TMI Blog2021 (1) TMI 1099X X X X Extracts X X X X X X X X Extracts X X X X ..... and in the course of their business where the principal supply is supply of goods. Therefore, the instant supply squarely falls under the definition of composite supply . Thus we find that there is a composite supply in the subject case since in the subject case there is no building, construction, fabrication, completion, erection etc of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of the contract - Besides, as per Para 1(c) of Schedule II of the CGST/OGST Act, any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods and not a service. Whether the supply of the applicant falls under the supply of works contract service ? - HELD THAT:- The salient features of the agreement indicate that the obligation on the applicant is in relation to the effective installation and functioning of the goods supplied by them and thereafter, they would undertake the activities of operation and maintenance of the same. The contract governing their supplies does not relate to building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be a subsidy by any stretch of the imagination, rather the same is a consideration as defined in Section 2(31) of the CGST Act in relation to the supply of goods and therefore, the said capital subsidy shall certainly be liable to be included in the Transaction Value for the purpose of calculation of GST. - Order No. 04/ODISHA-AAR/2020-21 - - - Dated:- 20-1-2021 - SRI GOPAL KRISHNA PATI, AND SRI DILLIP SATPATHY, MEMBER Present for the Applicant in the E- hearing/Virtual hearing Kevin Gogri Siddhartha Shankar Subject: M/s Pinnacles Lighting Project Private Limited, Plot No.306, 1815, 3101, House No.-17, Surya Vihar, Near KIIT Square, Bhubaneswar, Odisha-751024 (herein after referred to as the Applicant ) having a GSTIN :21AAKCP2751L1ZC, is a company filed an application for Advance Ruling under Section 97 of CGST Act, 2017 and Section 97 of the OGST Act, 2017 in FORM GST ARA-01 discharging the fee of ₹ 5,000/- each head under the CGST Act and the SGST Act. 1.0 The Applicant having assigned with GSTIN number 21AAKCP2751L1ZC sought for an advance ruling in respect of the following questions. A. Whether in facts and circumstances of the case, the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Monitoring System with the Government of Odisha represented by the Directorate of Municipal Administration ( the Authority ) and the ULBs. The Agreement provides that the initial term of the Agreement shall be 7 years. Under the Agreement, the Applicant undertakes to supply and install equipment such as LED Luminaire, feeder panels, poles, outreach arms, cables/wires with holding arrangement for overhead supply cables, in respect of both, the Greenfield Public Street Lighting System as well as the Centralized Control Monitoring System. 2.3 It was submitted that for such installation, the Applicant is entitled to receive a consideration, in the form of Capital Subsidy, being 90% of the total capital expenditure incurred by the Applicant in supplying, installing and commissioning of the equipment. The balance 10% of the total capital expenditure along-with O M fees is receivable as Annuity fees , and is recovered by the Applicant by raising quarterly invoices on the ULBs. After the Greenfield Public Street Lighting System has been commissioned, the Applicant is required to undertake the Operation and Maintenance of the system till the end of the term of the Agreement. 2.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) The aforesaid activities must be carried out in respect of a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession. 2.7 The Applicant submitted that as per para 13.1 (a) of the agreement, the Applicant is entitled to receive from the Authority and the ULBs a consideration, in the form of Capital Subsidy, being 90% of the total capital expenditure incurred by the Applicant in supplying, installing and commissioning of the equipment. As per Section 15 of the CGST Act, 2017, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy excluding subsidies provided by the Central Government and State Governments. The applicant pleaded that in the present case, capital subsidy has been received from the Authority and the ULBs, as already stated, the Authority is an extension of the State Government. Hence, in their case, capital subsidy should not be included in the value of supply. 3.0 The personal hearing was fixed on 04.12.2020 under due intimation to the applicant, the jurisdictional officer of State GST jurisdictional officer of Central G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of Materials and O M Fee (operation and maintenance fee). Out of ₹ 67.62 Cr, the price of Equipments is ₹ 66.66 Cr and the price for O M Fee is ₹ 0.96 Cr only. Thus the contract price has clearly bifurcated the contract into a supply of goods and supply of services. Further clause No. 13 of the agreement deals with TERMS OF PAYMENTS. The said clause of the agreement envisages that separate payment for capital subsidy O M Fee. There appears to be a clear bifurcation in the agreement with respect to price of Equipments and O M Fees. 4.4 Thus we find from the agreement that the contract is considering a clear demarcation of goods and services to be provided by the applicant but the supplies are naturally bundled and in conjunction with each other. Hence we now refer to the definition of composite supply as mentioned in sub-section (30) of Section 2 of CGST Act, 2017 and which is as under :- 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 cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer of property in goods in execution of the said contract. 4.8 In order to examine the fulfillment of these requirements, it is imperative to examine the contract/agreement under which the supplies are made. The applicant has submitted that they are under an obligation to supply and install equipment such as LED Luminaire, feeder panels, poles, outreach arms, cables/wires with holding arrangement for overhead supply cables, in respect of both, the Greenfield Public Street Lighting System as well as the Centralized Control Monitoring System. It was also submitted that the applicant shall be responsible for the supply, installation and commissioning of the following: (i) Street light poles of 8 to 9 meters in height (above ground) along with outreach arms, LED Luminaires, feeder panels and overhead cables. The poles will be buried up to 1.8 meters underground depth and base plates will be welded to the bottom of the poles. All the poles shall be connected with earthing electrodes installed at every fifth pole. The poles shall be designed and installed in such a manner as to withstand wind speeds of 150 km/hr.; (ii) Central Control and Monitoring System automation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Further, the said activity performed by the applicant is not related to the immovable property at any point of the time and hence the said activity does not qualify to be a works contract . The applicant in support of their contention has cited some rulings (as mentioned in para 2.5) pronounced by different Advance Ruling Authorities which are not applicable to the present case inasmuch as the facts and circumstances of those cases are distinguishable from the noticee s case. 4.11 We come to the second question raised by the applicant which is, If the answer to Question 1 is in affirmative, whether GST is liable to be paid under Entry 3(vi) of Notification No. 11/2017-CT (Rate) dated 28 June 2017 (as amended) on the supply and installation activities along with operation and maintenance activities to be undertaken by the Applicant? . Since, the answer to question no.1 is in the negative , the provisions of Notification No. 11/2017-CT (Rate) dated 28 June 2017 (as amended) are not applicable to the noticee s case. The principal supply as mentioned above in this case is a supply of goods and therefore the GST will have to be paid on the goods at the appropriate rate after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital expenditure). 5.0 RULING Question No.1 Whether in facts and circumstances of the case, the activities of supply installation, operation and maintenance of Greenfield Public Street Lighting System (GPSLS) carried out by the Applicant is classifiable as a supply of Works Contract Services? Answer : - Answered in the negative. Question No.2 If the answer to Question 1 is in affirmative, whether GST is liable to be paid under Entry 3(vi) of Notification No. 11/2017-CT(Rate) dated 28 June 2017 (as amended) on the supply and installation activities along with operation and maintenance activities to be undertaken by the Applicant? Answer : -Since, answer to Question No.1 is in negative, there is no need to answer Question No.2. Question No.3 Whether in facts and circumstances of the case, the capital subsidy received/ receivable by the applicant for the subject transaction be liable to be included in the Transaction Value for the purpose of calculation of GST payable in terms of Section 15 of the CGST Act, 2017? Answer :- Capital Subsidy received/receivable by the applicant for the subject transaction be liable to be included in the Transaction Val ..... X X X X Extracts X X X X X X X X Extracts X X X X
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