TMI Blog2019 (11) TMI 1145X X X X Extracts X X X X X X X X Extracts X X X X ..... 17(5) are erroneous. The proposed activity of setting-up of the data centre facilities as explained would qualify as works contract as per Section 2(119) of the Central Goods and Service Tax Act, 2017 and Section 2 (119) of the Karnataka Goods and Service Tax Act, 2017 Rate of tax applicable on the activities proposed to be undertaken by them - HELD THAT:- The activities proposed to be carried out by the applicant qualify to be treated as works contract the rate of tax applicable would be accordingly applied. Notification 11/2017 - Central Tax (Rate) dated June 28, 2017 provides the rates of GST applicable on intra state supply of goods and services. SI. No.3 of the Notification provides that a composite supply of works contract, as defined in clause 119 of section 2 of Central Goods and Services Tax Act, 2017, is liable to GST @ 18% - Therefore, as the proposed activity falls under the category of the works contract it is liable to tax @18%. - KAR ADRG 121/2019 - - - Dated:- 30-9-2019 - SRI. HARISH DHARNIA, AND DR. RAVI PRASAD M.P. MEMBER Represented by: Sri. Harish Bindumadhavan, Advocate ORDER UNDER SECTION 98(4) OF THE CENTRAL GOODS SERVICES TAX ACT, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Valves e. Grills, tiles, f. Air ducts, exhaust fans, 3. Electrical works namely:- a. UPS with batteries, b. DG with diesel tanks and exhaust, c. Electrical panels, d. Lighting, e. Distribution boards, f. Electrical earth, g. Cables and bus duct, 4. Building management products namely:- a. CCTV for surveillance, b. Access control, c. Fire detection Centre, d. Fire suppression system, e. Water leakage detection system. 5. Obtaining statutory approvals like occupancy certificate electrical system approval, pollution and fire department clearance, lift license, CCOE approvals and any other approvals applicable to make data center operational. The Applicant proposes to undertake and oversee end-to-end activities in relation to design and implementation of data center facilities. The proposed activities include preparing the blueprints of the data centre facility based on customer needs, designing the centre based on approval and undertaking all the activities required to have a fully functional data centre faci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer of property in goods; and c. The activities are carried out in relation to an immovable property. 5.4 The applicant then discusses the nature of the various proposed activities to be undertaken as per the agreement and SOW and compares them with the three factors stated above. The applicant discusses the meaning of each of the terms construction, erection, installation, fitting out, modification, or commissioning and their applicability as per their SoW. We have examined the tabular presentation made in the application. The applicant, thus, submits that the proposed activities as per their SoW are covered in the first leg of the definition of works contract meaning thereby that the activities proposed are for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning . 5.5 The applicant once again stresses that the applicant may be awarded the entire contract for setting up of the data centre or they may only undertake a portion of the entire contract i.e. undertake civil, mechanical, electrical works on a standalone basis or as a combination of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as works contract services. They further cite the case of Otis Elevator Company (India) Limited = 2002 (8) TMI 118 - HIGH COURT OF JUDICATURE AT BOMBAY wherein it was held that the contracts for erection and installation of elevators and escalators were indivisible works contracts and do not constitute contracts for sale of goods. The relevant portions of the judgements as quoted have been examined. 5.9 On the basis of all these citations the applicant submits that the activities proposed to be undertaken fall under the first limb of the definition of works contract. 5.10 The Applicant submits that the activities of construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning proposed to be carried out are in relation to an immovable property. In order to ascertain the definition of an immovable property the applicant places reliance on Section 2 (36) of the General Clauses Act, 1987 which defines the term of immovable property as below:- immovable property shall include land, benefits to arise out of land, and things attached to the earth, or permanently f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sulting being the integral part of the land/premises. 5.14 The Applicant further submits that for both supply of goods and services involved in the proposed activity of setting up the data centre, a consolidated fee is agreed upon as consideration. 5.15 The applicant further states that the scope of the activity of works contract cannot be restricted in relation to immovable property alone, the same can be extended to activities in relation to plant and machinery. In this regard, the Applicant places reliance on Section 17 (5) (c) of the CGST Act which restricts credit on works contract service when it is supplied for construction of an immovable property other than plant or machinery. It is submitted that as per the language used in Section 17 (5) (c), it can be inferred that if works contract service is utilised towards the plant and machinery, credit is eligible on the same. In view of this, it is submitted that scope of the activity of works contract cannot be restricted to an activity undertaken only in relation to immovable property, the scope can be extended to the services rendered in relation to plant and machinery also. 6. In respect of the rate of tax applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. Civil, interior and exterior architectural and finishing works namely:- a. False flooring, b. False ceiling, c. Painting, d. Gypsum partition e. Light weight walls and partitions, f. Carpets or flooring B. Mechanical works namely:- a. Piping for chilled water, b. Supports for chilled water piping, c. Chillers and chiller platforms d. Valves e. Grills, tiles, f. Air ducts, exhaust fans, C. Electrical works namely:- a. UPS with batteries, b. DG with diesel tanks and exhaust, c. Electrical panels, d. Lighting, e. Distribution boards, f. Electrical earth, g. Cables and bus duct, D. Building management products namely:- a. CCTV for surveillance, b. Access control, c. Fire detection Centre, d. Fire suppression system, e. Water leakage detection system E. Obtaining statutory approvals like occupancy certificate, electrical system approval, pollution and fire department clearance, lift license, CCOE approvals and any other approvals applicable to make data center operational . 9.3 The activities outlined above indicate that the applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be restricted in relation to immovable property alone, the same can be extended to activities in relation to plant and machinery. In this regard the applicant takes recourse to Section 17 (5)(c) of the CGST Act which restricts credit on works contract service when it is supplied for construction of an immovable property other than plant or machinery. They further state that as per the language used in Section 17 (5) (c), it can be inferred that if works contract service is utilised towards the plant and machinery, credit is eligible on the same. In view of this, the applicant contends that scope of the activity of works contract cannot be restricted to an activity undertaken only in relation to immovable property and the scope can be extended to the services rendered in relation to plant and machinery also. 9.8 We do not agree to the contention of the applicant in this regard. Firstly the term Works Contract is clearly defined in Section 2(119) of the CGST Act, 2017. The definition is self explanatory and leaves no doubt that it is in relation to an immovable property only. Secondly, in Section 17(5) of the said Act, the term plant and machinery is also defined. Here the mac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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