Entry 3(vi) of Notification No. 11/2017-CT (Rate) dated 28 June 2017 (as amended) on the supply and installation activities along with operation and maintenance activities to be undertaken by the Applicant? - HELD THAT:- The provisions of Notification No. 11/2017-CT (Rate) dated 28 June 2017 (as amended) are not applicable to the noticee’s case. The principal supply as mentioned above in this case is a ‘supply of goods’ and therefore the GST will have to be paid on the goods at the appropriate rate after classification under the appropriate heading. Whether in facts and circumstances of the case, the capital subsidy received/ receivable by the applicant for the subject transaction be liable to be included in the Transaction Value for the purpose of calculation of GST payable in terms of Section 15 of the CGST Act, 2017? - HELD THAT:- In view of Section 15(2)(e) of the CGST Act, the ‘value of supply’ shall include subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. On perusal of the agreement/contract, we see that the capital subsidy received/ receivable by the applicant in the instant case is the actual cost incurred by the project SPV (the applicant in the instant case) in the project as approved by the Authority & ULBs. It is not a subsidy which generally means grant/grant-in-aid or a benefit given to an individual, business or institution, usually by the government. It is also not a subsidy which typically given to remove some type of burden and to promote a social good or an economic policy for overall interest of the public. The so called ‘capital subsidy’ cannot be a ‘subsidy’ by any stretch of the imagination, rather the same is a consideration as defined in Section 2(31) of the CGST Act in relation to the supply of goods and therefore, the said ‘capital subsidy’ shall certainly be liable to be included in the Transaction Value for the purpose of calculation of GST.
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