TMI Blog2021 (4) TMI 565X X X X Extracts X X X X X X X X Extracts X X X X ..... xisting trains and for integration with installation and commissioning of cars supplied, including training, supervision and maintenance and supply of spares and preparation of manuals etc. and this is a single contract. The contract is verified and found that the contract is a single contract for both supply of goods and also for services related to those goods supplied, like installation, integration, commissioning, training and maintenance and splitting of the entire contract is for the purposes of milestones in the completion of the contract and is a single continuous chain. The Contract agreement also clearly states that the contract is a single contract involving supply of goods and services. Further, it is also seen that the contract cannot be separated and awarded to different persons and since the nature of the spares and services are exclusive to the main supply, it cannot but be awarded to the same person. It is seen that the Total Contract Price is split up into separate Contract Prices cost centre wise and one of the cost centre H is optional, and is incidental but integral part of the Supply contract. Further, it is also important to note that there is no option ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determination of the liability to pay tax on any goods or services or both and hence is admissible under Section 97(2)(e) of the CGST Act 2017 and Section 97(2)(e) of the KGST Act, 2017 and hence admitted. 4. The applicant has furnished some facts relevant to the issue and the same is as under: 4.1 The applicant is a Company inter-alia engaged in manufacture and supply of a wide range of products to meet the needs of mining, construction, power, irrigation, fertilizer, cement, steel and rail sectors. The applicant is also one of the leading manufacturers of rail and metro coaches. 4.2 The applicant was a successful bidder to the tender invited by BMRCL for Supply of 150 numbers of Standard Gauge Intermediate Cars compatible with and suitable for integration with existing trains of Bangalore Metro Rail Project Phase- 1 procured under Contract No.2 RS-DM. The Applicant entered into a contract with BMRCL vide Contract No.3RS-DM dated 25th March, 2017. 4.3 In relation to the scope of work under the contract, the applicant states that as per the terms of the contract, the broad scope of activity to be undertaken by the applicant was to manufacture and supply the Standard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Plan vi. Submission of Safety Assurance Plan and Site Safety Plan vii. Submission of Environmental Plan viii. Submission of Software Quality Assurance Plan; ix. Submission of Inspection, Testing and Commissioning Plan x. Liaison with other Designated Contractors during the design process xi. Submission of the Preliminary Design, the pre-Final Design xii. Submission of the Final Design Document xiii. Submission of As-Built drawings xiv. Any other item considered necessary to comply with the Scope of Supply 4.6.2 Cost Centre B: Delivery and receipt of offshore manufacturing The activities undertaken by Cost Centre B includes:- i. Selection of suppliers for major system and sub-systems for Trains/ Cars ii. Completion of all routine and type testing of equipment iii. Completion of Main Tooling for manufacture iv. Completion of all Factory Acceptance Tests v. Completion of test running in factory vi. Completion of manufacture, testing, running etc and inspection/clearance first prototype unit by the Engineer and shipping to port in India vii. Completion of the shipment to port in India viii. Provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies' 4.6.5 Cost Center E: Taking over of unit/train for revenue services The activity undertaken by Cost Centre E includes- i. Completion of minor outstanding works during dispatch of unit ii. Completion of any defects/deficiencies observed during machine type test and integration test iii. Joint inspection iv. Completion of defects and deficiencies observed during the joint inspection v. Any other item considered necessary to comply with the scope of 'Facilities' 4.6.6 Cost Center G: Supply of Unit Exchange spares, mandatory spares and consumable spares and special tools, testing and diagnostic equipment The activities undertaken by Cost Centre G includes:- i. Supply of unit exchange spares up to expiry of Defect Liability Period ii. Supply of mandatory spares up to expiry of Defect Liability Period iii. Supply of consumable spares up to expiry of Defect Liability Period iv. Supply of special tools, testing and diagnostic equipment v. Supply of special jigs, fixtures and gauges for repair and maintenance vi. Any other item considered necessary to comply with the scope of supply 4.6.7 Cost Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,200 E Taking Over of Unit / Train for Revenue service 18,81,950 12,06,67,700 18,45,28,050 F Deleted Sub-Total (A to E) 6,27,31,678 4,02,22,55,360 6,15,09,34,760 Cost Centres on Actual Amount Basis G Supply of Unit exchange spares, mandatory spares and consumable spares for period up to expiry of defect liability period and special tools, testing and diagnostic equipment 25, 15,637 84,524,000 44,45,60,498 Bid Total 'A' To 'G' (Excluding Cost Center 'H') 6,52,47,315 4,106,779,360 659,54,95,258 H Training, Operation and Maintenance Manuals (Optional) which is incidental but integral part of the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st Centres is tabulated hereunder for ease of reference: Cost Centre Description Supply GST rate levied by BEML A Preliminaries General Requirements for Rolling Stock including Design which is incidental to Supply of Rolling Stock Goods 5% 12% w.e.f 01.10.19 C Delivery and Receipt of indigenous manufacturing Goods 5% 12% w.e.f 01.10.19 D Commissioning and acceptance of trains/ cars in depot Service 18% E Taking over of unit/ train for revenue service Service 18% G Supply of unit exchange spares, mandatory spares and consumable spares and special tools, testing and diagnostic equipment. Goods 28% / 18% 8. Regarding the dispute on nature of supply and applicable rate of tax charged by BEML, the applicant stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in a timely manner. He has stated that they have also duly declared the details of tax paid in their GSTR-3B as regularly filed during the relevant period. 10. In the above factual matrix, the applicant seeks clarity on the following questions:- i. Whether the supplies made by cost centres C, D, E and G to BMRCL are to be considered as independent supplies of goods and services depending upon the scope of the work and applicable GST at the rate of 18% for supply of services and at the rate of 5%/ 12% for supply of goods shall be levied and charged? Consequently, what will be the time of supply for each supplies made by the cost centres? ii. Whether the supplies made by cost centres C, D, E and G to BMRCL are to be considered as 'composite supply' as defined under Section 2(30) of the CGST Act, 2017 read with Section 9(1) of the CGST Act, 2017, with the supply of intermediate cars undertaken by Cost Center C as the principal supply on which GST at 12% shall be levied and charged? Consequently, what will be the classification and time of supply for the entire Contract considering supplies made by Cost Centre C as principal supply? 11. The grounds to support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant is making separate supplies based on their scope. 11.1.6 The applicant submitted that the contract categorically stipulates that the scope of each of the cost centres are independent of each other and the obligations and responsibilities of each of the Cost Centres should be based on their independent scope of works. 11.1.7 In this regard, it is pertinent to address the supplies made by each of the Cost Centres separately as summarized in the table below: Cost Centre Description Supply HSN/SAC GST rate levied by BEML A Preliminaries General Requirements for Rolling Stock including Design which is incidental to Supply of Rolling Stock Goods 8603 5% 12% w.e.f 01.10.19 C Delivery and Receipt of indigenous manufacturing Goods 8603 5% 12% w.e.f 01.10.19 D Commissioning and acceptance of trains/ cars in depot Service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e viii. Transportation costs of indigenously manufactured trains from factory in India to Depot(s) in Bangalore ix. All handling costs and incidental charges at factory in India, Depot(s) and any intermediate location in India x. All costs associated with special traffic arrangements necessary for transportation 11.2.4 The applicant submitted that as evident from above, the activities undertaken by Cost Centre C clearly falls in the ambit of supply of goods. The term 'goods' under Section 2(52) of the CGST Act is defined to mean every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply . 11.2.5 Undisputedly, supply of Standard Gauge Intermediate Cars to BMRCL is covered under the definition of goods read with Section 7 of the CGST Act which prescribes the scope of supply. The Central Government vide Notification No. 1/2017-Centra1 Tax (Rate), dated 28.06.2017, has notified the rate of tax on the goods as per the Schedules appended to it as per which the goods falling unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ests of 6-Car Train and running of 6-Car Train in the Depot and test track ii. Type test/ Routine test of 6-Car Train set on mainline iii. Integrated testing and commissioning of 6 car trains in the nominated Depot and on sections iv. Instrumentation Tests and Oscillation trails on first prototype 6-Car train only as necessary for obtaining sanction of statutory authorities in regard to introduction of train for carriage of passengers, if required v. Service trail of trains vi. All instrumentation, computers and any other item including supervisory and operating staff essential for testing, commissioning and service trails of trains etc will be provided by the Applicant vii. Any other item considered necessary to comply with the scope of 'Facilities' 12.2 The supply made by Cost Centre D is a supply of service as covered under the definition of 'service' under section 2(102) of the CGST Act which is defined as anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... encies observed during machine type test and integration test iii. Joint inspection iv. Completion of defects and deficiencies observed during the joint inspection v. Any other item considered necessary to comply with the scope of 'Facilities' 13.2 The scope of supply as supplied by Cost Centre E is covered under the definition of service read with scope of supply of services under Section 7 of the CGST Act. Based on the scope of activities to be undertaken, the applicants have classified the supply of services under SAC 998739 as 'installation services of other goods' and are presently charging GST at the rate of 18% as applicable under Notification No. 11/2017 dated 28.06.2017 for supply of said services. 13.3 Regarding the time of supply related to the above, the applicant submits as under 13.1.1 Similar to Cost Centre D, the time of supply of services by Cost Centre E is also determined by Section 13 of the CGST Act. In the instant case also, separate milestones have been identified based on which invoices are being raised by the Applicant. In some cases a common invoice has been issued on completion of different milestones. 13.1.2 Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly and issuing separate invoices for supply of each of the goods and services as supplied by respective Cost Centers. 16. In this regard, the applicant has placed reliance on Para 2.2 of CBIC Circular No. 47 / 21/2018-GST, dated 8.6.2018, wherein the Board in the context of servicing of cars involving both supply of goods (spare parts) and services (labour), where the value of goods and services are shown separately, has clarified that where the value of such goods and services supplied are shown separately, the goods and services would be liable to tax at the rates as applicable to such goods and services separately. 17. It is submitted that the transactions or supplies undertaken by the Cost Centres separately are independent supply of goods and services and do not form part of the same bundle. The applicant submitted that the bundling of supply is not relevant in the facts of the present case as the interdependence of each transaction is absent. 18. It is submitted that even if there is one single contract but the obligations of supplies envisaged there in are distinct and separable then the courts have interpreted it to be two separate activities under the same contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning train as a composite supply of catering. The Hon'ble Authority held that various goods and catering services supplied by applicant have separate value in terms of agreement with IRCTC wherein separate values for goods and services are indicated in the billing. It was held that since the nature of entire supply is such that no supply can be termed as principal supply and such supplies are not naturally bundled, the transaction is not in the nature of 'composite supply'. 19.5 In the case of Vista Marine And Hydraulics 2019 (30) G.S.T.L. 671 (A.A.R. GST), the question before the Authority for Advance Ruling was whether supply of repair services for Naval Boats along with supply of spare parts is a composite supply or not. It was held that it was clear from contract between applicant and Naval Ship Yard that work order is for two distinct and separately identifiable supplies, one for goods, i.e., spare parts and other for services. Further, the applicant was issuing separate invoices for these two supplies. It was held that the supplies were independent taxable supplies and not composite supplies. 19.6 The applicant submitted that the reasoning of the above d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 12(2) of the CGST Act, time of supply of goods is earlier of (a) issuance of invoice or last date on which invoice is required to raised or (b) date of receipt of payment by supplier. 21.3.3 Since the principal supply is that of supply of goods, the time of supply for the entire composite supply shall be removal of the Standard Gauge Intermediate Cars pursuant to which invoice will be raised by the Applicants. 21.3.4 Where the supply is held to be a composite supply, the same is a continuous supply of goods as defined under 2(32) of the CGST Act as a supply of goods which is provided, or agreed to be provided, continuously or on recurrent basis, under a contract, whether or not by means of a wire, cable, pipeline or other conduit, and for which the supplier invoices the recipient on a regular or periodic basis and includes supply of such goods as the Government may, subject to such conditions, as it may, by notification, specify . Therefore, the time of supply will be the time of completion of each milestone and invoice is required to be raised on the basis of completion of each milestone such as supply of cars, Testing and Commissioning and Supply of spare parts i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply of cars, Testing and Commissioning and Supply of spare parts in terms of Section 12 of the CGST Act read with Section 31 (4) of the CGST Act? (e) That once the transaction is held to be composite supply, the applicants should be entitled to refund of differential GST paid on their own account by treating the supplies as independent supplies. PERSONAL HEARING: /PROCEEDINGS HELD ON 15-12-2020 23. Sri. Ravi Raghavan, Advocate and duly authorised representative of the above concern appeared and reiterated the submissions made in the application. FINDINGS AND DISCUSSION 24. We have considered the submissions made by the applicant in their application for advance ruling as well as the issues involved and relevant facts having a bearing on the questions in respect of which advance ruling is sought by the applicant. 25. At the outset, we would like to state that the provisions of both the CGST Act, 2()17 and the KGST Act, 2017 are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the corresponding similar provisions under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Contract Agreement, which is related to Contract Price and Completion time, clearly states as under:- The Employer agrees to pay and the Contractor agrees to accept the sums mentioned below in the following currencies, to be the total cost of Facilities to be supplied by them as part of their obligations, responsibilities and liabilities under and according to the provisions and obligations imposed on them by Contract. The Total Contract Price in different currencies is: Euro XXX, Japanese Yen YYY and INR ZZZ. It follows: The breakup of the Contract Price is as follows: A) Cost Centre A to E The Contract Price for Cost Centre A to E is Euro AAA, Japanese Yen BBB and INR CCC (which shall be inclusive of Basic Custom Duty (BCD) at the concessional duty rate available under the project import registration). Employer shall reimburse to the Contractor, the following taxes and duties as applicable and invoiced by the Contractor to the Employer:- a) Excise Duty on the value of finished metro cars b) VAT under Karnataka VAT on the sale of finished metro cars c) Service Tax including cess on the value of the service portion of the contract (Cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per the Schedule of Key dates, within an overall period of 240 weeks from the commencement date stipulated in the Notice to Proceed (NTP), issued by the employer. The modifications in the existing cars with respect to improvements to optimize the energy consumption, CCD monitoring and CCTV upgradation are not included in the Contract Price. These modifications required in the existing cars shall be dealt separately as Change Proposals in accordance with GC Clause 39 and respective PC Clause. 28.3 From the above, it is seen that the Total Contract Price is split up into separate Contract Prices cost centre wise and one of the cost centre H is optional, and is incidental but integral part of the Supply contract. Further, it is also important to note that there is no option on the supplier as far as supplies of spares are concerned. Hence the analysis of the Contract Pricing clearly shows the following: 28.3.1 The Contract Price of Cost Centres A to E is on the basis of the Contract Price and the Contract Price of Cost Centre G which is related to Spares is on the basis of actual amount supplied and the Contract Price of Cost Centre H which is related to Training etc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also states in para 6 of the Attachment B that as under this contract is divided into various activities as detailed in Annexure FB-2 of the pricing document and the activities are conveniently named to enable cash flows to the contractor according to the several phases involved in the supply of the intermediate cars in terms of this contract. 30.2 Further, Section 8 of the CGST Act, 2017 reads as under: Section 8: Tax liability on composite and mixed supplies The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:- (a) a composite supply comprising of two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and (b) a mixed supply comprising of two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax. 30.3 Hence, Cost Centres C to G would only make it a composite supply and the supply of intermediate cars being the principal supply, the entire supply done under cost Centres A to E would be deemed to be the supply of intermediate cars. 30.4 Further, when the Cost Centres C to G taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the issue of the invoice - the last date on which she/he is supposed to issue invoice as per Section 31 of CGST Act, 2017 - the date on which supplier receives the payment. Section 31 (4) (5) of CGST Act, 2017 reads as below. (4) In case of continuous supply of goods, where successive statements of accounts or successive payments are involved, the invoice shall be issued before or at the time each such statement is issued or, as the case may be, each such payment is received. (5) Subject to the provisions of clause (d) of sub-section (3), in case of continuous supply of services,- (a) where the due date of payment is ascertainable from the contract, the invoice shall be issued on or before the due date of payment; (b) where the due date of payment is not ascertainable from the contract, the invoice shall be issued before or at the time when the supplier of service receives the payment; (c) where the payment is linked to the completion of an event, the invoice shall be issued on or before the date of completion of that event. After a combined reading of both the provisions cited above, we conclude that the time of supply is the issuance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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