In re Manipal Energy & Infratech Ltd. (GST AAR Karnataka)
Whether entry 3(vi)(a) to Notification No.8/2017 –Integrated Tax (Rate) is applicable for services provided to Electricity Supply Companies (wholly owned Government of Karnataka undertakings) by way of construction, erection, commissioning, installation, completion, etc., which attracts levy of 12%.
The services provided by the applicant to the Electricity Supply Companies (wholly owned Government of Karnataka Undertakings) by way of construction erection, commissioning, installation, completion, etc. are not covered under entry 3(vi)(a) of the Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 or under entry 3(vi)(a) of the Notification No.8/2017-Integrated Tax (Rate) dated 28.06.2017 as amended from time to time and consequentially are not eligible to be taxed at a lower rate of 12% GST and hence are liable to be taxed at 18% GST.
Read AAAR Ruling in this case- 18% GST on commercial services to electricity distribution companies
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, KARNATAKA
ORDER UNDER SECTION 98141 OF THE CGST ACT, 2017 & UNDER 98141 OF THE KGST ACT, 2017
1. M/s Manipal Energy and Infratech Limited., (called as the ‘Applicant’ Company hereinafter), having GSTIN number 29AAHCM0173A1ZT, have filed an application for Advance Ruling under Section 97 of the CGST Act, 2017 & Section 97 of the KGST Act 2017, in FORM GST ARA-01 discharging the fee of Rs.5,000/-each under the CGST Act & the KGST Act.
2. The applicant company has sought advance ruling in respect of the following question:
Whether entry 3(vi)(a) to Notification No.8/2017 —Integrated Tax (Rate) is applicable for services provided to Electricity Supply Companies (wholly owned Government of Karnataka undertakings) by way of construction, erection, commissioning, installation, completion, etc., which attracts levy of 12%.
3. The applicant furnishes relevant informations related to the activity as under.
3.1 The Applicant, is a Company, registered under the Goods and Services Act, 2017, engaged in the activity of undertaking civil construction, mechanical structural work, erection of equipment, electrical infrastructure including substations, etc. The applicant also undertakes operation & maintenance of Waste Water Treatment Plants, Flocculation systems, Reverse Osmosis, Effluent Treatment Plants, Drinking water facilities, Zero Liquid Discharge Plants.
3.2 The Applicant (MEIL) is engaged in civil construction, mechanical structural work, erection of equipment, electrical infrastructure including substations etc. MEIL also undertakes operation and maintenance of Waste Water Treatment Plants, Flocculation Systems Reverse Osmosis, Effluent Treatment Plants, Drinking Water Facilities, Zero Liquid Discharge Plants, etc.
3.3 The Applicant regularly bids for the tenders floated by various electricity companies. In the instant case, the applicant participated in the tenders floated by some of the electricity distribution companies based in Karnataka i.e., Hubli Electricity Supply Company Limited (hereinafter referred to as “HESCOM”), Mangalore Electricity Supply company Limited (hereinafter referred to as “MESCOM’) and Bangalore Electricity supply company Limited (hereinafter referred to as “BESCOM”).
3.4 The Applicant, upon participating in the tender, has been awarded the following contracts by MESCOM:
a. Contracts for “Strengthening of Distribution Networks in Udupi Circle of MESCOM, Karnataka under Integrated Power Development Scheme (IPDS) on turnkey basis” vide letter number SE(T)/EEE(APR)/IPDS-SS/2017-18/CYS-3 darted 28.04.2017 and vide letter number SEM/EEE(APR)/IPDS-SS/2017-18CYS-4 dated 28.04.2017.
b. Contract for the work of providing infrastructure to regularized unauthorized IP sets by extending lIKV FIT Lines, LT 3 phase 4 wire lines, erection of BEE 3 Star Rated 25/63KVA distribution transformers on total turnkey basis under rate contract for a period of one year in urban section of Shikaripura O&M Sub-division vide letter number MESCOM/SEE(P)/EE9W) 2017-18/2823-33 dated 11.05.2017.
c. Contract for “Rural Electrification and System Strengthening works in Udupi District of MESCOM, Karnataka under Deen Dayal Upadhyaya Gram Jyothi Yojana (DDUGY) on turkey basis” vide letter number SECTREE(APR)/DDUGY-RE/ 2017-18/ CYS-11 dated 28.04.2017.
Similarly, the applicant, upon participation in the tender, has been awarded the contract by BESCOM for the work of providing infrastructure to regularized unauthorized IP sets by extending 11KV HT Lines, erection of 2SKVA 3 star rated distribution transformers and extension of LT line 3 phase 4 wire on Total Turnkey basis under rate contract for a period two year in Kolar division on percentage basis.
Also, Check how gst works in India.
Also, the applicant upon participating in the tender has been awarded the contract by HESCOM for strengthening works in 8 Nos. of towns. in Belagavi circle of Belagavi District in HESCOM of Karnataka State under integrated power development scheme (IPDS).
4. Contracts with MESOM
4.1 Strengthening of Destitution Network in Udupi Circle of MESCOM, Karnataka under Integrated Power Development Scheme (IPDS)
4.1.1 The contract for ‘detailed work award’ comprises of two parts: First part being the supply of goods and second part the supply of services. Para 4 of Schedule-IV of the ‘detailed work award’ deals with ‘scope of works’. As per pare 4.1 of the ‘detailed work award’ the ‘scope of work’ has been defined in Section -VII of Volume-I of the tender document The relevant paras of the scope of work as per the tender document is extracted below:
2.0 The following works are proposed for improvement of Distribution Network under IPDS on Total Turnkey basis in following towns of Udupi Circle. Viz Udupi Town. Saligrama Town, Kundapura Town and Karkala Town.
3.0 The scope of work under the subject package includes site survey, planning, design, engineering, assembly manufacturing, testing, supply, loading, transportation unloading, insurance, delivery at site, handing, storage, installation, testing, commissioning and documentation, of all items/ material required to complete the Electrification works.
5.0 Any other items not specially mentioned but which are essentially required for satisfactory performance and completeness of work, shall be deemed to be included in the scope of specifications and works and the same shall be executed/ carried out by the bidder at no extra cost to the MESCOM.
6.0 The works in each division are handled by concerned engineer in-charge of the 0 & M Division/ Authorized assistants, The measurements of the works executed by the contractor should be certified by the Engineer In-charge.
7.0 Successful bidder has to carry out the works as per the directions of Engineer In-charge of concerned division duly following MESCOM norms and regular practice being adopted for construction of HT/LT Lines, Erection of Distribution Transformers, Re-conducting, Augmentation of Line/Transformers and other proposed works using detailed approved estimate available in O&M divisions of respective Towns.
8.0 Entire works shall be executed in strict conformity with the contract documents and such explanatory detailed or modified drawings and directions as may be furnished from time to time by the Engineer in charge for the guidance of the contractors.
All equipment/ material to be supplied and under this contract shall be procured exclusively for this particular project only.
9.0 Engraving of ?PDS’ should be done in materials viz, Poles. Transforms (all Rating), Cables. Energy Meter, etc Procured for this works.
10.0 All Materials Released from the existing system/ lines of the proposed project, has to be corresponding MESCOM Divisional Stores. The Payment in this regard will be admitted only after receipt of store acknowledgment.
4.1.2 A brief scope of work provided under this contract requires MEIL to undertake ‘Inland transportation (specified equipment and material) to final destination at site, insurance, taking delivery, unloading, handling storing and supply including associated civil work, testing and commissioning of all equipment and materials supplied by the contractor and documentation of all items/material required to complete strengthening of distribution network in the towns of Udupi Circle viz., Udupi, Karkala, Saligrama, Kundapura towns’.
4.2 Providing infrastructure to regularized un-authorized IP sets in urban and rural section of Shilcaripura O&M Sub-division.
4.2.1 Para 3 of the proposal letter number MESCOM/SEE(P)/EE(W) 201718/2823-33 dated 11.05.2017 issued by MESCOM to MEM deals with ‘scope of work’. The relevant paras of the ‘scope of work’ reads as follows:
i. The scope of the works covered under this package is strictly for the work of providing infrastructure to the regularized un-authorised IP involving the works like Drawing & Commissioning of 11 kV Lines, Installing & Commissioning of 25/63 KVA DTCs, Drawing Z& Commissioning of L7′ 3 phase lines on total turnkey basis under Rate contract for the period of one year in Urban & Rural Sections of Shikaripura O&M Sub-division, Shikaripura O&M division as specified on the bid documents.
ii. The Scope of this Proposal is on 707’AL TURNKEY BASIS’ wherein all the materials/ equipment to be supplied shall be as per IS & MESCOM specification and the services required for the completeness of the works as per specifications come under the scope of the contractor. This shall completely cover packing, forwarding, supply of Materials on FOR Site basis including Insurance and Transportation. Erection, Testing at Site and Commissioning.
4.2.2 From the above it is clear that the work under consideration is a turnkey infrastructure work.
4.3 Rural Electrification and System Strengthening works in Udupi District of MESCOM, Karnataka under Deen Dayal Upadhyaya Gram Jyothi Yojana (DDUGY).
4.3.1 The contract for ‘detailed work award’ comprises of two parts. First part being the supply of goods and second part the supply of services. Para 4 of Schedule-IV of the ‘detailed work award’ deals with ‘scope of works’. As per pars 4.1 of the ‘detailed work award’ the ‘scope of work’ has been defined in Section -VII of the Volume-I of the tender document. The relevant paras of the scope of work as per the tender document is given below:
1.0 The scope of work under the subject package includes site survey, planning, design, engineering, assembly manufacturing, testing, supply, loading, transportation, unloading, insurance, delivery at site, handling, storage, installation, testing commissioning and documentation of all items/ materials required to complete the Electrification works.
2.0 The details of the Equipments to be supplied, transported, erected, assembled, tested & Commissioned are indicated in Price Schedule. (Refer, Vol-U, Price Schedule). The quantities indicated in the price schedule are only approximate and may increase or decrease and prices quoted by the bidder are deemed to be valid in spite of such variations in the quantities at the time of award of contract.
3.0 Any other items not specially mentioned but which are essentially required for satisfactory performance and completeness of work. Shall be deemed to be included in the scope of specifications and works and the same shall be executed/ carried out by the bidder at no extra cost to the MESCOM.
4.0 The works in each division are handled by concerned engineer in- charge of the 0 & M Division/ Authorized assistants. The measurements of the works executed by the contractor should be certified by the Engineer In-charge.
5.0 Successful bidder has to carry out the works as per the directions of Engineer In-charge of concerned division duly following MESCOM norms and regular practice being adopted for construction of HT/ LT Lines, Erection of Distribution Transformers. Re-Conductoring, Augmentation of Line/ Transformers and other proposed works using detailed approved estimate available in O&M divisions of respective Blocks.
6.0 Entire works shall be executed in strict conformity with the contract documents and such explanatory detailed or modified drawings and directions as may be .furnisheel from time to time by the Engineer in charge for the guidance of the contractors. All equipment/ material to be supplied and used under this contact shall be procured exclusively for this particular project only.
9.0 Engraving of DDUGLY. should be done in materials viz, Poles, Transformers (all Rating), Cables, Energy Meter, etc procured for this works
10.0 All materials Released from the existing system /line of the proposed project, has to be returned to corresponding MESCOM Divisional Stores. The Payment In this regard will be admitted only after receipt of store acknowledgement.
4.3.2 A brief scope of work provide under this contract, again, requires MEIL to undertake ‘Inland transportation (specified equipment and material ) to final destination at site, insurance, taking delivery, unloading, handling, storing and supply including associated civil work, testing and commissioning of all equipment and materials supplied by the contractor and documentation of all items/material required to complete Rural Electrification 8s System Strengthening works in Udupi District.
5 Contracts with BESCOM
5.1 Contract for the work of providing infrastructure to regularize unauthorized Irrigation Pump (19 sets in Kolar division.
5.1.1 The contract for providing infrastructure comprises of two parts. First part being the supply of goods and second part the supply of services..
5.1.2 Supply of Goods
In terms of para 1 of the proposal number BESCOM/ CGM(Proj)/DGM-4/BC-14 /17-18/3740-49 dated 16.11.2017, the description of work includes “supply of materials for providing electrical infrastructure to regularize Unauthorized IP sets” by extending 11KV High Tension (HT) lines, erection of 25KVA, 3 star rated Distribution Transformers and extension of Low Tension (LT) line, 3 phase, 4 wire, on total turnkey basis under rate contract for a period of two years in Kolar division.
5.1.3 Supply of Services
In terms of para 1 of the proposal number BESCOM/CGM(Proj)/DGM-4/BC-14/17-18/3750-59 dated 16.11.2017 the description of work includes “erection, testing and commissioning of materials for providing electrical infrastructure to regularize Unauthorized 111 sets” by extending 1 IKV HT lines, erection of 25KVA 3 star rated Distribution Transformers and extension of LT line , 3 phase, 4 wire, on total turnkey basis under rate contract for a period of two years in Kolar division.
6. Contracts with HESCOM
6.1 Strengthening works in 8 Nos, of towns in Belagavi Circle of Belagavi District in HESCOM of Karnataka State under integrated power development scheme (IPDS)
6.1.1 In terms of para 8 and para 6 of the “Detailed Work Award” for supply and erection portion the ‘scope of work’ has been defined in Section-VI! of Volume-I of the tender document. The relevant parts of the scope of work as per the tender document is given below:
1. Supply, Erection, Testing as Commissioning of all materials as per tender document.
2. Execution of all other works as per tender document. All Steel structure shall be hot dip galvanized as per relevant Indian Standard.
3. The Distribution Transformers must be BIS certified in line with Electrical Transformers (Quality Control) order, 2015 (along with its latest amendments).
4. A set of drawings are enclosed with this bid document, These are tender drawing and are to be approved by the Project Manager. These drawings are indicative in nature and therefore, must be referred while preparing drawings for approvaL
RELEVENT PROVISION OF LAW TO BE CONSIDERED
7. In the facts of the present case, the issue under consideration is the rate of tax applicable on supply of services to Electricity supply Companies (wholly owned Government of Karnataka undertakings) by way of construction, erection, commissioning, installation services in the nature of original works.
8. It is submitted that the relevant entry in the Rate Notification which covers the service by way of construction, erection, commissioning, under Chapter Heading 9954 being services provided to Electricity Supply Companies (wholly owned Government of Karnataka undertaldng) by way of construction, erection, commissioning, installation, etc’. is entry 3(vi)(a), which provides for the rate of GST at 12%. The relevant portion of the entry reads as follows:
Comments are closed.