TMI Blog2019 (3) TMI 539X X X X Extracts X X X X X X X X Extracts X X X X ..... sioning of immovable property wherein transfer of property in goods is involved in the execution of the contract and thus the 'Surveillance Project' is a works contract as defined in Sub-section 119 of Section 2 of the GST Act and is supply of services as per 6(a) of Schedule II of the GST Act. And therefore the amount received for the supply of services post GST are taxable under the provision of GST Act. Rate of tax applicable under GST Act? - Held that:- The Surveillance project remains works contract as in the subject case falls under (ii) attracting GST @18%. However in the subject it is seen that applicant is providing composite supply of works contract in respect of surveillance project to Government of Maharashtra but the reduced rate of tax is available only if the work is of the type of original work. The expression 'Original work' has not been defined under any of the Notifications applicable to the present case. Thus' Original Works' would mean ; all new constructions; all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable; erection, installation etc. that results in increas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Pune and Pimpri-Chinchwad (hereinafter referred to as the Surveillance Project ). 2. The GOM published the Request for proposal (for sort' RFP') to seek services of a reputed IT firm as a System Integrator for Design, Development, Implementation Maintenance of CCTV based Surveillance System For Pune and Pimpri-Chinchwad areas. Accordingly the Applicant, has submitted its proposal for the same. 3. The GOM has selected the Applicant as successful bidder and issued Letter of Intent dated 17th September 2013 to the Applicant, the Applicant in turn signed and returned the same as a token of acceptance of Letter of Intent. 4. Therefore the agreement dated 28th day of October, 2013 is made between the Home Department of GoM and the Applicant. The Applicant is referred to as 'Systems Integrator or 'SI in the contract document. 5. The Applicant has certain queries regarding the applicability of GST tax on the payments made by the GoM to the Applicant under above stated contract. 6. The important clauses of the said agreement relevant for deciding the issue are as follows: 1. Definitions In the Agreement, the following terms shall be interpret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty/liquidated damages as per the SLAs (refer to the clause no. 7 of this agreement), the same shall be adjusted from quarterly payments due to the System Integrator. GOM will release the payment within 30 days of submission of valid invoice subject to the condition that invoice and ail supporting documents produced are in order and work is performed to the satisfaction of GOM. GOM shall be entitled to delay or withhold the payment of any invoice or part of it delivered by SI. where GOM dispute such invoice or part of it provided that such dispute is bonafide. The disputed amount shall be settled in Resolution of dispute. 6) Work Completion Timelines List of the broad activities to be carried out by the Systems Integrator and the timelines from the date of work Order are given in the table below. T stands for the date of issue of the Work Order. Sr.No. Activity Time Line 1. Mobilization of Resources, Preparation of the Inception Report T + 3 weeks 2. Prepare the Detailed Technical Architecture of the Overall System in cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Police Stations T + 26 weeks 18 Establishing connectivity for Phase II Cameras, viewing Center, Police Stations T + 33 weeks 19 Training and Capacity Building for the Police Personnel for Phase II T + 35 weeks 20 FAT for phase II Cameras, Viewing Center Setup, Police Station T + 37 weeks 21 Go Live for the 2nd, 3rd 4th Zones T + 40 weeks 22 System Documents, User Documents as per ITIL (Information Technology Infrastructure Library) standards T +41 weeks 23 formal Go Live for the Entire Project T + 42 weeks 24 Operations and Maintenance post Go-live 5 years Time is the essence of the agreement 7) Service Level Agreement (SLA) GoM is looking at a very professional approach in the project implementation and its operations. System Integrator is expected to match these expectation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, etc. in the joint names of GOM the System Integrator, where the SI shall be designated as the loss payee' in such insurance policies; SI shall be able to pay premium for the insurance policy shall ensure that each every policy shall keep updated from time to time. o) Ownership of the Assets shall vest with GoM on Go Live of the project. Ownership of any asset, created during the contractual period after go live, shall also vest with GOM upon creation of such asset p) Ensure the integration of the software with hardware to be installed and the current Assets in order to ensure the smooth operations of the entire solution architecture to provide efficient services to GOM of this project in an efficient and speedy manner. q) Obtain a sign off from GOM or its nominated agencies at each stage as is essential to close each of the above considerations. r) Ensure that the Mobile Vans mentioned in RFP shall be registered under the provisions contained u/s 39 of Motor Vehicle Act, 1988 in the name of GoM. s) Follow/observe the conditions laid down under the provisions contained u/sub Section 2 of Section 149 of Motor Vehicle Act, 1988. 19) Date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nel have appropriate qualifications to perform the Services. GOM or its nominated agencies shall have the right to require the removal or replacement of any system Integrator personnel performing work under this Agreement, in the event that GOM requests that any System Integrator personnel be replaced, the substitution of such personnel shall be accomplished pursuant to a mutually agreed upon schedule upon clearance of the personnel based on profile review upon schedule upon clearance of the personnel based on profile review personal interview by GOM or its nominated agencies, within not later than 30 working days. System Integrator shall depute quality team for the project as per requirements, GoM shall have the right to ask System Integrator to change the team. m) Entire Agreement This MSA, the SLAs all schedules appended thereto the contents specifications of the volumes 1, II, III IV of the RFP subsequent corrigenda issued thereon clarification (undertakings) accepted by the GOM constitute the entire agreement between the parties with respect to their subject matter. 7. From the schedule forming part of the contract it is clear that the entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and circumstances the applicant raises the following questions before the honorable Advance Ruling authority for its kind consideration and decision Question 1:- Whether the amount received for supply of services during the post GST period to the Government of Maharashtra (Home Department) as per the contract in question are taxable under SGST/CGST Act ? Question 2:- If answer to the question No. 1 is in affirmative then what is the rate of tax under SGST/CGST? The Appellant prays to decide the above questions. 03. CONTENTION - AS PER THE CONCERNED OFFICE Please find required information of Advance Ruling Application No.90 in the case of M/s. Allied Digital Services Ltd. as under The dealer has entered into agreement between Government of Maharashtra to set up comprehensive CCTV based surveillance system on dt.28.10.2013 for desing, development, implementation and Maintenance of CCTV based surveillance system for Pune and Pimpri -Chinchwad area. The total fees paid to the applicants as per the agreement for the execution of this contract are at ₹ 2,243,150,105.50/- which includes all the cost components as per scheduled A to S , for a period o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... July, 2018) New Delhi, the 28th June,2017 the tax rate is SGST- 9% CGST- 9%) 04. HEARING The Preliminary hearing in the matter was held on 05.12.2018, Sh. Prakash Shah, Director, Sh. Vijay Walunj, Authorized signatory,Sh. Pradeep Rawal, Manager Accounts Finance, along with Sh. V. V. Guthe, Advocate appeared and made oral and written submissions and stated that they have made full submissions and they do not need final hearing in the matter. They requested to take decision on records submitted. Jurisdictional Officer Sh. S. V. Sawant, Dy. Commr. of S.T.(E-806), Nodal I, Mumbai appeared and made oral and written submissions. We were heard from both the sides. 05. OBSERVATIONS We have carefully gone through the facts of the case, oral and written submissions made by the applicant as well as the jurisdictional officer and the relevant provisions of the GST law In this regard. The Government of Maharashtra has awarded contract to the applicant to render services of system integrating design, development, implementation and maintenance of CCTV based surveillance system for the use by the Police in the jurisdiction of cities of Pune and Pimpri-Chinchwad. The agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ensive CCTV based city surveillance system. In this view of the matter we are convinced that various supplies as contemplated by the contract constitute composite supply as defined u/s 2(30) which reads as follow- Section 2(30): 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 : Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply As a corollary of above finding, the next issue to be decided by us is whether this composite supply is 'Works Contract' as defined in clause (119) of section 2 of the SGST/CGST Act. Section 2(119) reads: works contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any imm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... melt the raw materials. With a view to protect the shell against heat, the blast furnace is lined with refractory brick of one-metre thickness. Thus, the drilling Machine has to drill a hole through one-metre thickness of the refractory brick lining. The drilling machine as well as the mudgun are erected on a concrete platform described as the cast house floor which is in the nature of a concrete platform around the furnace. The cast house floor is at a height of 25 feet above the ground level. On this platform concrete foundation intended for housing drilling machine and mudgun are erected. The concrete foundation itself is 5-feet high and it is grouted to earth by concrete foundation. The first step is to secure the base plate on the said concrete platform by means of foundation bolts. The base plate is 80 mm mild sheet of about 5 feet diameter. It is welded to the columns which are similar to huge pillars. This fabrication activity takes place in the cast house floor at 25 feet above ground level. After welding the columns, the base plate has to be secured to the concrete platform. This is achieved by getting up a trolley way with high beams in an inclined posture so that base p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attel is movable to another place as such for use, it is movable but if it has to be dismantled and reassembled or re-erected at another place for such use, such chattel would be immovable. In the present appeal, even according to the finding of the Collector, mudguns and tap hole-drilling machines have to be dismantled and disassembled from the cast floor before being erected or assembled elsewhere. We have also arrived at the same conclusion independently, in para 10 above. Accordingly applying the test laid down by the Supreme Court we hold that the erection and installation of mudguns and tap hole-drilling machines result in immovable property. In the light of the ratio of the above case-law, we hold that the mudguns and tap hole-drilling machines do not admit of the definition of goods and, therefore, excise duty is not leviable thereon. 25. In Mittal Engg. Works (P) Ltd. v. CCE [(1997) 1 SCC 203 : (1996) 88 ELT 622] =1996 (11) TMI 66 - SUPREME COURT OF INDIA this Court was concerned with the exigibility to duty of mono vertical crystallisers which are used in sugar factories to exhaust molasses of sugar. The material on record described the functions and ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of the Transfer of Property Act, Section 3(26) of the General Clauses Act, it is evident that in an immovable property there is neither mobility nor marketability as understood in the excise law. Whether an article is permanently fastened to anything attached to the earth requires determination of both the intention as well as the factum of fastening to anything attached to the earth. And this has to be ascertained from the facts and circumstances of each case. 42. So also in T.T.G. Industries Ltd. v. CCE[(2004) 4 SCC 751 : (2004) 167 ELT 501] = 2004 (5) TMI 77 - SUPREME COURT OF INDIA , the machinery was erected at the site by the assessee on a specially made concrete platform at a level of 25 ft height. Considering the weight and volume of the machine and the processes involved in its erection and installation, this Court held that the same was immovable property which could not be shifted without dismantling the same. 43. It is noteworthy that in none of the cases relied upon by the assessee referred to above was there any element of installation of the machine for a given period of time as is the position in the instant case. The machines in question were by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e system for the city of Pune and Pimpri-Chinchwad does result into installation/commissioning of immovable property wherein transfer of property in goods is involved in the execution of the contract and thus the 'Surveillance Project' is a works contract as defined in Sub-section 119 of Section 2 of the GST Act and is supply of services as per 6(a) of Schedule II of the GST Act. And therefore the amount received for the supply of services post GST are taxable under the provision of GST Act. Question No. 2: Having answered the question No.1 in the affirmative, then the rate of tax applicable under GST Act is determined as under: While dealing with Que no. 1 above, we have drawn a conclusion that the applicant is supplying works contract services, we now reproduce the Notification no.11/2017 - Central Tax (Rate) dated 28/06/2017 which is applicable to the present case. SI.No. Chapter, Section or Heading. Description of Service Rate (per cent.) Condition 1 2 3 4 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied by way of construction, .............. of - (a) a road, bridge, tunnel, or terminal ; (b) a civil structure-........ under Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana; (c) a civil structure-........... under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana, ; (d) a civil structure or any other original works pertaining to under the Housing for All (Urban) mission/Pradhan Mantri Awas Yojana; (e) a pollution control or effluent treatment plant,................ 6 - (v) Composite supply of works contract as 6 defined in clause. (119) of section 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, excluding monorail and metro.............. 6 (vi) Construction services other than (i), (ii), (iii), (iv), (v) and (vi) above. 6 As per the said Notification with the ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ployees or other persons specified in paragraph 3 of the Schedule III of the Central Goods and Services Tax Act, 2017 6 - (vii) Construction services other than (i), (ii), (iii), (iv), (v) and (vi) above. 9 - Vide amendment Notification No. 31/2017, dated 13.10.2017, the original Notification No. 11/2017 stood as under:- SI.No. Chapter, Section or Heading. Description of Service Rate (per cent.) Condition 1 2 3 4 5 Chapter 99 All Services Section 5 Construction Services Heading 9954 (Construction services) (i) ....................................) 9 - (ii) composite supply of works contract as defined in clause 119 of section 2 of Central Goods and Services Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal authority, a Governmental Authority or a Government Entity. 2.5 Provided that where the services are supplied to a Government Entity, they should have been procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union territory or local authority as the case may be Notification 31/2017 Dt.13.10.2017 (viii) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017 and associated services, in respect of offshore works contract relating to oil and gas exploration and production (E P) in the offshore area beyond 12 nautical miles from the nearest point of the appropriate base line. 6 - Notification 31/2017 Dt.13.10.2017 (ix) Construction services other than (i), (ii), (iii), (iv), (v), (vi), (vii)and (viii) above. 9 - ; Even the amendment the applicant's position has not changed. Their composite supply of works contract as in the subject case falls under (ii) attract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid the applicant's position has remained unchanged. The Surveillance project remains works contract as in the subject case falls under (ii) attracting GST @18%. However in the subject it is seen that applicant is providing composite supply of works contract in respect of surveillance project to Government of Maharashtra but the reduced rate of tax is available only if the work is of the type of original work. The expression 'Original work' has not been defined under any of the Notifications applicable to the present case. The expression 'original work' has assigned meaning under the CPWD Works Manual 2014 which reproduced as below: 1.3.1 Original Works These shall mean:- (i) all new constructions, (ii) all types of additions, alterations and/or special repairs to newly acquired assets, abandoned or damaged assets that are required to make them workable. (iii) major replacements or remodeling of a portion of an existing structure or installation or other works, which results in a genuine increase in the life and value of the property. Thus' Original Works' would mean ; all new constructions; all types of additions and alt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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