In re Intellecon Private Limited (GST AAR Gujarat)
Whether the Entry no. 3(v) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (the Notification), as amended from time to time, is applicable to supplies by Intellecon under the Contract I and Contract II and resultantly, whether such supplies are subjected to 12% rate of Goods and Services Tax (‘GST’).
We find that the EPABX system comes into existence by assembly and connection of various goods/components, wherein transfer of property of such goods is involved in the execution of said contracts. We note that EPABX system once installed cannot be taken to market in as such condition. It would be required to be dismantled and disassembled in parts and components. In the process of dismantling, some parts of the EPABX system such as cables, connectors may even be damaged/ may not be usable again. We, thereby, hold that an installed and commissioned EAPBX system becomes an immovable property and thereby its supply with installation and commissioning is Works Contract Service supply.
The subject supply pertains to Railways as it is for supply in railway office. As per Section 2(3 l)(d) Railways Act, 1989 , railway includes all offices and any other works constructed for the purpose of, or in connection with, railway. The subject supplies of EPABX system for Railways is covered at entry No. 3 (v) of Notification No. 11/2017-CT (R) dated 28-6-17, as amended, and liable to 12% GST.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, GUJARAT
M/s. Intellicon Private Limited, hereinafter referred to as Intellicon for the sake of brevity, submits that it supplies EPABX system along with its installation and commissioning. Installation of a complete EPABX system inter alia requires other equipments along with lying of cables through the wall/duct/conduit/ceiling at the premises of the customers on the basis of their requirement.
2. Intellicon submits that EPABX system stands for Electronic Private Automatic Branch Exchange which is a private telephone network used by the organizations for various types of communication, either between the employees or with the outside clients. The EPABX works like an exchange that sends, receives and forwards calls from the organization to the outside world. It also helps the staff to communicate among them free of cost.
3. Intellicon submitted that for the purpose of installation and commissioning of a fully functional EPABX system, the EPABX machine is configured and connected to the exchange lines of the Telephone Exchange through cables. A main distribution frame is connected to the EPABX machine through wires/cables. The main distribution frame is terminating point for all the extension lines which are laid through wall, duct, and conduit to connect to the telephones, as per the requirement of the organizations. EPABX machine, main distribution frame, switches, telephones, various cards along with cables laid through wall/conduit/duct (to connect the EPABX machine to main distribution frame and subsequently, to various telephones) are cohesively treated as a fully functional EPABX system.
4. The supplies made by Intellicon to its customers include two types of contracts, as follows:-
A. Supply, installation and commissioning of EPABX machine along with laying cables through wall, duct, conduit and earthing.
B. Supply, installation and commissioning of EPABX machine involving cabling from EPABX machine to main distribution frame.
Detailed scope of work is as follows-
5. Supply, installation and commissioning of EPABX system along with laying cables through wall, duct, conduit and earthing (hereinafter referred to as ‘Contract I’)
5.1 The Intellicon sets up a functional EPABX system along with the required extension line cables infrastructure. It supplies, installs and commissions the EPABX machine and all other equipments such as main distribution frame, media gateway, switches, line cards etc. Intellicon’s scope of work in such cases would thus involve:-
a. Supply of EPABX machine and all other incidental equipment as stated above;
b. Laying of cables to connect the EPABX machine and the main distribution frame;
c. Laying extension lines cables through wall, ducts, conduit of the premises of the customer and undertake associated earthing work in order to connect various telephones installed by Intellicon to the main distribution frame, which is in turn connected to EPABX machine. This activity of laying extension line cables would also involve undertaking associated civil works.
5.2 Intellicon has submitted sample purchase order Letter No: Dhanbad Division-S AND T / SG-664-18-Tele-2019-20 dated 22-6-20 issued by Dhanbad Division-S and T, East Central Railway, in relation to such supply. The relevant clauses of scope of work is reproduced as follows:-
1. ‘Supply, Installation, Testing & commissioning of Set of two Servers along with VOIP software to working as PBX & SIP router as specified in the system architecture and fully Hot Standby. As per technical specification attached as Annexure -A or latest.
2. Supply of Monitoring / Maintenance Console (Desktop) Make – HP/DELL or similar. As per technical specification attached as Annexure -A or latest.
14. Supply of MDF with Krone modules & IPM as per technical specification equipped for termination of 250 Pairs and sized suitably to accommodate 300 pairs. As per technical specification attached as Annexure -A or latest.
31. Laying charge of optical Fiber Cable / UTP CAT-6 Cable/Power cable through Wall/Duct/conduit, including clamping/fixing duct/ conduit over wall/ceiling/open space /terrace /existing fixture etc as per directive of Railway Site Engineer.
34. Installation, testing & commissioning of whole system.
35. Laying of S&T cables of different sizes as per cable route plan approved by railway and meggering of all main & tail cables as per technical specification of tender. (Cable route plan will be supplied by site engineer at the time of execution of work).’
6. Supply, installation and commissioning of EPABX machine involving cabling from EPABX machine to main distribution frame (hereinafter referred to as ‘Contract II’):
6.1. Under the contract of this nature, Intellicon sets up a functional EPABX system by supplying, installing and commissioning the EPABX machine and all other equipments such as main distribution frame, media gateway, switches, line cards and cables etc. Intellicon scope of work involves:-
a. Supply of EPABX machine and all other incidental equipment as stated above;
b. Laying of cables to connect the EPABX machine and the main distribution frame and in turn connecting such equipment with extension line cables already available on premises of the customer.
6.2 Intellicon submitted a sample contract No. GEMC-511687702286858 dated 18-8-21 of West Central Railway, Railway in relation to such supply.
7. Intellicon submits that supplies made under Contract I and Contract II are covered under Entry No. 3(v) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (the Notification), as amended from time to time. Entry No. 3(v) of the Notification reads as follows:
