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TMI Blog2023 (7) TMI 705X X X X Extracts X X X X X X X X Extracts X X X X ..... ental charges are recovered from NHAI but the property remains under the ownership of PSTCL. Under which provision/section GST is to be charged on above work, at what rate and on which amount i.e; material, labour and supervision charges or only on supervision charges? ii) PSTCL construct and install sub-station / transmission lines on behalf of big industries/ other third parties for power supply (contribution works). In this case also total cost of work i.e; material cost, labour charges and supervision charges / departmental charges are recovered from NHAI but the property remains under the ownership of PSTCL Under which provision / section GST is to be charged on above work, at what rate and on which amount i.e; material, labour and supervision charges or only on supervision charges? iii) Whether the PSTCL can claim Input Tax Credit on material and services used in above works (either the work done by PSTCL itself or on turnkey basis) as the property remains under the ownership of PSTCL? At the outset, we would like to make it clear that the provisions of both the CGST Act and the PGST Act are the same except for certain provisions. Therefore, unless a mention is speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly supervision charges? iii) Whether PSTCL can claim Input Tax Credit on material and services used in above works (either the work done by PSTCL itself or on turnkey basis) as the property remains under the ownership of PSTCL? M/s Punjab State Transmission Corporation Limited, GSTIN: 03AAFCP4714J1ZK is engaged in the business of Transmission of electricity which is exempt supply under GST Act. Apart from transmission of electricity, PSTCL executes deposit and contribution work on behalf of the third parties. i) Deposit Work: In case of deposit work, total cost of material, labour and supervision charges are to be paid by the third party to PSTCL and the property in goods (i.e; asset) will be transferred to the said party, which requested PSTCL to execute the work on behalf of them. ii) Contribution Work: In case of contribution work, total cost of material, labour and supervision charges are to paid by the third party to PSTCL. However, goods (i.e. asset) is not transferred to third party and asset shall remain the property of the PSTCL. In both the above cases, the amount is recovered fully from the third party. With regard to first and second question asked by the appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplement the supply of electricity are neither naturally bundled nor provided in conjunction with each other. Hence it cannot be considered an exempted supply. These are taxable services falling under service accounting codes (SAC Codes) 995442 (Installation, assembly and erection services of other prefabricated structures and constructions) under Goods and Service Tax classification which are taxable at 18% of IGST Act (9% CGST and 9% PGST). With respect to third question regarding availability of TTC, as per sub-section (2) of section 17 of the PGST Act, 2017 read with rule 42 of the PGST Rules, 2017, ITC is available only to the extent of use in furtherance of taxable supplied. It implies that where the goods or services are used by the registered tax payer partly for utilisation in taxable supplies and partly for exempt supplies, then the ITC will be restricted to an amount which attributable for taxable supplies (including zero rated supplies). 4. PERSONAL HEARING: Personal hearing in the matter was held on 03.02.2022. Sh. Harminder Singh, Accounts Officer of the applicant appeared on behalf of the applicant and on being enquired whether any proceedings on the issue are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xure H. d) Copy of tender document along with work cum allotment order attached as Annexure I,J,K,L& M. 5. DISCUSSIONS AND FINDINGS: We have carefully gone through to the facts of the case, submissions made by the applicant in his application for advance ruling as well as the submissions made by authorised representative at the time of personal hearing. We have also gone through the questions raised by the applicant on which advance ruling is sought, the applicant's interpretation of law and the detailed comments submitted by the Assistant Commissioner, State Tax, Patiala. We observe that the following issues merit careful consideration for arriving at the final decision: (i) Under which provision section GST is to be charged on shifting of Transmission Lines on request of NHAI (Contribution work) for widening of road, at what rate and on which amount i.e; material, labour and supervision charges or only on supervision charges? (ii) Under which provision section GST is to be charged on construction and installation of sub-station / transmission lines on behalf of big industries / other third parties for power supply (contribution works)., at what rate and on which amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ensee shall comply with such technical standards, of operation and maintenance of transmission lines, in accordance with the Grid Standards, as may be specified by the Authority." 5.5 Therefore, we find that as the applicant is a state transmission licensee under the Electricity Act 2003, and it owns the transmission system/infrastructure with exclusive right and responsibility of its transmission lines. Apart from the above activity, the applicant also executes deposit and contribution works as detailed below in relation to transmission on behalf of third parties. I). Deposit Work: In case of deposit work, total cost of material, labour and supervision charges are to be paid by the third party to applicant and the property in goods (i.e; asset) is transferred to the said party, which requested the applicant to execute the work on behalf of them. II). Contribution Work: In case of contribution work, total cost of material, labour and supervision charges are to paid by the third party to the applicant. However, goods (i.e; asset) is not transferred to third party and asset shall remain the property of the applicant. We observe that although the applicant is said to be executin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e seen that the term works contract has been restricted to contract for building construction, fabrication etc of any immovable property but there should be a transfer of property in goods involved in the execution of such contract. Since in the case of contributory work undertaken by the applicant the ownership of the transmission lines/ towers still lies with the applicant, the supply of goods and services cannot be said to be classified under "works contract". Therefore such supplies made shall be treated as a composite or a mixed supply as the case may but can not be treated as a "Works Contract" for the purpose of GST. 5.9 Further, Section 8 of the CGST Act makes provision for tax liability on composite and mixed supplies which is reproduced below:- "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 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 two or more supplies shall be treated as a supply of that particular supply which at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C) & Scheme of classification of services) has been gone through and relevant service code is as under:- HSN Code HSN Code Description 998631 Support services to electricity transmission and distribution From the above, we observe that services provided by the applicant to the third parties as 'Contribution Work' falls under HSN/SAC 998631 which will attract GST @ 18% (CGST 9% + SGST 9%), as per Annexure to Notification No. 11/2017-Central Tax (Rate) dated 28th June, 2017 (as amended). 5.13 We would also like to refer to Circular No. 34/8/2018-GST dated 01.03.2018, issued vide F. No. 354/17/2018, which has categorically clarified that the other services such as application fee for releasing connection of electricity, rental Charges against metering equipment, testing fee for meters/transformers, capacitors etc., labour charges from customers for shifting of meters for shifting of service lines and charges for duplicate bill provided by DISCOMS to consumers are taxable. The relevant part of the said circular is reproduced below: - S.No Issue Clarification 4 (1) Whether the activities carried by DISCOMS against recovery of charges from consumers under State Electri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e supply and not included in the price actually paid or payable for the. goods or services or both; (c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services; (d) interest or late fee or penalty for delayed payment of any consideration for any supply; and (e) subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. Explanation.-For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy." From above we observe the value of a supply of goods or services shall be the transaction value, that is the price actually paid or payable for the said supply of goods and/or services where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. The value of supply shall include amount that the applicant is liable to pay but which has been incurred by the recipi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f material, labour and supervision charges are to be paid by the third party to PSTCL and the goods i.e. asset is not transferred to third party and remains the property of PSTCL. Therefore the taxability of the supply made in this case also shall be similar as discussed supra. 5.18 . With regard to the third query whether ITC is available to the applicant on the material and services used in above works (either the work done by PSTCL itself or on turnkey basis) as the property remains under the ownership of PSTCL. We find that the applicant is undertaking Contribution Work i.e. creating infrastructure for electricity transmission on the request of NHAI/ Third party and recovering the same from the NHAI/ Third party. 5.19 We find that Section 16 of the CGST Act, 2017 deals with the eligibility and conditions for taking the input tax credit which is reproduced hereunder:- "16. Eligibility and conditions for taking the input tax credit.- (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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