TMI Blog2020 (3) TMI 481X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is further seen that during the course of the execution of the works contract, the applicant is not supplying any of the items listed in Entry No. 234 - It is pertinent to note that the explanation which provides for splitting the value of the supply into goods and supplies is in Entry No. 234 and not in Entry No. 38. The contention that supply of the goods in Entry No. 234 is essential is further supplanted by the inclusion of the explanation in Entry No. 234. Thus, in case of a Works Contract, the explanation to Entry No. 234 shall apply if and only if, the goods the title in which is/'are being transferred during the execution of Works Contract find a place in Entry No. 234. Works Contract in relation to any of the goods listed in Entry No. 234, where such goods are not part of the Works Contract shall not merit taxation under Entry No. 234. Rate of tax on goods supplied under the contract - HELD THAT:- T he contract identifies the goods that form part of the works contract and goods that form part of supply as goods and not as part of a works contract. Also, unless the goods being supplied are part of contract for building, construction, fabrication, completion, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rks contract. The applicant is engaged in inter alia, in construction of new 33 / 220 kV Pooling Substation at Badwar, REWA along with associated 220 kV DCDS Transmission line (Route length 3.0 Kms) and associated feeder bay work on total Turnkey basis against Bid Identification No. RUMS/2016-17/372/014 (Lot-I) under World Bank Financing for Rewa Ultra Mega Solar Limited, hereinafter referred to as RUMS. 3.2 The work was allotted vide Notification of Award No. 04-01/RUMS/2016-17/372/14 (Lot-I) /TK - II/89 dated 23.09.2016 read with revised Notification of Award No. 04-01/RUMS/2016-17/372/14 (Lot-I) /TK - II/119 dated 17.11.2016. 4. QUESTIONS RAISED BEFORE THE AUTHORITHY:- The following questions have been posted before the Authority in the application:- 4.1 Whether the explanation to Entry No. 234 of Schedule I to Notification No. 01/2017 - Central Tax (Rate), as amended from time to time, shall apply to construction of new 33 / 220 kV Pooling Substation at Badwar, REWA along with associated 220 kV DCDS Transmission line (Route length 3.0 Kms) and associated feeder bay work on total Turnkey basis against Bid Identification No. RUMS/2016-17/372/014 (Lot-I) under World ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplies testing and commissioning of all outdoor;/indoor plant. Civil work associated with construction of substation works. f) Carryout erection work as stipulated in the Bid Document which involves fabrication, galvanizing and delivery of Double Circuit /Multi Circuit Towers, there body extensions, river / line crossing gantries, hangars, U Bolts, D Shackles, Bolts Nuts, spring washers, pack washers, step bolts, tower accessories, earthing rods with clamps, danger boards, number plates, face plates and anti-climbing devices (including fixing arrangements and barbed wire) and ground wire, ACSR Conductor, ground wire, disc insulators, hardware and accessories for conductor and ground wire and complete erection of transmission lines including detailed/check survey, casting of foundations, tower erection, stringing etc and testing of commissioning of transmission lines. 6.5. Under the contract, the list of materials and their cost is mentioned in detail in Annexures - I to V of the Contract, which fact is detailed in para 4.17. 6.6. The contract price at para 5.1 clearly mentions the rates for supply of goods and that for service of construction separately. 6.7. It is m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I of Notification No. 1/2017 - Central Tax (Rate) and the corresponding notifications issued under MPGST Act and Entry No. 38 in Notification No. 11/2017 - Central Tax (Rate) and the corresponding notifications issued under MPGST Act: 6.14.1. The provisions of law, which form the basis of the dispute of interpretation are Entry No. 234 in Schedule - I of Notification No. 1/2017 - Central Tax (Rate) and the corresponding notifications issued under MPGST Act and Entry No. 38 in Notification No. 11/2017 - Central Tax (Rate) and the corresponding notifications issued under MPGST Act. 6.14.2. Notification No. 1/2017 - Central Tax (Rate) contains the rate of CGST on goods being supplied. Entry No. 234 of Schedule - I of the said notification is as under: S.NO. Chapter / Heading / Sub-heading / Tariff item Description of Goods (1) (2) (3) 234 84 or 85 Following renewable energy devices parts for their manufacture (a) Bio-gas plant (b) Solar power based devices (c) Solar powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corporated in the corresponding notifications issued under MPGST Act. 6.14.4. Prior to 31.12.2018, in case of works contract service, where the supplies included any of the items included in SI.No. 234, such were taxed at the rate applicable to the Works Contract under which the goods were being supplied, i.e. 18%. Even though the supply of the goods was taxable @ 5%, but owing to the composite nature of supply, the goods and the service were taxed in aggregate @ 18%. 6.14.5. To remove this anomaly, the explanation was added, along with introduction of Entry No. 38 in Notification No. 11/2017 - Central Tax (Rate) and in corresponding notifications issued under MPGST Act. which stated that out of the gross value of the supply, 70% shall be deemed to be on account of goods and 30% was deemed to be on account of service. Accordingly, the effective rate came to 8.9% as under: S.No. Particulars % of value Rate of tax Effective Rate of tax (1) (2) (3) (4) (5) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... devices (c) Solar power generating system (d) Wind mills, Wind Operated Electricity Generator (WOEG) (e) Waste to energy plants / devices (f) Solar lantern / solar lamp (g) Ocean waves/tidal waves energy devices/plants or their parts. 6.14.9. The Applicant stated that their work starts after the Solar Power is generated through Solar Power Generating System. They are engaged in Evacuation of the power generated by the Solar System. The Solar Power is supplied to the Sub-Station that is set up by us. From this sub-station, the power is further transmitted for supply. 6.14.10. The work done by them is identical to the work done for any other Power Generating System, be it Hydro Power, Thermal Power or any Power Generating System. 6.14.11. After electricity is generated in power plant, its transmission is done by using step-up transformers that increases the voltage. This high voltage electricity is transmitted through a network of electrically conductive wires of aluminium or copper. These lines are called high-voltage transmission lines that can transmit electricity over long distances. Thereafter, electricity is distributed via electric distribut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The goods supplied alongwith the construction services where such supplies are part of the construction service, as referred to in the contract at para 7.11 of the contract, their value is clubbed with the value of the construction services and taxed accordingly. 6.15.5. In their opinion, only because the supply of goods and supply of works contract service is specified in the same contract, the whole of the supply does not become a works contract. Only where transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract, then such value of such goods form part of the Works Contract. 7. DISCUSSIONS AND FINDINGS: 7.1. We have carefully considered the submissions made by the applicant in the application and during time of personal hearing. The first issue is regarding applicability of explanation to Entry No. 234: 7.2. In the GST laws, Works Contract is defined under section 2(119). The text of the provision is as under:- (119) works contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplies of other goods and services, one of which being a taxable service specified in the entry at S. No. 38. Thus, this explanation is applicable to supply of goods in Entry No. 234, where such supplier is engaged in supply of goods or service which is to be taxed under Entry No. 38.- Entry No. 38 covers service by way of construction or engineering or installation or other technical services, provided in relation of setting up of the goods that are listed in Entry No. 234. It is worth noting that the wording of Entry No. states that construction services arc in relation of', thus, there may be situations, where construction or engineering or installation or other technical services are being provided in relation of setting up of Bio-Gas Plants, Solar Plants etc., as mentioned in Entry No. 38, but such service does not include supply of the goods listed in Entry No. 234. In such cases, the explanation to Entry No. 234 shall not be attracted. To summarize, the applicability of deemed bifurcation of the value of supply into goods and services is where the goods mentioned in Sl.No. 234 are being supplied along with or under a Works Contract of the nature covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not in Entry No. 38. The contention that supply of the goods in Entry No. 234 is essential is further supplanted by the inclusion of the explanation in Entry No. 234. 7.10 It therefore appears that in case of a Works Contract, the explanation to Entry No. 234 shall apply if and only if, the goods the title in which is/'are being transferred during the execution of Works Contract find a place in Entry No. 234. Works Contract in relation to any of the goods listed in Entry No. 234, where such goods are not part of the Works Contract shall not merit taxation under Entry No. 234. The second issue is regarding rate of tax on goods supplied under the contract: 7.11 From the contract entered into by the applicant, it is seen that the contract is in the nature of a Turnkey Contract and has been divided into different parts. The whole contract is a single contract but the activities are clearly defined and segregated, with the values for each segregated supply being duly stated in the Annexures to the Agreement. The contract price of the Agreement is also mentioned separately in para 5.1 of the contract. The para states the value of supply separately for :- - Equi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioning, as well as in the execution of the Civil Construction work, there is transfer of title in goods during the course of the execution of the contract. Therefore, in the supply of equipment for Sub-Station and transmission line, the supply is that of goods and accordingly the rates given in Notification No. 1/2017 - Central Tax (Rate) and corresponding notifications issued under MPGST Act shall apply. Further in the case of Erection Testing and Commissioning, as well as in Civil Work for Substation, the supply shall be taxed as service and rates applicable to a Works Contract shall apply. 8. RULING (Under section 98 of Central Goods and Services Tax Act, 2017 and the Madhya Pradesh Goods and Services Tax Act, 2017) In view of deliberation above we pass the advance ruling as under- 8.1. Goods listed in Entry No. 234 of Notification No. 1/2017 - Central Tax (Rate) and corresponding notifications issued under MPGST Act are not part of the supply and therefore, the Explanation to Entry No. 234 of Notification No. 1/2017 - Central Tax (Rate) and corresponding notifications issued under MPGST Act shall not apply to the supply of works contract service in contract o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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