In re PES Engineers Pvt Ltd (GST AAR Telangana)
In a recent ruling by AAR Telangana in the case of M/s. PES Engineers Pvt. Ltd. [TSAAR Order No. 09/2023 dated April 13, 2023], held that when parties enter into separate agreements for goods and works contract services, they are treated as distinct supplies and not composite supply. Accordingly, if any advance is received for supply of goods, that will be taxed as per Section 12(2)(a) of the Central Goods and Services Tax Act, 2017
Facts:
M/s. PES Engineers Pvt. Ltd. (“the Applicant”) is engaged in the business of construction and maintenance of various types of power projects.
The Applicant is awarded with a contract by M/s. Singarenni Collieries Company Ltd. (“SCCL”) vide bid notifications dated December 28, 2021.
Accordingly, the Applicant entered into 2 agreements with SCCL. The first agreement is related to supply of goods i.e the Flue Gas Desulphurization (FGD) system, Limestone and gypsum handling system, items related to chimney and the spares related to above parts etc. The second agreement is related to services of transportation, insurance, unloading at site, storage, erection, civil works, safety aspect to safety rules, testing, commission and conducting guarantee tests of the goods supplied under the first agreement.
The Applicant stated that it has received advance of 5% and 7.5% which is specifically for supply of goods under the first agreement and since the activities of both agreements are properly demarcated thus, each agreement has to be independently assessed for the purpose of GST and accordingly, he is liable to pay GST on goods at the time of supply which is, the date of issue of invoice and not on the date on which the Applicant received advance payments for goods under the first agreement.
Issue:
Whether the Applicant is exempt from payment of tax on advances received under the first agreement, as per Notification No. 66/2017-Central Tax dated November 15, 2017?
Held:
The AAR, Telangana in TSAAR Order No. 09/2023 held as under:
