In re Yogiraj Powertech Private Limited (GST AAR Maharastra)
Question 1. :- Whether EPC Contract for electrical cable supply and laying work can be classified as contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract.
Answer:- Answered in the affirmative.
Question 2. :- Whether these contracts can be classified as works contracts as per GST Law and whether notification no. 11/2017-Central Tax (Rate) dated 28th June 2017 as amended by notification no.01/2018-Central Tax (Rate) dated 25th Jan 2018 is applicable to the present case?
Answer :- In view of the discussion above these contracts are classifiable as Works Contract as per GST Law and Notification No. 11/2017-Central Tax (Rate) dated 28th June 2017 as amended by notification no. 01/2018-Central Tax (Rate) dated 25th Jan 2018 is applicable to the present case but the rate of GST @ 18% would be applicable in respect of applicant as per detailed discussions above.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING MAHARASTRA
PROCEEDINGS
(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by YOGIRAJ POWERTECH PRIVATE LIMITED, the applicant, seeking an advance ruling in respect of the following ISSUE.
1. Whether EPC Contract for electrical cable supply and laying work can be classified as contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract.
2 Whether these contracts can be classified as works contracts as per GST Law and whether notification no. 11/2017-Central Tax (Rate) dated 28th June 2017 as amended by notification no.01/2018-Central Tax (Rate) dated 25th Jan 2018 is applicable to the present case?
At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act 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 same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the “GST Act”.
02. FACTS AND CONTENTION – AS PER THE APPLICANT
The submissions, as reproduced verbatim, could be seen thus-
Statement of relevant facts having a bearing on the question(s) raised
We have received order from Nagpur Metro Rail Corporation hereafter called as NMRCL for “Shifting LT,HT O/H lines crossing and providing LT,HT U/G cables from Hingna Depot CH. 19500 to Ambazari Lake CH.12500 for Nagpur Metro Rail Project for E-W corridor”. NMRCL Is a Special Purpose Vehicle (SPV) created for the smooth implementation and operations of the Nagpur Metro Rail Project & is a joint venture of Govt. of India & Government of Maharashtra, with 50:50 equity. NMRCL is incorporated by Govt. of India- Ministry of Corporate affairs.
This work is awarded to us through tendering process and scope of work is described in work schedule attached to the tender. The work involves Supply, erection, testing and commissioning including transport, loading, unloading, insurance etc. of transformer substation, HT & LT Overhead Line & Cable Through Underground, from RR Substation to metro Khapri station for Metro Rail Project. The work schedule separately describes each activity to be carried out to complete the work and also rate for each activity is separately mentioned, by adding amount of each activity total estimated tender cost is derived and we have to quote in percent % above or below of the estimated cost. Thus we have no option to quote the individual prices for each activity but we have to quote in percent below or above to the total estimated cost provided by contractee i.e. NMRCL. More over we have to accept whole tender and do not have option to accept part activities and refuse rest activities. Thus it can be seen that:
a. The components are sold as a package at a single price and different components are not available separately.
b. Single tender is floated for all the components.
c. Different components are integral to one main supply. If one or more components are removed the nature of main supply would get affected.
d. Many components viz. cement concrete foundation, dismantling, joints, earthing, stone, metal etc. are clearly incidental and ancillary to an identifiable main supply i.e supply of cable.
In the above said case identifiable main supply particularly underground “LT/HT cable” and it can be moved/shifted by excavation of earth and can be re-installed at other place. The cable is embedded in earth for safety of human and cable itself. The name of the work itself says “… Shifting & providing 315 KVA transformer substation HT & LT Overhead Line & Cable Through Underground,…”
The said NMRCL department is insisting us to charge 12% GST as per the notification number 11/2017-Central Tax (Rate) dated 28th June 2017 as amended by notification no. 01/2018-Central Tax (Rate) dated 25th Jan 2018, treating above work as Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied by way of construction, erection, commissioning, or installation of original works pertaining to,- (a)
railways, including monorail and metro;
Statement containing the applicant’s interpretation of law and/or facts, as the case may be, in respect of the aforesaid question(s) (i.e. applicant’s view point and submissions on issues on which the advance ruling is sought).
As per Section 2(119) of the Central Goods and Services Tax (CGST) Act, 2017, unless the context otherwise requires, the term “works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract”
As can be seen from definition of works contract only construction, fabrication, completion ……………. of immovable property will be considered as works contract but as per our interpretation of work schedule attached to the tender the work can not be classified as immovable property therefore it cannot be classified as works contract and hence it cannot be classified as service, thus the above said notification will not be applicable in this case. But it should be classified as Composite supply, as different goods and services vis. Testing, cable, wires, cement pipes, laying, joints, Insurance, commissioning, transport etc. which are naturally bundled and supplied in conjunction with each other, with principal supply being LT/HT Cable.
Once it is classified as composite supply, rate of GST applicable to principal supply will be applicable to whole composite contract, here the principle supply is LT/HT cable (item no. 1, 7,10 of work schedule) and rate of the same should be applicable to whole contract.
NAGPUR METRO
Name of Work:- Estimate No. NMRCI/U/S (ELE)/01-2015,
CH 11040 to CH 16280 Shifting & providing 315 KVA transformer substation HT < Overhead Line & Cable Through Underground, 11 KV RMU, LBS from RR Substation to metro Khapri station for Metro Rail Project on North South Corridor.
SCHEDULE-B
