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TMI Blog2025 (4) TMI 415X X X X Extracts X X X X X X X X Extracts X X X X ..... n of facts, shall render such ruling to be void ab initio in accordance with Section 104 of the Act. 5. The provisions of both the Central Goods and Services Tax Act and the Tamil Nadu Goods and Services Tax Act (herein referred to as the Act) are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Services Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Services Tax Act. M/s. Hitachi Energy India Limited, 3rd Floor, Old No. 7, New No. 41, Jayant Tech Park, Mount Poonamallee Road, Manapakkam, Chennai - 600 089 (hereinafter called as the "Applicant") is engaged in manufacture and supply of electrical equipment of various capacities depending on end use and application to specific industry. They are registered under GST with GSTIN 33AARCA9513E1ZO. 2. The Applicant has made a payment of application fees of Rs. 5,000/- each under sub rule (1) of Rule 104 of CGST Rules, 2017 and SGST Rules, 2017. The Applicant has filed this application seeking Advance Ruling on the following questions, viz., 1. Whether the supply of services made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices of transportation, insurance and freight under the Fifth Contract for the supply of goods. d. Through the instant application, the Applicant seeks a ruling as to whether the services of transportation, insurance and freight are eligible for exemption under SI. No.18 of Notification No. 12/2017-CT (Rate) dated 28.06.2017 e. Alternatively, whether the services of transportation, insurance and freight are in the nature of composite supplies with principal supply being that of goods? 4.1. As per the terms of the Contract, M/s. Power Grid Corporation of India Ltd., ('PGCIL' in short), desirous of setting up 800KV, 6000MW HVDC Multi-Terminal System Package, had invited bids for complete project management, system design, engineering, type testing, manufacture, testing, supply, port handling and customs clearance for the imported goods, further handling, inland transportation and delivery at destination site, unloading, storage, handling at site, erection / installation including associated civil works, employer staff training, testing and commissioning including performance testing of equipment / materials and any other services as required for complete execution of the packag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued by PGCIL dated 21.12.2021 noting the change of name of the applicant from M/s. ABB Power Products and Systems Limited to M/s. Hitachi Entergy India Limited for the purpose of the contract has been enclosed as Annexure -2 to the application. 4.5. The entire scope of work was split into five Contracts covering specific and detailed nature of supply of various goods and services for supply of equipment and material offshore and onshore and for supply of services: (i) 'First Contract' - Off-shore Contract (with ABBAB) - for CIF supply of equipment and material including mandatory / availability spares, type testing & training to be conducted outside India. (ii) 'Second Contract' - On-shore Supply Contract (with BHEL) - ex-works supply of equipment and materials including mandatory / availability spares from within India, type testing under the scope of BHEL as per the division of work indicated in the JV agreement, required for the complete execution of the Project. (iii) 'Third Contract' - On-shore Supply Contract (with Applicant) - ex-works supply of equipment and materials including mandatory / availability spares from within India, type testing under the scope of Applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Equipment to be supplied from abroad under scope of ABB AB 438,121,107 (INR) 3. Installation Charges 9,231,059,834 (INR) The above contract price has undergone several changes since the formulation of the contracts but broadly remains the same. 4.7. The provisions of the contracts require the successful execution of all five contracts for the implementation of the Project, meaning that the contracts are interlinked. As per the provisions of each of the contracts, the Applicant was liable to furnish Contract Performance Security for 10% of the value of the First Contract', 'Second Contract', 'Third Contract', Fourth Contract' and 'Fifth Contract' and the Applicant was to furnish Contract Performance Security for 10% of the Contract Value of the Third Contract' and Fifth Contract' to ensure due performance of the Contract. 4.8. As mentioned above, the price payable by PGCIL in respect of the supplies specific to each of the contracts and entities are separately stipulated and milestones have been identified for payment by PGCIL. The Contractor under each of the contracts, shall raise the invoice in respect of part deliveries as work proceeds. PGCIL shall make the payment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoices raised by the Applicant on PGCIL was enclosed as Annexure-6. 4.14. The Applicant has borne the cost of the differential GST on their own account and duly deposited the same to the Government in a timely manner. The Applicant has also duly declared the details of the tax paid in their Form GSTR-3B as regularly filed during the relevant period. The invoice raised by the Applicant in terms of the Fifth Contract requesting PGCIL to make the payment of inter alia the Contract Value of transportation, freight and insurance along with GST and GST component has not been acknowledged and the payments have not been released, as reported by the applicant. 5.1. In the above factual matrix, the Applicant seeks advance ruling on the following questions: i. Whether the supply of services made by the Applicant under Fifth Contract is composite supply with principal supply of goods under the Third Contract? ii. Whether the supply of services of transportation, freight and insurance under the Fifth Contract' provided for the goods supplied by the Applicant is in the nature of Business Support Services and shall be chargeable to tax at specified rates? 5.2. We find that the queries ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r stated that in response to the queries raised by the Authority for Advance Ruling, Tamil Nadu, through the reference RC No. 286/2023, dated 22:07.2024, they have the furnished relevant details/documents as called for vide their letter dated 03.12.2024 and requested the same to be taken on record. She insisted on the cross-fall breach clause which is in-built in the contract, whereby all the five contracts are inter-linked to each other and that the failure in one contract results in the failure of the entire contract. She cited a few ruling pronounced by various authorities on the same issue in support of their contention and stated that the copies of the same have been filed already along with the written submissions. DISCUSSION AND FINDINGS 8.1. We have carefully considered the submissions made by the applicant in the advance ruling application, the submissions made during the personal hearing and the documents furnished by the applicant thereafter. The questions which require an advance ruling in this case are :- i. Whether the supply of services made by the Applicant under Fifth Contract is composite supply with principal supply of goods under the Third Contract? ii. Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia Limited the right to terminate (Annexure-3 Page 52-54). Thus, it is understood that the Five contracts entered by the Joint Venture and the applicant with Power Grid Corporation of India Limited are indivisible and interlinked to each other, covered by 'cross-fall breach clause', whereby the breach of one of the contracts will result in breach of the entire contract. 8.6. The exact terms of the Fifth Contract', assumes significance under the facts and circumstances of the instant case, and the same is as in page 4 of the Contract dated 25.01.2017 is reproduced for reference and analysis, viz., "Fifth Contract' for all services to be performed in India covering, inter alia, local transportation, insurance and other incidental services, taking delivery of equipment / materials to be supplied under the 'First Contract' and 'Third Contract' under the scope of ABB AB and INABB, respectively, and unloading, handling, storage, erection including civil works, testing and commissioning of various equipment / materials to be supplied under the First, Second, and Third Contracts, under the scope of ABB AB / BHEL / INABB, as per the division of work under the JV agreement, training in I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncipal supply." It becomes clear from the above, that a supply shall be treated as a 'composite supply' when two or more taxable supplies are provided, which are naturally bundled together in the ordinary course of business, one of which is a principal supply. Further, it is a normal industry practice that the goods to be supplied are delivered at site, and freight and insurance gets attached to the same and are paid as a natural consequence. Thus, the supplies are bundled together and the services so performed are ancillary and necessary for the supply of goods, being the principal supply. However, we note that in the instant case, the scope of work especially under the Fifth Contract' involving the applicant, does not get restricted to procurement of goods, transportation of goods and taking delivery of the same, but it extends to erection, testing and commissioning, i.e., installation of the facility/system including the training to be imparted in relation to the same. The nature and the scope of work that is involved in the instant case, gets reflected in simple terms as in Article 2 (Contract Price and terms of payment) of the Contract, i.e., Fifth Contract - On Shore Contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration." 8.11. From a conjoined and harmonious reading of the various clauses of Third Contract and Fifth Contract awarded to the applicant, and their inter-dependency under the overall contract comprising of five contracts, we are of the considered opinion that the agreement for setting up the aforesaid project is nothing but a composite works contract as defined under Section 2 (119) of the CGST/TNGST Acts, 2017, and that the same is classifiable under 'Construction Services', falling under SAC 9954, attracting GST @ 18% (CGST-9% + SGST-9%) as provided under entry Sl.No.3 (xii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended vide Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018. 8.12. Accordingly, once it is held that the said activity qualifies as 'Works Contract' Service, the question of examining the applicability of exemption as provided under Sl.No.18 of the Notification No. 12/2017-Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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