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TMI Blog2020 (3) TMI 481X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Ruling, a reference to such a similar provision under the CGST or MP GST Act would be mentioned as being under the GST Act. 3. BRIEF FACTS OF THE CASE: 3.1. The applicant, M/s Vihan Enterprises is engaged in works 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l items indicated in Annexure - III and IV. e) Supply, erection testing and installation fabricated, galvanized sub-station structures, stringing and earthing material, supplies 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 detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... included them in the value of the supply of construction service. 6.14. Regarding applicability of 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: 6.14.1. 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 power generating system (d) Wind mills, Wind Operated Electricity Genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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) 1. Goods 70 5% 3.5 % 2. Services 30 18% 5.4% Total 8.9% 6.14.6. This fact was clarified in Press Release by the Board, communicating the recommendations made during 31 st meeting of the GST Council held on 22nd December, 2018 (New Delhi) vide C.B.l. & C. Press Release No. 78/2018, dated 22-12-2018. The relevant extract of the Press Release is reproduced hereunder: III. GST on solar power generating plant and other renewable energy plants,- * GST rate of 5% rate has been prescribed on renewable energy devices & parts for their manufacture (bio gas plant/solar power based devices, solar power generating system (SGPS) etc.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 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 distribution substation. At the substation, the high voltage electricity from the high-voltage transmission lines is passed through step-down transformers that lower the voltage. The electricity is then transmitted to network of local electric distribution lines. Before electricity enters a home, the voltage is again lowered using step-down transformers. In most countries the voltage is 220 V AC or 110 V DC. In a home, electricity is distributed to different outlets by network of wires through electrical wiring. 6.14.12. The Applicant's role in this system is limited to construction of Sub-station at Badwar, REWA along with associated 220 kV DCDS Transmission line (Route length 3.0 K.ms) and associated feeder bay work. They are neither engaged in construction of Power Plant nor in supplying any renewable energy devices & parts for their manufacture. 6.14.13. The items that we supply in the execution of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder 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, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract;" Work Contract, by way of deeming provision is treated to be a supply in the nature of a service and is taxed as a service as per the rate applicable, notified in Notification No. 11/2017 - Central Tax (Rate) and corresponding notifications issued under MPGST Act. The value of the goods whose property is transferred during the execution of the works contract is included in the assessable value of the supply. 7.3. Irrespective of the rate of tax on the goods whose property is transferred during the execution of the works contract, the whole of the value of the supply is taxed as service and the value of goods component is included in the value of the supply. Therefore, irrespective of the rate of tax on the goods being supplied during the course of the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acted. 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 in Entry No. 38. The list of goods in the Entry is exhaustive and not in the nature of an inclusive list. Thus for the applicability of the Notification, the supply has to be of an item mentioned in Entry No. 234 or parts of items mentioned in the Entry. 7.7 From the agreement the applicant has entered into with RUMS, it is seen that the applicant has been awarded a contract, where some of the supply is in the nature of a Works Contract and the contract relates to solar power. Solar Power Plants are included in the list given in Entry No. 234 of the Notification. The question therefore arises as to the rate of tax that shall be applicable on the supply being made under the contract i.e., whether the supply shall be that of goods, falling under Entry No. 234, or supply of service in the nature of a works contract, attracting tax under Entry No. 38. 7.8 From perusal of the contract, it is seen that the contract is in relation to a Solar Power Plant, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uly 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 :- - Equipment for Sub-Station and Feeder Bays; - Material for Transmission Line; - Erection Testing and Commissioning of Outdoor and Indoor Equipment; - Erection Testing and Commissioning of Transmission Line and - Civil Work for Substation and Feeder Bay. Annexure I to V of the agreement contains the detailed item-wise break-up of the cost. 7.12 These separate activities in aggregate form the Turnkey contract, but the contract is divisible into independent activities and values of such independent activities are also ascertainable under the contract. Each independent activity has a value assigned to it with detailed list of Equipment and Materials which form part of the independent contract within the contract. Under the GST Act, where transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract, then the value of such goods is subsumed in the value of the supply of the works contract service and is not taxed as goods. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication 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 of 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. 8.2 Supply of goods under a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property are included in the value of contract for supply of service only where the transfer of property in goods (whether as goods or in some other form) is involved in the execution of the contract . Goods supplied under a Turnkey Contract, where there are multiple independent contracts, of which some are not in the nature of Works Contract, shall not be included in the value of contract in the nature of a works contract merely on account of the fact that goods are being supp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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