TMI Blog2023 (1) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... n of NH-111 (NH-130) from 0.000 km to 53.300 km in the State of Chhattisgarh under Bharatmala on Hybrid Annuity Mode. Subsequently, Concessionaire entered into an agreement with AIIL for Engineering, Procurement and Construction (EPC) works of development, maintenance and management of 4 laning of Bilaspur to Pathrapali Section of NH-111 (NH-130) from 0.000 km to 53.300 km in the State of Chhattisgarh. ln background of the aforesaid facts i.e. award of contract for development, maintenance and management of NH-111 by NHAI to Concessionaire and award of contract for EPC works relating to said project by Concessionaire to AIIL. The scope of work awarded to the applicant covers only the activities involved in the Lighting works at various locations including highway and flyover/VUPS/bridges area across the length of the project as indicated in TCS Schedule and as per approved design basis by IE/NHAI. In addition to the above work of electrification or lighting works the applicant is responsible for Supply, installation testing of electrical materials as per BOQ with the pre-condition that all the fixtures, panels, wires/ cables, lights, earthing materials, and other items complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidences furnished by the applicant there exist all reasonable grounds to hold that natural bundle of supply of goods and services is prevalent in the instant supply of installation services of highway lighting system and these are supplied in conjunction with each other in the ordinary course of business by the applicant. Besides this, the impugned supply of installation services in entirety thereof can only be construed to be made, once whole of the supplies are made by the applicant. Thus, we come to the considered conclusion that the second criterion of composite supply stands fulfilled in the instant supply of installation services of highway lighting system made by the applicant. Whether the work of installation of highway lighting system, rendered by the applicant qualifies being Works Contract, much essential for availing the claimed exemption as provided under S.no. 3(v)(a) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended, vide Notification 01/2018 Central Tax (Rate) doted 25.01.2018? - HELD THAT:- There exists a clear demarcation of a works contract as a supply of service under GST. Besides this, as per section 17(5) (c) of the CGST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gible to be benefit of the claimed exemption. - STC/AAR/02/2022 - - - Dated:- 2-5-2022 - SMT. SONAL K. MISHRA AND SHRI RAJESH KUMAR SINGH, MEMBER PROCEEDINGS [U/s 98 of the Chhattisgarh Goods Services Tax Act, 2017 (herein- after referred to as CGGST Act, 2017)] No. STC/AAR/02/2022 Raipur Dated M/s HPL Electric, and Power Limited (here in after referred to as the applicant), Pandri, Raipur, Chhattisgarh, 492001 GSTIN-22AAACH0165J1ZO has filed an application U/s 97 of the Chhattisgarh Goods Services Tax Act, 2017 dated 03/02/2022 enclosing duly filled in Form ARA-01 (the application form for Advance Ruling) along with certain Annexure and attachments seeking advance ruling Whether the supply to be made by Applicant to AIIL can be classified under Entry 3(iv)(a) of Notification no. 11/2017-C.T. (Rate) dated 28.06.2017 and the benefit of concessional rate of GST of 12% (i.e. 6% each CGST and SGST) can be availed in respect of said supply by Applicant to AIIL? 2. Facts of the case: -HPL Electric and Power Ltd. (hereinafter referred to as Applicant ) is engaged in the business of manufacture, sale and installation of electrical equipments, r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct by Concessionaire to AIIL, AIIL has subcontracted a portion of the works contracted to it, by sub-contracting the following work to the Applicant, which is a part of the works awarded by NHAI to Concessionaire and then by Concessionaire to AIIL: Design, engineering, supply, testing at site, freight and transit insurance, erection, installation and commissioning and trial run of Highway Lighting System as per IRC-SP-84-2014 for the project of development, maintenance and management of 4 laving of Bilaspur to Pathrapali Section of NH-III (New NH-130) from 0.000 km to 53.300 km in the State of Chhattisgarh under Bharatmala on Hybrid Annuity Mode . 2.2 The scope of the work awarded by AIIL to Applicant is specified in Service Order dated 26.06.2020, the relevant portion of which is reproduced hereunder for ready reference: Design, engineering, supply, testing at Site/Works, freight and transit insurance, erection, installation and commissioning and Trial run (SITC) of Highway Lighting System (which includes fighting pole, luminaries, cable, feeder panels, high mast, DG set and its accessories for complete highway including flyover at 0+000 chainage, major/ minor juncti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in the scope of contractor including overhead or underground crossing required, if any, as per the site conditions. Any exclusion from scope of contractor shall be Nil. . Contractor shall procure materials from approved vendor list (Annexure-V) only. Contractor shall get approval of sources and materials to be procures, within this approved vendor list, from IE/NHAI before procurement. . Contractor shall carry out the work in close coordination with IE, NHAI authorities and other contractors to complete all sequential activities to achieve progress in totality. Contractor shall carry out the work on behalf of the Employer under the strict supervision of Employer/ NHAI/IE and will take all the necessary approvals for material sources and will execute the work as per the relevant specifications of MoRTH, methodology approved by NH/OE/Employer. . The Basic Price shall be inclusive of applicable Taxes (except GST), inclusive of all cost towards required Manpower, Material, Equipment, Tools Tackles, Insurance, Safety equipment, PPE, Statutory Compliance, License, Work Permit, Mobilization, Demobilization, Lodging Boarding, Transport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i), (ia), (ib), (ic), (id), (ie) and (if) above, supplied by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,- (a) a road, bridge, tunnel, or terminal for road transportation for use by general public; 6 3.2 that on coming to the first point as to whether the supply of highway lighting system can be said to be supplied by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration of a road for use by the general public in terms of Entry 3(iv) (a) of Not. No. 11/2017-CT (Rate) dated 28.06.2017, it was their contention that the highway lighting system is part and parcel of the project of construction of highway and highway cannot be said to be completed and capable for use by the general public, unless the lighting system is installed and starts functioning. 3.3 that for any works contract to fall under Entry 3(iv)(a), the following conditions need to be fulfilled: i) There should be composite supply of works contract; ii) The works contract should be for construction, ere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . PL.) Property that cannot be moved; an object so firmly attached to land that it is regarded as part of the land. Also termed immovable thing. SEE FIXTURE. Cf. MOVABLE [Cases Fixtures 1; Property 4. C.J.S. Property . 14-21, 23.) immovable, adj. The Chambers Dictionary: Immovable adj. impossible to move; steadfast; unyielding; impassive, motionless; unalterable; not liable to be removed (law: commonly immovable): real not personal (law). n (law: usu in pi immovables) immovable property. n immovableness or immovability. adv. immovably [im (in- (2))] 3.7 A plain reading of the aforesaid definitions suggests that immovable property would include land and the things which are attached to or embedded in the land such as buildings, bridges, etc. However, not everything that is attached to the land would automatically constitute an immovable property. Whether a particular property is an immovable property or not, is subject to the peculiar facts of each case. The courts have given various decisions laying down certain criteria for determining whether a property is immovable or not. 3.8 Reference is made to the decision of Hon ble Supreme Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d transportation, it is submitted that in the instant case, the works to be executed by the Applicant are for completion of road i.e., National Highway-111. further that construction of road does not merely include creation or construction of ground-level surface, but includes a host of things and affairs, such as markings on the roads, signboards, pavement/ footpath, medians, drainage system, intelligence transport system, toll management system, entire lighting system (including lighting pole, luminaries, cable, feeder panels, high mast, etc.) depending on the nature of road, to make it functional and operational for public use. All these facilities alongwith construction of ground-level surface make construction of road complete. In other words, a road cannot be said to be completed for use by general public, until and unless all such facilities are also made available on the road. Hence, the highway lighting system to be installed by the Applicant on the NH-111 also forms part and parcel of the highway and highway cannot be said to be completed and capable for use by the general public unless the lighting system is installed and start functioning. 3.13 Highway lighting syste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning of lighting system for National Highway, which is to be used by public only, thus the condition for supply of works contract by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a road for use by public is satisfied. 3.18 Reliance has been placed on the advance ruling passed by Authority of Advance Ruling (for short AAR ), Uttar Pradesh in the case of Sice Vaaan Joint Venture, 2020 (2) TMI 550, wherein the issue was whether the installation of ITS i.e. Intelligence Transport System can be said to be part and parcel of the construction of road transportation system for use by general public and hence, classified under Entry 3(iv)(a) of Not. No. 11/2017-CT(R). 3.19 The aforesaid ruling is squarely applicable in the present case, in light of the following facts and understanding: The project awarded by NHAI to Concessionaire and then by Concessionaire to AIIL includes the installation of highway lighting system on the National Highway-111, which involves design services, supply of equipment, installation of equipments/ system, operation and maintenance to facilitate its long ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of M /s. Building Roads Infrastructure Construction Pvt. Ltd., 2021 (8) TMI 526- AAR, Andhra Pradesh. 3.25 That on the same issue, reliance is also placed on the following rulings: Shapoorji Pallonji and Pvt. Ltd.,2020 (1) TMI 789- AAR Maharashtra Puranik Construction Pvt. Ltd., 2019 (5) TMI 493-AAR Maharashtra M/s. Core Construction (Yatin Manoj Mora), 2021 (12) TMI 609- AAR Maharashtra M/s. Shimsha Infrastructures, 2019 (10) TMI 1017- AAR, Karnataka In view of the above, the applicant was of the opinion that the works to be executed by them are classifiable under Entry 3(iv)(a) of Not. No. 11/2017-CT (Rate) dated 28.06.2017 and hence, is exigible to the concessional rate of GST @ 12% (CGST 6% and SGST 6%). 4. Personal Hearing:- Keeping with the established principles of natural justice, personal hearing in the matter was extended to the applicant in Virtual mode and accordingly, Shri Manish Gaur, authorized representative of the Applicant appeared before us for hearing on 11.03.2022 and reiterated their contention. He also furnished a written submission along with sample copies of work order which has been taken on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned officer or the jurisdictional officer as stipulated above. The question sought by the Applicant is also covered under Section 97(2)(a)/(c) of the CGST Act i.e., classification of any goods or services or both and accordingly the present advance ruling application is maintainable before the Chhattisgarh Authority of Advance Ruling. 7. Before getting in to the issues involved, for a better under understanding of the subject, we would first like to go through the relevant text of the issue in hand, as appearing at S.no. 3(iv)(a) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended, vide Notification 3/2019 Central Tax (Rate) dated 29.03.2019 effective from 1.4.2019. In the instant case the eligibility or otherwise of the benefit of said Notification no. 11/2017 Central Tax (Rate) provided under S.no. 3(iv) ibid, to the applicant is the subject matter of this proceeding. For the sake of brevity the relevant text of the same is reproduced hereunder. 7.1 Rate of GST on intro-State supply of specific services with Service Code Tariff (SAC) Government of India Ministry of Finance (Department of Revenue) Notification No. 11/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rajiv Awaas Yojana; (c) . 6 7.2 Thus from the above it gets abundantly clear that for availing the benefit as stipulated supra at 3(iv)(a) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended, all the conditions mentioned therein is to be necessarily fulfilled viz. (i) the service should be Construction services under the Heading 9954 (ii) the supply should be a Composite Supply (iii) the work undertaken should be works contract as defined in Clause (119) of Section 2 of CGST Act,2017 and (iv) The work should be by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a road, bridge , tunnel, or terminal for road transportation for use by general public. 7.3 On going through the Scheme of Classification of Services as provided in the Annexure to Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 supra, the SACs which are relevant to the issue in hand are as under: 7.3.1 It would be relevant to have a preliminary view of the text of the said Scheme of Classification of Services. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g circuits or fittings in buildings and other construction projects: ANNEXURE: SCHEME OF CLASSIFICATION OF SERVICES S.No. Chapter, Section, Heading or Group Service Code (Tariff) Service Description (1) (2) (3) (4) 1 Chapter 99 All Services 2 Section 5 Construction Services 3 Heading 9954 Construction services 4 Group 99541 Construction services of buildings 5 995411 Construction services of single dwelling or multi dwelling or multi-storied residential buildings 6 995412 Construction services of other residential buildings such as old age homes, homeless shelters, hostels and the like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sification of Services is based on the explanatory notes to the UNCPC, and as recommended by the committee constituted for the purpose, is annexed. 3. The explanatory notes indicate the scope and coverage of the heading, groups and service codes of the Scheme of Classification of These may be used by the assessee and the tax administration as a guiding tool for classification of services. However, it may be noted that where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description. EXPLANATORY NOTES FOR SUPPLY OF SERVICES UNDER GST [Chapter 99] 9954 Construction services : This heading includes : i. General construction services for all complete ii. Specialized construction services i.e., services related to parts of buildings or civil engineering works, rather than the complete construction object. .. .. 995421 General construction services of highways, streets, roads, railways, airfield runways, bridges and tunnels This service code includes construction services i. for formations of highways, incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lways, airports, harbours and similar premises; x. installation services of heavy electrical equipment; Page 11 of 130 xi. installation services of telecommunications wiring, including of fibre optic cables; xii. other electrical installation services n.e.c. 995423 General construction services of long-distance underground/overland/submarine pipelines, communication and electric power lines (cables); pumping stations and related works; transformer stations and related works This service code includes construction of i. long-distance overland, underground and submarine pipelines for the conveyance of petroleum products, gas, water or other products; ii. pumping stations and similar related structures; iii. long-distance overland, underground or submarine telecommunication cables transmission lines; iv. long-distance high tension electric power transmission lines (cables); v. long-distance electricity power lines for railways; vi. transformer stations, pylons etc 978736 Installation services of electrical machinery and apparatus n.e.c. This service code includes installation of electric motors, generators and tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: 2.1.1 Design, engineering, supply, testing at Site/Works, freight and transit insurance, erection, installation and commissioning and Trial run (SITC) of Highway Lighting System (which includes lighting pole, luminaries, cable, feeder panels, high mast, DG set and its accessories for complete highway including flyover at 0+000 chainage, major/ minor junctions, cross roads, structures, rest area, truck lay byes, toll plaza, canopy, busboys and bus shelters) and associated civil work for complete lighting solution as per Concession Agreement and IRC-SP-84-2014 for Bilaspur to Pathratpali road project from 0.000 km to 53.300 km in the State of Chhattisgarh. 2.1.2 Scope of work covers all activities involved in the Lighting works at various locations including highway and flyover/VUPS/bridges area across the length of the project as indicated in TCS Schedule (Annexure-VI) and as per approved design basis by IE/NHAI 2.1.3 Supply, installation testing of electrical materials as per BOQ. All the fixtures, panels, wires/cables, lights, earthing materials, and other items complete in all respect, shall confirm to MoRTH specifications and other relevant codes as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and will execute the work as per the relevant specifications of MoRTH, methodology approved by NHAI/IE/Employer. 2.2 The Basic Price shall be inclusive of applicable Taxes (except GST), inclusive of all cost towards required Manpower, Material, Equipment, Tools Tackles, Insurance, Safety equipment, PPE, Statutory Compliance, License, Work Permit, Mobilization, Demobilization, Lodging Boarding, Transportation, Travelling to all the site visit/ Employer/ s office visit/ IE s office visit/ NHAI, Per diem charges, Material shifting, Material inspection charges, Testing charges, all Liaison work, etc. all necessary to complete the scope of work but excluding Goods Service Tax (GST). 7.4.2 Thus, from the above it gets revealed that the scope of work awarded to the applicant covers only the activities involved in the Lighting works at various locations including highway and flyover/VUPS/bridges area across the length of the project as indicated in TCS Schedule and as per approved design basis by IE/NHAI. In addition to the above work of electrification or lighting works the applicant is responsible for Supply, installation testing of electrical materials as per BOQ wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , being special trade installation services involving the installation of basic electrical wiring circuits or fittings in buildings and other construction projects, as also being electrical installation services of illumination and signalling systems for roads. Further the work of supply and laying of cable aptly falls under SAC entry no. 995423 and supply of safety equipment under SAC 998736 in respect of supply of electrical materials as per BOQ furnished by applicant. As can be seen from above, the said EXPLANATORY NOTES TO SCHEME OF CLASSIFICATION OF SERVICES UNDER GST in very unambiguous way stipulates that where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description. The work undertaken by the applicant in entirety, as elaborately discussed herein is nothing but electrical Installation services of illumination for roads and by no stretch of imagination can be termed as civil engineering works. The applicant in their application in the instant proceedings while listing out the essentialities required for availing the benefit as provided under S.no. 3(iv)(a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply and supply of goods is a principal supply; 7.5.1 On perusal of the copy of clause 1.1 of the service order dated 26.06.2020 issued by AIIL to the applicant, the scope of work awarded is design, engineering, supply, testing at site/works, freight and transit insurance, erection, installation and commissioning and trial run (SITC) of Highway Lighting System (which includes lighting pole, luminaires, cable, feeder panels, high mast, DG set and its accessories for complete highway including flyover at 0+000 chainage, major/ minor junctions, cross roads, structures, rest area, truck lay byes, toll plaza, canopy, bus bays and bus shelters) and associated civil work for complete lighting solution as per Concession Agreement and IRC-SP-84-2014 for Bilaspur to Pathrapali road project from 0.000 km to 53.300 km in the state of Chhattisgarh . Further clause 1.3 of the service order provides that supply, installation testing of electrical materials as per BOQ. All the fixtures, panels, wires/ cables, lights, earthing materials, and other items complete in all respect, shall confirm to MoRTH specifications and other relevant codes as a minimum . Clause 1.10 provides that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perusal of the aforesaid clause of the service order read with Bill of Quantities (BOQ), it is clear that the Applicant is supplying all the goods required for highway lighting system as well is responsible for installation of such goods, such as lighting pole, lights, earthing work, etc. The applicant in their submissions before us, to bring home their point has cited reference to clauses 1.10 and 1.11 of the service order wherein the Applicant has been entrusted and made responsible for all the works including construction of foundation, other civil works including excavation, wall, road cutting, fixing of poles, installation of lights, etc. We find considerable strength in the applicants contention that the scope of Applicant s work is not only limited to fixing of lights, but also fixing of poles, which when once installed as lighting system along the road of significant length, there cannot be any intention to move the same to another place during its useful life without making the same defunct. The contract also involves civil work and various items are permanently embedded into earth and these civil works are for completion of the Electrical Installation services entrus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r paint job done in automotive body shop will not fall within the definition of term works contract per se under GST. Such contracts would continue to remain composite supplies, but will not be treated as a Works Contract for the purposes of GST. As per Para 6 (a) of Schedule II to the CGST Act, 2017, works contracts as defined in section 2(119) of the CGST Act, 2017 shall be treated as a supply of services. Thus, there exists a clear demarcation of a works contract as a supply of service under GST. Besides this, as per section 17(5) (c) of the CGST Act, 2017, input tax credit shall not be available in respect of the works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service. Thus, ITC for works contract also stands restricted and can be availed only by one who is in the same line of business and is using such services received for further supply of works contract service. For example, a building developer may engage services of a subcontractor for certain portion of the whole work. The subcontractor will charge GST in the tax invoice raised on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of installation services of highway lighting system to be installed by the applicant on the National Highway comes into existence in an immovable condition and there appears no intention to move the same in future to any other place. The applicant has further submitted that it is not possible to shift the lighting system from one place to another without causing damage/breaking up the existing system. On dismantling, what would be taken out are parts/components of the system and not the system itself. Thus, highway lighting system installed by the Applicant is immovable in nature. 7.6.4 Now the allied aspect for a contract to qualify as works contract is that the contract should involve transfer of property in goods. In this context, it is seen that clauses 1.1, 1.3, 1.26, 6.2 and 8.3 of the service order dated 26.06.2020 supra read with Annexure 1 to the said service order bring to the fore the fact that the applicant is responsible for supply of goods as well as installation thereof, which in our opinion is sufficient enough to conclude that there exits transfer of property as well as of goods being supplied in the instant Installation services under the contract. 7.7 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jai Bhole Complex, Pandri, Raipur,Chhattisgarh, 492001 GSTIN-22AAACH0165J1ZO, as the basic requirement for eligibility to the said exemption as provided under S.no. 3(iv)(a) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended, of getting covered under Construction service under Heading 9954 stands unfulfilled, whereas the instant supply pertains to electrical Installation services . The work undertaken by the applicant is electrical installation services of illumination for roads, as discussed above. As regards the issue of applicability of Entry 3(iv) (a) of Not. No. 11/2017-CT (Rate) as applicable in case of sees provided by the sub-contractor raised by the applicant, hem sae has no relevance as the applicant eligible to be benefit of the claimed exemption. 8. Having regard to the facts and circumstances of the case and discussions as above, we pass the following order:- ORDER (Under section 98 of the Chhattisgarh Goods and Services Tax Act, 2017) No. STC/AAR/02/2022 Raipur Dated 02.05.2022 RULING The ruling so sought by HPL Electric and Power Limited, behind Mata Garage, Jai Bhole Complex, Pandri, Raipur, Chhattisga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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