In re Agarwal Coal Corporation Pvt. Ltd. (GST AAR Madhya Pradesh)
Whether the Applicant is liable to discharge tax liability @ 18% on coal handling and distribution charges wherever supply of such services is intended to be made expressly to a customer or will the Applicant be entitled to charge GST at the rate of 5% as applicable on supply of coal?
Coal handling and distribution charges will be taxable @ 18% and not 5% wherever supply of such services only is intended to be expressly made to a customer.
Will the applicant be entitled to utilize the input tax credit availed for discharging liability towards supply of coal and supply of coal handling and distribution charges?
Input credit availed as per the conditions specified in section 16 shall be allowed for discharging the liability towards supply of coal and supply of coal handling and distribution charges respectively.
FULL TEXT OF ORDER OF THE AUTHORITY OF ADVANCE RULING, MADHYA PRADESH
1. BRIEF FACTS OF THE CASE:
1.1. M/s Agarwal Coal Corporation Private Limited (“Applicant” for brevity) is engaged in business of trading of coal in India and for the same Applicant undertakes purchase of coal from domestic markets as well as imports from overseas.
1.2. On purchase of coal, the Applicant has submitted that GST is paid @ 5% (on intra-state and inter-state supply as the case may be) and on import of coal from overseas market, IGST is paid @ 5%.
1.3. After coal is imported, the coal is stockpiled at port itself at the designated place for subsequent sale to customers. Various services are availed by Applicant at the port during process of procurement of coal and for fulfilling obligations towards supply of coal.
1.4. The services so utilized by Applicant include the following but not limited to,-
a. Stevedoring services
b. Unloading and Loading of coal
c. Security of coal
d. Insurance
e. Renting of the premises
Appropriate rate of GST is charged by respective service providers on above services so provided.
1.5. Above services will be utilized by Applicant at the following stages:-
a. Procurement and keeping of coal at the port
b. Services provided to customer at port towards handling the coal on behalf of / for the customer.
1.6. Customers from all over India including traders and manufacturers place order(s) on Applicant which can be broadly classified as:-
a. Supply of coal simpliciter:- Where the customer does not wish to avail any of the coal handling and distribution services and intends to purchase coal.
b. Supply of coal and availment of coal handling and distribution:- Where the customer not only wishes to purchase coal, but also intends to avail services of coal handling and distribution during the period of supply of coal.
1.7. Coal handling and distribution charges (per MT) includes a bouquet of services provided to customer towards handling the desired quantity of order placed by customer including but not limited to :-
a. Loading, unloading of material at site
b. Storage charges of the quantity ordered
c. coal safety and security
d. Adequate water sprinkling
e. Commitment charges towards fulfilling supply
f. Custom clearing services
g. Insurance
1.8. A customer is liable to pay coal handling and distribution charges for the full intended quantity of purchase even if the quantity lifted/ purchased under a purchase order falls short of the impugned purchase order.
However, a customer is charged only for the actual quantity of the coal lifted/purchased and the amount is charged as and when a consignment is made.
1.9. In light of the above, separate purchase order / intent is to be placed on Applicant by the customers for:-
a. Purchase of coal
b. Coal handling and distribution charges, as the case may be
1.10. As per the terms agreed with customer, on placing the order for desired quantity of coal, separate invoices to be raised by the Applicant on a customer for:-
a. Price of supply of coal
b. Coal handling and distribution charges
1.11. The Applicant intends to raise invoice on customer(s) for the following:-
a. Supply of coal with 5% GST in addition
b. Coal handling and distribution services with 18% GST in addition
1.12. The Applicant is presently availing input tax credit and will continue to avail the same as follows:-
a. 5% IGST on import of coal
b. 18% on various services availed at port
1.13. The input tax credit so availed is to be utilized for discharging liability of tax on sale of coal and coal and handling charges at the respective rates.
2. QUESTIONS RAISED BEFORE THE AUTHORITY
2.1 Whether the Applicant is liable to discharge tax liability @ 18% on coal handling and distribution charges wherever supply of such services is intended to be made expressly to a customer or will the Applicant be entitled to charge GST at the rate of 5% as applicable on supply of coal?
2.2. Will the applicant be entitled to utilize the input tax credit availed for discharging liability towards supply of coal and supply of coal handling and distribution charges?
3. DEPARTMENT’S VIEW POINT
The Joint Commissioner(ln-situ), CGST & Central Excise, Division-IV, Indore, vide his letter IV(16)30-50/T/D-IV/Adj/18-19/10227 dated 06.06.2020 has furnished the opinion of the department and it has been categorically opined that-
A. The issue has been examined and found that the applicant activities are trading of coal and supply of coal and the same shall be taxable at 5% (CGST 2.5%+SGST2.5%) under heading 2701 of Notification no. 1/2017-Central Tax (Rate). They are also providing services named as coal handling and distribution services which shall be taxable at 18% (9% + 9%) under the heading 9997 of Notification no. 11/2017-Central Tax (Rate).
B. As per the present scenario also the applicant is paying GST 18% with availing benefit of ITC as per applicable rate which is correct as per CGST Act, 2017.
RECORD OF PERSONAL HEARING
3.1 Adv. Dr. Arvind Singh Chawla and CA Pramod Shrivastava (Group CFO), appeared on behalf of the applicant and reiterated submissions already made in the application. They pleaded that pursuant to provisions of CGST Act, 2017 and Notification 1/2017- CT (Rate); Notification 11/2017-CT (Rate), supply of coal and coal handling & distribution services are taxable at 5% and 18% respectively. Further, input tax credit availed on inputs and input services are to be allowed for discharging aforesaid liability of tax.
4. DISCUSSIONS AND FINDINGS
4.1. We have carefully considered the submissions made by applicant in the application, pleadings on behalf of Applicant made during the course of personal hearing and Department’s view provided by the Joint Commissioner, CGST & Central Excise, Division, Indore.
4.2. We find that the short question before us pertains to :
1. Taxability of supply of coal handling and distribution charges @ 18% in case of supply of such services is intended to be expressly made to a customer apart from sale of coal, and
2. Utilization of input tax credit availed for discharging liability towards supply of coal and supply of coal handling and distribution charges respectively.
It is necessary to examine the relevant provisions of CGST Act, 2017 and relevant notification.
4.3. Supply is defined u/s 7 (1) of the CGST Act,2017 as:
7.(1) For the purposes of this Act, the expression “supply” includes,-
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
(b) import of services for a consideration whether or not in the course or furtherance of business and;
(c) the activities specified in Schedule I, made or agreed to be made without a consideration;
4.4. In order to examine the issue regarding rate of tax to be charged on supply, it is necessary to examine; Notification no. 1/2017-Central Tax (Rate) dated 28-Jun-2017 which provides for CGST tax rate of 2.5% on supply of coal with similar rate in SGST, hereby effective rate being 5% (2.5%+2.5%)
