TMI Blog2018 (12) TMI 844X X X X Extracts X X X X X X X X Extracts X X X X ..... t of above observation the plumbing contract constitute a composite supply as defined u/s 2(30) of the GST Act. Works Contract as is essentially a contract of service which may also involve supply of goods in the execution of the contract. It is basically a composite supply of both goods and services. In a general sense, a contract of works, may relate to both immovable and movable property - it can be seen that the term works contract has been restricted to contract for building, construction, fabrication, repair etc. of any immovable property only. The draft contract for plumbing work is a composite supply of works contract as defined in S. 2(119) of the GST Act. The acts to be committed by the applicant cannot be divided into two parts, namely supply of goods and services which are in fact inseparable - thus, the plumbing contract is indivisible works contract pertaining to immovable property within the scope of section 2(119) of the GST Act. Compete installation testing and commissioning and satisfactory handing order of substation electrical works, HT & LT cabling works, DG and cabling works, street light and cabling - Held that:- The applicant would be required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffairs? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the GST Act . 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- Statements of relevant facts having a bearing on the questions raised and statement containing the applicant s interpretation of law. The applicant M/s. Eiffel Hills And Dales Developers Pvt Ltd having GSTIN 27AABCE8028J1Z1 is a construction company engaged in the business of Mechanical, electrical and plumbing (MEP) turnkey project contracting engineering. The MEP activities provided by the applicant include design, engineering, supply, installation and commissioning of plumbing, firefighting and electrical infrastructure sys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lectrical contract includes complete installation, testing Commissioning of Substation Electrical Work, HT LT Cabling work, DG Cabling Work, Street light Cabling Works whereas the scope of work for plumbing contract includes complete external plumbing work, laying of RCC hume pipes/Gl pipes/UPVC Pipes for storm water lines, construction of chambers. With reference to section 3(26) of General Clause Immovable Property is defined as Land, benefits to arise out of land, and things attached to the earth or permanently fastened to anything attached to the earth. Further Works Contract as defined in clause (119) of Section 2 of the CGST Act 2017, means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in execution of such contract. On conjoint reading of both the definitions it is amply clear that the aforesaid work activities results in creation of immovable property and also satisfies the definition of work contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mended by notification No. 1/2018 rate dated 25/01/2018. The details of exemption at S. No. V are as under: (v) Composite supply of works contract as defined in clause (119) of sec 2 of the Central Goods and Services Tax Act, 2017, supplied by way of construction, erection, commissioning, or installation of original works pertaining to, (a) Railways, including monorail and metro; (vide notification No. 1/2018 central Tax rate dated 25/01/2018 excluding deleted and replaced by including) (b) A single residential unit otherwise than as a part of a residential complex; (c) low-cost houses up to a carpet area of 60 square meters per house in a housing project approved by competent authority empowered under the Scheme of Affordable Housing in Partnership framed by the Ministry of Housing and Urban Poverty Alleviation, Government of India; (d) Low cost houses up to a carpet area of 60 square meters per house in a housing project approved by the competent authority under (1) The Affordable Housing in Partnership component of the Housing for All (Urban) Mission/ Pradhan Mantri Awas Yojana; (2) Any housing scheme of a State Government; (e) Po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmovable property shall include land, benefits to arise out of land, and things attached to the earth or permanently fastened to anything attached to the earth. IV) In view of the above, the reply is under; 1) Whether MEP activities (Mechanical, Electrical, plumbing Works) undertaken by the applicant falls within the definition of composite supply of works contract as defined under Section 2(119) of Central GST Act? Ans : - As per the Annexure II of the application dated 28.06.18 for the Advance ruling, the MEP activity provided by the applicant includes design, engineering, supply, installation and commissioning of plumbing, firefighting and electrical infrastructure systems to a wide range of commercial projects. The definition of Immovable property as defined u/Section 3(26) of the General Clause, Immovable property shall include land, benefits to arise out of land, and things attached to the earth or permanently fastened to anything attached to the earth. If the aforesaid works become immovable property as permanently fastened to the building attached to Earth transfer of property is involved in execution of contract then it will fall within the defini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Please refer to this office letter of even no. dated 30.07.2018 and letter dated 14.08.2018 received from M/s. Eiffel Hills and Dales Developers Pvt. Ltd. on the above mentioned subject. In view of the above, the comments are as under; Q.1 Whether MEP activities (Mechanical, Electrical, plumbing Works) undertaken by the applicant falls within the definition of composite supply of works contract as defined under Section 2(119) of Central GST Act? Comments : As per further instructions received from Member, Advance ruling authority, GST, Mumbai during PH on 31.07.2018 that in order to determine the nature of supply i.e. Composite Supply , we have to study the contract. The applicant has submitted separate Work Orders (Draft) for electrical work and plumbing work vide letter dated 14.08.2018 (received on 21.08.2018). Our observation is as below on the basis of extracts of the draft agreement: ELECTRICAL WORK: Contract type: The Contract shall be divided into two types: A) TYPE-/-- . B) TYPE- 11 Supply of material under basic rates This shall be Item rate Contract for the supply of material for above mentioned works in Type ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ualify as such for composite supply 1. There should be two or more taxable services. 2. They should be naturally bundled. 3. Supply in conjunction with each other, 4. in the ordinary course of business; 5. one of which is a principal supply. It is observed that in the ordinary course of business , the customer controls only the quality of that goods and services and the timelines Of the project. However, the quantity of the goods is left to the control of the Contractor. But in the instant case, as per the Service Work Order, they are controlling both. As per Annexure 1 they are billing the goods and labour cost separately. Hence, these are two different supplies to be treated as such instead of composite supply. Annexure - I (shall be treated as part of SWO) Schedule of Item quantities with Specifications applicable Rates Contractor: Company Name: Site Name: SWO: Location:- Infra Subject:- Service Work Order for Suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Comments: The supply made by the applicant cannot be treated as composite supply as explained above in r/o Question No. 1, the applicant is not entitled to avail the exemption GST rate of 12% on MEP activity. 04. HEARING The case was taken up for Preliminary hearing on DT. 31.07.2018 when Sh. Narender Varma, Manager along with Sh. Govind Soni, Manager Tax appeared and stated that they were not carrying copy of authority letter and would be submitting the same next time. They were also requested to provide copies of contracts in respect of both their questions. Jurisdictional Officer, Sh. Said Hakim Supt., Division - III, Pune appeared and made written submissions. The application was admitted and called for final hearing on 04.09.2018, Sh. Narender Varma, Manager along with Sh. Govind Soni, Manager Tax appeared. They made detailed oral submissions in respect of their application. Jurisdictional Officer, Sh. Said Hakim Supt., Division - III, Pune appeared and made written submissions. We were heard from both the sides. 05. OBSERVATIONS We have gone through the facts of the case. The issue put before us is in respect of a classification and rate of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our esteemed organization at the rates mentioned herein below for the specifications mentioned therein for above said works. Agreed Rate Contract Value: - Total Value of the Contract awarded is Rs____plus GST (as applicable). Contractor shall study the detailed drawing / BOQ site topography and revert with the final BOQ in consultation with our MEP head Mr. Prince -______, in 7 working days after receipt of LOI/ WO; we shall thereafter convert the work order on Lumsum basis. The Contract Value is arrived based on the present tax structure prevailed as on date. However, any new levy of taxes or change in present tax structure as implemented by Govt. authorities during the tenure of the Contract will be assessed, mutually discussed, agreed upon paid accordingly. General Special Conditions of Contract 1. The Contractor shall execute and complete the work shown upon the drawings and contained in the Tender document, as revised and modified from time to time and issued to the Contractor, and shall execute the work as per the terms, conditions and specifications contained in the Tender document, subject to any modifications contained in this Work Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y may be considered for the reimbursement at actuals with due production of signed documents in original recorded jointly, by the Contractor with the authorized representative of the Client, along with proof of payments made by the Contractor during such period from time to time 13. The Shuttering design shall be prepared submitted to the Client upon receipt of the approval from the Structural Consultant, prior to the commencement of the RCC works. 14. Contractor shall consider basic rate of Cement (OPC-53G / Vasavdatta OR equivalent) @_______F.O.R. at Site. Billing and Payment Terms:- This contract is Item Rate labour plus material contract. A contract to carry out work in respect of the scope of work defined in the said conditions in the Tender document as modified by this Work Contract to be paid for according to actual measured quantities at the rates contained in the schedule, as per Annexure-A . R.A. Bill and Final Bill:- 1. Contractor is entitled to submit his R.A. Bill on Milestone basis duly defined mutually agreed while signing the Work Order. On receipt of such R.A. Bill and after an assessment amount shall be released upon thoroug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gency at Contractors risk and cost Consequences. Completion Period:- Entire work shall be carried in coordination with site in charge. The actual schedule of work shall be as discussed with Management and site in charge. In the event of delay, on account of issue of drawings, decisions, statutory permissions, from Client side then the required extension of time to complete the project will be given to the Contractor. (M+L) Cost + Mark Up Contract:- If Client intend to execute (M+L) Contract with pre-defined basic rates of Material component then Contractor will be asked to execute the Contract accordingly with fixed pre-defined prices of required material component as finalized by the client, to be procured from client defined Contractor and with the following terms and conditions :- 1. Your contract is finalized on the basis of [(Material + 15% profit on Material) + labour + 3% Overheads Wastages.] 2. Material component is to be derived on the basis of material indicated in item description Other miscellaneous material required to complete work even if not indicated in item description. 3. Take of sheet of the Material, based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iver a fully functional facility or asset to the Client right from preparation of exclusive Planning, Value engineering, it s application cum installation, testing, commissioning satisfactory handing over of the facility including related services with due diligence to the complete satisfaction of the Client. Agreed Rate Contract Value: - The Total Value of awarded scope of Contract pertaining to the subject matter is works out to the tune of INR.__________/- (before Taxes) with applicable GST@_____, the Total Value of Work is stands at INR.__________. The contract value is arrived based on the present tax structure as on date and the present statutory requirements of Local / Govt. authorities, any new levy of taxes or change in present tax structure and any additional expenditure to be incurred towards any statutory changes enforced by Local / Govt. authorities hereafter till the completion of work will be reimbursed by the Client at actuals . Scope of Work:- The Scope of Work for the Electrical Infra Works shall comprise of the following and as mentioned in attached Annexure I- Bill of Quantities :- a. Based on our mutually agreed terms, we will pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... landed approved rate (excluding GST) plus 5% for handling charges. f. It shall be mandatory for the Contractor to seek approval from the Client for each every lot of Procurement of all the items also for which the basic rates has been mentioned in Annexure-II. g. Any variations in the basic rates of the items will be paid or debited - as the case may be - to the Contractor accordingly upon the completion of the entire awarded scope of work i.e. at the time of Full Final Bill. h. However, failing to adherence or an attempt to By-pass the defined procedure may lead to candid dental of any or all considerations for such claims. 2. Agreed Rate Contract Value: -The Total Value of awarded scope of Contract pertaining to the subject matter is works out to the tune of INR._______(before Taxes) after adding an applicable GST@ ____%, the Total Value of work is stands at INR._____. The contract value is arrived based on the present tax structure on date and the present statutory requirements of Local / Govt. authorities, any new levy of taxes or change in present tax structure and any additional expenditure to be incurred towards any statutory changes enfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bill:- a. Contractor shall have to submit two types of separate bills for respective Contract type. Cumulative amount shall be calculated for each bill for tracking purpose. b. Contractor is entitled to submit his R.A. Bill on Monthly basis based on the work progresses at the work site at the rate not more than I bill/ month, before 10th of every month. On receipt of such R.A. Bill and after its assessment, due payment - after keeping aside retention - will be made within 15 days starting from date of receipt of certified invoice / bill at our Head Office. c. Similarly upon satisfactory completion of awarded work, Contractor shall submit Full and Final Bill duly supported by all requisite measurements, reconciliation statement for Client supplied material and Statement showing reconciliation of advances paid till date, etc.to our Billing department. Payment in the form of full and final settlement excluding 5% Retention amount will be made within 45 days starting from its date of receipt of certified copy of said Full Final Bill at our Head Office.. d. Contractor shall submit reconciliation sheet of material supplied by the Client on FOC basis along with each mil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The schedule of Rate hereby mentioned shall remain unaltered unchanged thus mandatorily binding upon the contractor for entire scope of work awarded herewith till the complete tenure of the Contract the Contractor is not liable to claim any escalation under whatsoever circumstances. f. Points discussed mutually agreed duly signed by both the parties hereinafter, from time to time, during the meetings pertaining to this Work Contract thus transformed into M.O.M.(Minutes of Meeting) shall form the part of this Contract treated as an Addendum to this Work Order. We find that in view of above facts we have to decide whether the plumbing work undertaken by the applicant falls within the definition of supply of Works Contract. The GST Act provides definition of Composite Supply which is as below: S.2(30) of the Act, composite supply means a supply made by a taxable person to a recipient consisting, of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. Illustration . Wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of above discussion lead to a conclusion that the draft contract for plumbing work is a composite supply of works contract as defined in S. 2(119) of the GST Act. However, we find that jurisdictional officer holds different opinion. We want to deal with their contention. The officer on perusal of records found that applicant billed goods and labour separately and thus opined that there are different supplies which seems to be not naturally bundled or supplied in conjunction with each other in the ordinary course of business and hence not a supply in the nature of composite supply. After having gone through the relevant clauses of the draft contract we are not inclined to agree with the jurisdictional officer that there is separate supply of goods and services. We observe that all the activities to be undertaken by the applicant pursuant to agreement are integral parts of the performance of the contractual obligation by the applicant. In order to comply with the contractual obligation cast on the applicant, the applicant would be required to do various acts as per the scope of work. In our view, the acts to be committed by the applicant cannot be divided into two parts, namely ..... X X X X Extracts X X X X X X X X Extracts X X X X
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