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2023 (2) TMI 758 - APPELLATE AUTHORITY FOR ADVANCE RULING, MAHARASHTRAWorks Contract or not - supplies of goods or services for 'selling up of network' - composite supply/principal supply - If supplies contemplated as per the contract with BSNL are not treated as works contract, can these continue to qualify as composite supply? - what is the principle supply? - rate of tax applicable to the supplies made under the contract - applicability of Entry No. 3(vi) (a) of Notification No 11/2017-Central Tax (Rate) (as amended from time to time). - two ruling of the AAR - first one was accepted but second one was appealed against. HELD THAT:- The supply of material and services for setting up of network, supply of satellite connectivity vehicle and training service being made in pursuance of setting up and effective operation of the network as a turnkey contract where contractor undertakes holistic responsibility of all the activities relating to the contract. The activities of Applicant inter-alia involve manufacture of telecom products such as optic liber, optic fiber cable, etc. and services in relation to laying these optic fiber cables (either underground or hung overhead) to create a network, setting up of control centres, installation of equipment, commissioning of network and other ancillary activities that may be necessary for creation of network infrastructure for its customers in the telecom industry. The scope of these activities is contractually stipulated and are typically recognized as a 'turnkey contract'. Therefore, it is clear that supply under consideration meets criteria of “civil structure or any other original works”. As the network is intended to be used for war fighting operations of Indian Navy, the works contract required therefore is set up with the predominant purpose of defence. In such a case, said works contract is undertaken for a predominant purpose other than commerce, industry, business or profession. The Navy (under the Ministry of Defence, a central government ministry) has entrusted the BSNL. by agreement, works contract to supply, install, commission next generation network along with all materials, civil structure, equipment, satellite connectivity, routers, switches and services to make entire setup to establish network for Indian Navy. BSNL has procured these services in relation to work entrusted by the Indian Navy (central government) - It may be noted that the Notification No 11/2017 has been further amended vide Notification No. 22/2021-CENTRAL TAX (RATE) dated 31.12.2021 (w.e.f. 1.1.2022) by which concessional rate of 12% for specific works contract services provided to Government authority and Government entity have been withdrawn. Said principal notification is further amended vide Notification No 3/2022-CENTRAL TAX (RATE) dt 13.7.2022 w.e.f. 18.7.2022 by which, inter-alia. Entry at Sr No 3(vi) is omitted. The supply of services made by appellant to the BSNL is fulfilling all the requirements and conditions of the entry at serial number 3 clause (vi)s(a). Appellant has specifically mentioned (in his AAAR application at para 1.15) the period of application as a 1.4.2019 to 31.12.2021. As per provision of section 103, advanced ruling pronounced shall be binding on the applicant and the jurisdictional officer, if it is not assailed by filling against it. Hence, there is binding effect of the first order of advance ruling till 31st March, 2019. which classified the said supply under entry No 3(ii) taxable at 18%.
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