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TMI Blog2019 (11) TMI 1365X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Mechanical system, Facility Fluid System, safety and Fire protection system, Instrumentation, control and data acquisition system - the whole contract for 'Establishment of an Integrated Cryogenic Engine Stage Test Facility' at ISRO Propulsion Complex (IPRC), Mahendragiri is a composite contract as various supplies of goods and services are naturally bundled together. In the case at hand, the applicant has a contractual obligation to supply the materials and also to erect the civil electrical and Air conditioning system, structural and Mechanical system, Facility Fluid System, safety and Fire protection system, Instrumentation, control and data acquisition system. Such erection and installation is to be done to the Integrated Cryogenic Engine Stage Test Facility' by means of civil works. It involves the transfer of ownership of these equipment, instruments, consumables, civil and electrical goods involved in the erection, construction and installation of these systems. The Integrated Cryogenic Engine Stage Test Facility itself is an immovable structure erected at the site in Mahendragiri. Hon'ble Supreme Court in the case of COMMISSIONER OF CENTRAL EX ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act. M/s. Tata Projects Limited , No.9, First Floor, AF Block, 8 th Street, 11 th Main Road, Anna Nagar, Chennai-600040 (hereinafter called the Applicant or TPL) are engaged in the process, design, detailed engineering, procurement, shop fabrication inspection, supply, storage, site fabrication, erection, inspection commissioning of Integrated Cryogenic Engine Stage Test Facility. They are registered under GST vide GSTIN 33AAACT4119L1ZF. They have preferred an application seeking Advance Ruling on. 1. Whether supply of Engineering, Procurement Construction (EPC) contract for establishment of Integrated Cryogenic Engine Stage Test facility (ICET) where in both goods and services are supplied can be construed to be a Composite Supply in terms of Section 2(30) of CGST Act, 2017? 2. If Yes, Whether the Principal Supply in such case can be said to be Establishment of Fluids Servicing System (FSS) can be taxable at 5% GST vide notification No. 45/2017 -Central Tax (Rate) dt 14 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, Control Data Acquisition system. Integrated Cryogenic Engine Stage Test facility will be commissioned jointly by ISRO and the applicant and the duration of project is 21 months. 2.4 Detailed price break up for the supplies under contract price given as annexure to the Contract. The break-up of contract price as a percentage in the Contract is as given below. S.No. Description Amt (Rs. in Crs) Payment in INR equivalent to the extent of USD Total in INR % of contract price In USD In INR (Base date considered for conversion as on 02.11.2018 1. Materials underCEAS 832278000 832278000 11.63 2. Services underCEAS 529656000 529656000 7.40 3. Materials underSMS 354946000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eon under section 9 of the CGST Act, as is in excess of the amount calculated at the rate of 2.5% when supplied to Public funded research institutes. ; As per the definition given under Section 2(30) of CGST 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.; Further, in terms of Section 2(90) of CGST Act, principal supply means the supply of goods or services which constitutes predominant element of a composite supply.; Further, in terms of Section 8 of CGST Act, in case of composite supply, the taxes applicable on principal supply would be applicable on composite supply. ; Accordingly, to avail such concessional rate of GST @ 5%, supply involved in the contract should be covered under the above said notification no.45/2017-Central Tax (Rate) and the definition of Composite supply. Therefore, supply under the Contract should meet the following conditions. 1. ISRO shall qualify as Public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the goods which constitute establishment of Integrated Cryogenic Engine stage Test (ICET) facility. It is evident from the price break given in clause 1.5.1.1 of the contract agreement, procurement and supply of materials such as equipment's, flow components, instruments, pipes, pipe fittings etc. pertaining to scope including shop fabrication, testing and inspection at manufacturer's site constitutes 82% of the Total Contract Value. 2.8 To create facility for testing of Integrated cryogenic engine, supply, installation and testing and commissioning of Civil electrical and Air conditioning system, Structural and Mechanical system, Facility Fluid System, Safety and Fire protection system, Instrumentation, control and data acquisition system are most important and in which supply of materials/ equipment which constitutes 82% of contract value. Further, works Contract is also defined as composite Supply and includes a contact for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance. Renovation, alteration or commission of immovable property wherein transfer of property in goods (Whether as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) Terms and conditions (2) Specifications of Civil, Electrical Air Conditioning System(CEAS), (3) Specifications of Structural Mechanical system (SMS), (4) Specifications of Facility Fluid Systems (FFS), (5) Specifications of Safety Fire Protection System (S FS), and (6) Specifications of Instrumentation Control Data Acquisition System 4. The applicant is under the administrative jurisdiction of Chennai North Commissionerate of Central Excise and CGST. The jurisdictional authority has not furnished the report on any proceedings pending on the issue raised by the applicant in the case at hand. Therefore, we proceed with the issue at hand. 5. We have carefully examined the statement of facts, supporting documents filed by the Applicant. It is seen from the various submissions before us that the applicant is awarded contract by IPRC to Establish Integrated Cryogenic Engine Stage Test Facility at Mahendragiri in the capacity of Prime Contractor. The issues to be decided are 1. Whether supply of Engineering, Procurement and Construction(EPC) contract for establishment of Integrated Cryogenic Engine Stage Test Facility where in both go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s)(CEACS) Basic Design Review(Structural Mechanical System) (SMS); Basic Design Review(Facility Fluid System) (FFS); Basic Design review(Safety Fire System)(SFS); Basic Design review (Instrumentation, Control and Data Analytics System) (ICDAS); Detailed Engineering along with System Engineering of the above systems; Static Equipment-Process Data Sheet Engineering Drawing, Procurement specification, procurement from Vendor, etc; Pump, Machinery Package Equipment- Process Data Sheet Engineering Drawing, Procurement specification, procurement from Vendor, etc; Piping Entire scope of realizing Safety Fire Protection System Entire scope of realizing Civil, Electrical Air Conditioning Systems Electrical- Detailed Design for Electrical Equipment, Installation works, procurement Painting/ Lining/ Coating Insulation Chemicals/ Consumables and other Miscellaneous items Transportation Construction which includes Planning, Work, Pre-commissioning Commissioning 6.2 From the above, it is evident that the contract between the applicant and ISRO Propulsion Complex Mahendragiri (IPRC))is for the establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... electrical and structural works, instrumentation, insulation works along with transportation of materials to site, construction at site followed by commissioning of the entire system to have an operational Integrated Cryogenic Engine Stage Test Facility for the satellite launch vehicle program. Mere supply of the equipments, instruments, consumables etc. is not enough, the same has to be integrated and erected and finally commissioned at Integrated Cryogenic Engine Stage Test Facility. The Contract itself shows that the supply of these equipment and instruments are necessarily to be given with a host of services such as designing, engineering, inspection, construction, commissioning. Further, the payment schedule in the contract also shows that the billing / invoicing is indivisible. Thus, the whole contract for 'Establishment of an Integrated Cryogenic Engine Stage Test Facility' at ISRO Propulsion Complex (IPRC), Mahendragiri is a composite contract as various supplies of goods and services are naturally bundled together. 6.4 Works Contract is a composite supply. Section 2(119) of CGST Act defines works contract as: (119) works contract means a contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the structure permanently, would stand on a different footing. In the instant case all that has been said by the assesse is that the machine is fixed by nuts and bolts to a foundation not because the intention was to permanently attach it to the earth but because a foundation was necessary to provide a wobble free operation to the machine. An attachment of this kind without the necessary intent of making the same permanent cannot, in our opinions constitute permanent fixing, embedding or attachment in the sense that would make the machine a part and parcel of the earth permanently .. Applying the above to the case at hand, the erection of the Systems at site makes the system a permanent fixture, i.e. immovable property. Thus it is clear that in the case at hand, the applicant supplies materials and in conjunction provides the service of erection of the Systems into at the Integrated Cryogenic Engine Stage Test Facility making all the systems together as an immovable property. Therefore, the whole contract for 'Establishment of an Integrated Cryogenic Engine Stage Test Facility' at ISRO Propulsion Complex (IPRC), Mahendragiri at ISRO Propulsion Complex (IPRC), Mahen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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