TMI Blog2019 (8) TMI 1352X X X X Extracts X X X X X X X X Extracts X X X X ..... ingredients of supply as it is a supply of service in the form of facilitation, further there is a consideration as the construction activities carried out by the customer / intending agency will ultimately be the property of the applicant - Thus all the ingredients of section 7(1)(a) are present to be categorized the transaction as supply of services. Considering the fact that the ownership of asset remains with the applicant, it is evident that the execution of works requiring deposit works is a facilitation for the access/ use of such transmission system and thus such facilitation is a supply of services. Valuation of supply - Work executed by RVPN itself - Section 15 of the GST Act, 2017 - HELD THAT:- When the applicant incurred such cost, then GST would automatically be leviable on total transaction value without any recourse to section 15(2)(b) of GST Act, 2017 - Accordingly, even when the cost of deposit work to the applicant s transmission system is incurred by the consumer/ intending agency itself, such cost is also required to be included in the transaction value and to be considered as value of supply for the purpose of levy of GST in terms of section 15(2)(b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would be mentioned as being under the GST Act . The issue raised by M/s. Rajasthan Rajya Vidyut Prasaran Nigam Limited, 1, Vidyut Bhawan, Janpath, Jaipur, Rajasthan 302005 (hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97 (2) (b), (c) (g) given as under: (b) applicability of a notification issued under the provisions of this Act; (c) determination of time and value of supply of goods or services or both; (g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term. Further, the applicant being a registered person (GSTIN is 08AABCR8312A1ZT as per the declaration given by him in Form ARA-01) the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the applicant is admitted to pronounce advance ruling. 1. SUBMISSION AND INTERPRETATION OF THE APPLICANT: The applicant is a company registered under the companies act 1956 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on lines, in accordance with the Grid Standards, as may be specified by the Authority. As a transmission licensee, RVPN is required to develop transmission system in the State of Rajasthan and provides the pathway for power within whole of Rajasthan. RVPN owns, builds, maintains and operates the high-voltage electric transmission system that helps to keep the lights on, businesses running and communities strong. RVPN also owns the shared generating projects as representative of erstwhile RSEB. The main source of revenue of RVPN is the Transmission Charges as per tariff decided by the Rajasthan Electricity Regulatory Commission (RERC), which are recovered from the State DISCOMS and other customers against services of Transmission of electricity through the Transmission system. The transmission system so developed is accounted for as Fixed Assets in the books of RVPN to be depreciated over a useful life as per RERC Tariff Regulations. Simultaneously the Transmission charges are recovered as per Tariff approved by the RERC against services of Transmission of electricity through the Transmission system. In terms of GST Notification No. 12/2017 Central Tax (Rate) dated 28th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the transmission system after execution of deposit works shall remain with the applicant in the capacity of a State transmission licensee as per the provisions of the Electricity Act 2003. In case of services of deposit works, the cost of services is calculated by the applicant as per the estimation methodology which includes Hard cost (material labour), overhead charges, other charges etc. Under the deposit works, the applicant is facilitating the transmission system for the consumers/ intending agencies against recovery of the amount as per approved estimation mechanism. For facilitating such deposit work to the transmission system on the specific request of the consumers/ intending agencies, the applicant generally charges the following amount as a consideration: Charges for modification/ augmentation/ shifting/ additions to transmission system - These are the cost incurred under deposit works requiring modification/ augmentation/ shifting/ additions to the transmission system. Supervision Charges Shut down charges Modification/ augmentation/ shifting/ additions to the applicant s Transmission System on the request of consumers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansmission asset/ infrastructure is built/ created first at a particular trench (where modification is required) so that the electricity supply in the related areas is not affected. After completion of such work of new transmission asset/ infrastructure, shutdown (of electric flow) takes place for disconnecting old line at a particular trench (where modification is required) and connecting new line. The old asset/ Infrastructure (Line) is then dismantled. Therefore, practically new asset/ infrastructure is created even in case of shifting/ modification. The applicant also remains the owner of the dismantled material/ scrap. e. Being a transmission licensee under the Electricity Act 2003, the applicant will be the owner of the asset/ infrastructure built/ modified even though the cost/charges are borne by the intending agency/ consumer. f. Therefore, under both the methods/ options, the ownership of the asset/ infrastructure built/modified remains with the applicant only is being a Transmission Licensee under the Electricity Act 2003. The only procedural difference in the two methods/options is that in the first option, the complete deposit works are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modification/ augmentation/ shifting/ additions to the transmission system for the consumer and cost or charges are collected from the consumer and the above activity is being carried out in the course of business i.e. the transmission of power to the consumer, it would be covered under the scope of sub-section (1) of section 7 of the RGST Act, 2017 as supply of services. b. Value of supply in case: a) works executed by RVPN itself shall as per sub-section 1 of Section 15 of RGST Act, 2017 would be transaction value, which is the price actually paid or payable for the said supply. b) Work executed by the consumer/ intending agency under supervision of RVPN shall as per sub-section 1 of Section 15 of RGST Act, 2017 would be transaction value which is the price actually paid or payable for the said supply to the intending agency whether by the consumer itself directly because it is immaterial who makes payment but actually work is executed on behalf of RVPN who is solely responsible to provide the above said service as per Electricity Act, 2003. c. Since the execution of works requiring modification/ augmentation/ shifting/ additions to the transmiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 08/05/2019 (F R No. 1277), the asset/ infrastructure built/ modified by the intending agency/ consumer under supervision of the applicant is required to be transferred to applicant and any expenditure or taxes incurred or to be incurred by the applicant is to be borne by the consumer/ intending agency. In this transaction, though the expenditure in actual is incurred by the consumer/ intending agency but the applicant being the owner of the asset/ infrastructure under Regulations, account it in its books by creating Asset on one hand and Income on the other hand as a Consumer Contribution . In other words we observe that even though the expenditure and the work in actual is done by the consumer / intending agency but the same will be treated as the work has been done by the applicant. d. Therefore, under both the methods/ options, the ownership of the asset/ infrastructure built/ modified remains with the RVPN only. It is also pertinent to mention here that both these cases are transactions of supply of pure services and there is no supply of goods. The only procedural difference in the two methods/options is that in the first option, the complete deposit w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is evident that the execution of works requiring deposit works is a facilitation for the access/ use of such transmission system and thus such facilitation is a supply of services. f. Further act of facilitating the execution of deposit work falls under the term to do an act as specified in clause (e) of para 5 of Schedule II referred in Section 7 to the GST Act 2017. Same is reproduced as under:- Section 7 (1A) Where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II. Schedule II (Section 7): Activities or transactions to be treated as supply of goods or supply of services: Para 5, clause (e) - agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; shall be treated as supply of service. Thus in our view the act of facilitating the execution of works requiring modification/ augmentation/ shifting/ additions to the applicant s transmission system are a supply of services. g. In a contract of supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the present case where the deposit work is undertaken by the consumer/ intending agency under supervision of the applicant, the cost is directly incurred by the consumer/ intending agency, still the applicant is exclusively liable and responsible for modification/ alteration of the transmission infrastructure as per Electricity Act, 2003 so as to comply with the grid standards and that s why the work is mandatorily to be executed under the supervision of applicant. Thus as per the above discussions, since the applicant is liable and responsible for such work, therefore, according to section 15(2)(b) of GST Act, 2017, the cost of such asset/ infrastructure incurred by the consumer/ intending agency is to be included in the value of supply. Therefore, in view of the above discussion, the transaction of facilitating the execution of deposit works to the applicant s transmission system at the specific request of the consumer/ intending agency amounts to supply in terms of section 7 of GST Act, 2017 as the same fulfills all the essential ingredients of supply , more particularly when the ownership of asset remains with the applicant, the deposit work is a facilitatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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