In re Siemens Ltd (GST AAR West Bangal)
Whether mobilization advance for works contract is supply on the date on which it stands credited on the supplier’s account?
After the GST comes into force, the works contract is no longer divisible into a contract for the supply of goods and a service contract. It is a service contract and the entire unadjusted mobilisation advance as on 01/07/2017, according to the Contract, applies towards payment of consideration for the works contract service. As discussed in para 3.3 above, ‘consideration’ includes any payment for the inducement of a supply. Mobilisation advance is meant specifically for inducing the contractor to spend for provisioning the works contract service. The contract provides a mechanism in the form of a bank guarantee that ensures that the advance is not diverted or misappropriated. Its application as payment for inducing the supply is, therefore, direct and unambiguous. It is, therefore, ‘consideration,’ whether or not in the form of a deposit, for the supply of the works contract service. The Contract makes it amply clear that the entire amount is applied as consideration for provisioning works contract service.
The Applicant’s reference to the decisions of the Tribunal in Thermax Instrumentation Ltd (supra) and GB Engineering Enterprises Pvt Ltd (supra) is misplaced in this context. The relevance of these decisions in the legal framework of the Finance Act, 1994 is discussed in para 3.6 and need not be repeated. They are not relevant under the GST regime, as the valuation of works contract no longer requires a rule separate from other services. The Contract, therefore, is to be valued as provided under section 15(1) of the GST Act, which does not restrict in any way the scope of time of supply, as provided under section 13(2) of the GST Act. Moreover, ‘consideration’ under the GST Act has a wider scope and includes deposits if applied as consideration. In that context, whether the mobilisation advance is earnest money or not is of little relevance.
The Applicant is, therefore, deemed to have supplied works contract service to KMRCL on 01/07/2017 to the extent covered by the lump-sum that stood credited to its account on that date as mobilisation advance. As the supply to the extent of the above amount is deemed to have been made on 01/07/2017 and tax is leviable thereon accordingly, the value of the supply of works contract service in the subsequent invoices as and when raised should, therefore, be reduced to the extent of the advance adjusted in such invoices. To avoid double taxation, the GST should, therefore, be charged on the net amount that remains after such adjustment.
Also Read AAAR Decision- GST on mobilization advance for works contract- Date of Supply
