In re Tecnimont Private Limited (GST AAR Gujarat)
1. Whether the transaction of sale of goods by Tecnimont Pvt. Ltd. (TCMPL) to Indian Oil Corporation Ltd. (IOCL) on High Seas Sale basis in terms of Contract No. 44AC9100-EPCC-1 would be covered under Entry No. 8(b) of Schedule III of the CGST Act and shall be excluded from the value of work contract service for charging GST?
The transaction of sale of goods by Tecnimont Pvt. Ltd. (TCMPL) to Indian Oil Corporation Ltd. (IOCL) on High Seas Sale [HSS] basis in terms of Contract No. 44AC9100-EPCC-1 is covered under Entry N 8(b) of Schedule III of the CGST Act. However in terms of the findings recorded supra, the value of such HSS supply would form a part of the transaction value under section 15, ibid, for computing the value of work contract service for charging GST.
2. Whether the transaction of sale of goods on high seas sale basis by the Applicant to IOCL in terms of Contract No. 44AC9100-EPCC-1 would be treated as works contract and whether Applicant is liable to charge GST on the goods sold on high seas sale basis to IOCL? If yes, what will be the applicable rate of tax on such goods supplied?
The transaction of sale of goods on high seas sale [HSS] basis by the applicant to IOCL in terms of Contract No. 44AC9100-EPCC-1 as has been held supra, is covered under entry 8(b) of Schedule III of the CGST Act, 2017 and is therefore the HSS supply is neither a supply of goods nor a supply of services.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, GUJARAT
Brief facts:
Tecnimont Private Limited, Laxmi Chamber, Navjivan Press Road, Ahmedabad, Gujarat- 380014 [for short `applicant’] is a wholly owned subsidiary of Tecnimont S.P.A. Milan, Italy and an Engineering, Procurement, and Construction (EPC) company. Their GST registration number is 24AAACI2628B1Z8.
2. The applicant has entered into a turnkey contract with Indian Oil Corporation Ltd. (for short – IOCL), vide contract No. 44AC9100-EPCC-1 dated 19.01.2021 [for short ‘contract], for executing EPC work of ‘Acrylic Acid Unit (90 KTA) and Butyl Acrylate Unit (150 KTA) of Acrylic/Oxo-Alcohol Project’, located at IOCL Dumad Complex, Nr. Gujarat Refinery, Vadodara.
3. The applicant states that in terms of the contract, all imported materials required to be supplied under the contract will be sold by the applicant to IOCL on High Seas Sale [HSS] basis by endorsing bill of lading in favour of IOCL who will be filing the bill of entry for warehousing and subsequently for home consumption by paying the applicable customs duty and IGST.
4. The applicant, further states that the contract value is fixed on a lump sum price of Rs. 18,72,00,48,047.50 comprising of- [synopsis para 1.5]
(i) Rs. 14,70,30,56,131/- for domestically sourced material and supply of service;
(ii) Foreign Exchange Euros of € 4,55,18,322 (ie converted @ 1 EURO = INR 88.25 as on the date of opening of price bid Rs. 401,69,91,916.5) based on the terms and conditions of the Contract No. 44AC9100-EPCC-1 towards goods imported outside India;
(iii) Rs. 32,89,75,280.89 towards custom Duty & SWS on Foreign Component imported which is reimbursable according to contractual terms.
5. As per the applicant, during the course of importation, before the goods reach the Customs frontier in India, they enter into a HSS agreement with IOCL, transferring the ownership of the goods to IOCL at the price agreed in the contract. The applicant raises a custom invoice with respect to goods sold to IOCL under HSS without charging GST. IOCL then files a bill of entry as the importer of the said goods and discharges customs duty and IGST by clearing the goods for warehousing or home consumption. The applicant treats this as a separate supply of goods distinct from the works contract supplies.
6. The letter of acceptance issued by IOCL to the applicant mentions the specific scope of work to be executed and the Schedule of Rates for identified supplies including goods imported from outside India.
7. It is the applicant’s say that the contract No. 44AC9100-EPCC-1 entered into with IOCL, identifies two separate set of supplies for the turnkey project Ii] works contract for EPC work pertaining to EPCC-1 project and [ii] supply of imported materials for the same project.
8. With respect to consideration mentioned in para 4(i) supra, the applicant informs that they will charge GST @ 18% as work contract services.
9. The applicant further states that in terms of Schedule-III of CGST Act, 2017, no GST is leviable on supply of imported goods on HSS basis.
10. Applicant’s submissions to substantiate the argument that supply of goods on HSS basis is neither a supply of good nor supply of services is as under:
