Case Law Details
In re Universal MEP Projects & Engineering Services Limited (GST AAR Odisha)
The GST AAR Odisha addressed whether supplementary invoices for a works contract executed before 18/07/2022 should apply the GST rate of 12% or 18%, following the recent amendment to Notification No. 3/2022-CT (Rate) effective from 18/07/2022. The contract, executed by Universal MEP Projects & Engineering Services Limited for RWSS, involved a price escalation clause leading to the issuance of supplementary invoices. Under the earlier rate of 12% (CGST 6% + SGST 6%), the applicant had invoiced before the amendment. However, due to the amendment, the rate increased to 18% (CGST 9% + SGST 9%). The AAR ruled that the applicable GST rate for the supplementary invoices should be 18% since the services were supplied before the rate change but the invoices were raised after the rate was amended. The decision is based on Section 14 of the CGST Act, which dictates that the rate of tax depends on the occurrence of supply, issuance of invoice, and receipt of payment. The applicant or jurisdictional officer can appeal the ruling to the Odisha State Appellate Authority within 30 days.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, ODISHA
Universal MEP Projects & Engineering Services Ltd (herein after referred to as the ‘Applicant’) having principal place of business/registered office/corresponding address at B-15, 1st Floor, Arihant Tower, Saheed Nagar, Bhubaneswar, Odisha- 751007 bearing GSTIN 21AAACR5512K1ZP has filed an application for advance ruling under Section 97 of CGST Act, 2017 and Section 97 of the OGST Act, 2017 in FORM GST ARA-01 discharging fee of Rs. 5,000/- each under the CGST Act and the SGST Act.
1.0 The Applicant has sought ruling in respect of the following question:
Whether the applicable rate of GST under the CGST & SGST Act, 2017 will be 6%+6% respectively (total 12%) under Notification No. 24/2017-Central Tax (Rate) dated 21.09.2017 (as amended from time to time) or 9% t 9% respectively (total 18%) in view of the amendment to the said Notification No. 3 / 2022-CT (Rate) dated 13.07.2022 read with Section 14 of CGST & SGST Acts, 2017 for price adjustment invoices (for escalation of price) to be raised (and payments there-against to be received in future) for services supplied prior to 18/07/2022 in respect of works contract executed by the applicant for the contractee RWSS, Govt, of Odisha.
1.1 At the outset, we would like to make it clear that the provisions of both the CGST Act and the OGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the OGST Act.
2.0 Submission of the Applicant
2.1 The Applicant is 100% subsidiary of Voltas Ltd. Voltas Ltd was awarded a works contract dated 19/03/2020 on EPC (Engineering Procurement & Construction) basis by RWSS (Rural Water Supply & Sanitation Department), Govt, of Odisha tor Rural Piped Water Supply Project in Sudergarh District of Odisha. Subsequently, Water Management Business Division of Voltas Ltd. was transferred to the applicant-company by Voltas Ltd. & the aforesaid contract has been executed by the applicant.
2.2 The Applicant sated that Clause no. 19.10 at page 80 to 83 of the aforesaid contract provided for price variation based on the formula stated therein for raw materials & labour charges.
2.3 The Applicant has been executing the said contract & submitted its invoices to the contractee RWSS charging CGST + SGST of 6% + 6% respectively (total 12%) under Notification No. 24/2017-Central Tax (Rate) dated 21.09.2017 prior to 18/07/2022. The rate of tax on these invoices / services rendered is not the subject matter of the present application. The Applicant has classified the said service under Chapter Heading/HSN/SAC Code 995462. In respect of these services supplied prior to 18/07/2022, the applicant has to issue invoices on the contractee RWSS for recovery of price variation in terms of clause 19.10 of the contract as aforesaid. The applicant has not yet issued the said invoices of price variation & also, therefore, has not received payment there-against from RWSS.
2.4 By Notification No. 24/2017-Central Tax (Rate) dated 21.09.2017 (as amended from time to time), the rate of CGST on aforesaid services was fixed @ 6%. By Notification No. 3 / 2022-CT (Rate) dated 13.07.2022 w.e.f. 18.07.2022, an amendment was made in the entry no. 3 by which the rate of CGST on works contract became 9% in place of 6%.
2.5 The applicant submitted that Section 14 overrides provisions of Section 12 & 13 of CCST Act, 2017 and therefore, the said section will apply in the instant case for determination of the time of supply. In the present case, clause (i) of Section 14 should apply. As per clause (i), where invoice will be issued and payment will be received after the change of rate of tax, the time of supply shall be the date of receipt of payment or the date of issue of invoice, whichever is earlier. Therefore, the applicant is in the opinion that the rate of GST will be 18% on the aforesaid price adjustment invoices to be issued by the applicant on RWSS.
3.0 The personal hearing was fixed on 23.04.2024 under due intimation to the Applicant, the jurisdictional officer of State GST & jurisdictional officer of Central GST (intimated through their respective Commissionerates along with a copy of the application and the written submission of the Applicant). The Applicant through its representative Shri Chandan Ghosh, AR appeared for personal hearing. Shri Ghosh re-iterated the submission already furnished in the application filed for advance ruling and requested to decide the issue accordingly. The Revenue has neither submitted its comments nor appeared for personal hearing.
Discussion & findings
4.0 We have gone through the advance ruling application, question on which advance ruling has been sought and the Applicant’s interpretation of law and/or facts, as the case may be, in respect of the question asked. We observe that the issue before us is squarely covered under Section 97(2) of the CGST Act, 2017 and therefore we admit the application for consideration.
4.1 On examination of the application and documents submitted by the applicant, it is seen that Voltas Ltd. was awarded a works contract dated 19/03/2020 on EPC basis by RWSS (Rural Water Supply & Sanitation Department), Govt, of Odisha for Rural Piped Water Supply Project in Sudergarh District of Odisha. Subsequently, the said contract has been executed by the applicant who is a subsidiary of voltas Ltd. On execution of the contract, it has issued invoices to the contractee charging GST @12% in view of Notification No. 24/2017-Central Tax (Rate) dated 21.09.2017. Both the events i.e. Supply of services as well as issuance of invoices have been occurred prior to 18.07.2022. However, due to price escalation (clause 19.10 of the contract), the applicant intends to issue supplementary invoice on the contractee against the works already completed before 18.07.2022 and sought ruling about the rate of GST against such invoices proposed to be issued. It is also seen that consequent upon the amendment of the aforesaid Notification vide Notification No. 3 / 2022-CT (Rate) dated 13.07.2022, the rate of GST has been has been increased to 18% from 12% (w.e.f. 18.07.2022) in respect of works contract services.
4.2 The applicable rate of GST under Notification No. 24/2017-Central Tax (Rate) dated 21.09.2017 (as amended from time to time on aforesaid services was 12% (CGST@6% & SGST@6%). However, as per the recommendations of 47th GST Council meeting held on 28th 29th June, 2022 and in view of Notification No. 3 / 2022-CT (Rate) dated 13.07.2022, the rate of CGST became 9% in place of 6% on Works contract supplied to Central and State Government, Local authorities for historical monuments, canals, pipelines, plant for water supply, educational institutions, hospitals etc., & subcontractor thereof.
4.3 The moot issue before us to decide is the applicable rate of GST on supplementary invoice proposed to be issued, by the applicant for price escalation against the works contract services executed prior to 18.07.2022. To determine the rate of tax, we need to discuss provisions of Section 14 of the CGST Act, 2017 which deals with the time of supply, where there is a change in the rate of tax in respect of goods or services or both. Section 14 of the CGST Act, 2017 is reproduced below:
“Notwithstanding anything contained in section 12 or section 13, the time of supply, where there is a change in the rate of tax in respect of goods or services or both, shall be determined in the following manner, namely:-
(a) in case the goods or services or both have been supplied before the change in rate of tax,-
(i) where the invoice for the same has been issued and the payment is also received after the change in rate of tax, the time of supply shall be the date of receipt of payment or the date of issue of invoice, whichever is earlier; or
(ii) where the invoice has been issued prior to the change in rate of tax but payment is received after the change in rate of tax, the time of supply shall be the date of issue of invoice; or
(iii) where the payment has been received before the change in rate of tax, but the invoice for the same is issued after the change in rate of tax, the time of supply shall be the date of receipt of payment;
(b) in case the goods or services or both have been supplied after the change in rate of tax,-
(i) where the payment is received after the change in rate of tax but the invoice has been issued prior to the change in rate of tax, the time of supply shall be the date of receipt of payment; or
(ii) where the invoice has been issued and payment is received before the change in rate of tax, the time of supply shall be the date of receipt of payment or date of issue of invoice, whichever is earlier; or
(iii) where the invoice has been issued after the change in rate of tax but the payment is received before the change in rate of tax, the time of supply shall be the date of issue of invoice:
Provided that the date of receipt of payment shall be the date of credit in the bank account if such credit in the bank account is after four working days from, the date of change in the rate of tax.
Explanation: For the purposes of this section, “the date of receipt of payment” shall be the date on which the payment is entered in the books of account of the supplier or the date on which the payment is credited to his bank account, whichever is earlier”.
4.4 From the above, it is noticed that the rate of tax depends on occurrence of 3 events namely (a) Supply of Goods and/or Services have been provided, (b) Issuance of Invoice & (c) Date of receipt of payment. The provisions of section 14 can be compiled in the following tables:
In case the goods or services or both have been supplied before the change in rate of tax.
Table 1
| s. No. | Date of receipt of payment | Invoice Issued | Time of supply | Rate of Tax |
| 1 | After change in rate of tax | After change in rate of tax | Date of receipt of payment or the date of issue of invoice, whichever is earlier; | New |
| 2 | Before change in rate of tax | After change in rate of tax | Date of receipt of payment | Old |
| 3 | After change in rate of tax | Before change in rate of tax | Date of issue of invoice | Old |
In case the goods or services or both have been supplied after the change in rate of tax.
Table 2
| S. No. | Date of receipt of payment | Invoice Issued | Time of supply | Rate of Tax |
| 1 | After change in rate of tax | Before change in rate of tax | Date of receipt of payment or the date of issue of invoice, whichever is earlier; | Old |
| 2 | After change in rate of tax | Before change in rate of tax | Date of receipt of payment | New |
| 3 | Before change in rate of tax | After change in rate of tax | Date of issue of invoice | New |
4.5 In the present case, services have been supplied before 18.07.2022 (before the change in rate of tax vide Notification No. 03/2022-CT (Rate) dated 13.07.2022 w.e.f. 18.07.2022) and no payment against price escalation has been made. Further, invoices are proposed to be issued. So, rate of tax can be decided in view of the provisions of Section 14(a) (i) of the CGST Act, 2017 indicated at SI. No.l of Table 1, as above which is 18% ( CGST @ 9% & SGST @ 9%) .
5.0 We pass the following order:
Q.1 Whether the applicable rate of GST under the CGST & SGST Act, 2017 will be 6%+6% respectively (total 12%) under Notification No. 24/2017-Central Tax (Rate) dated 21.09.2017 (as amended from time to time) or 9% + 9% respectively ( total 18%) in view of the amendment to the said Notification No. 3 / 2022-CT (Rate) dated 13.07.2022 read with Section 14 of CGST & SGST Acts, 2017 for price adjustment invoices (for escalation of price) to be raised (and payments there-against to be received in future) for services supplied prior to 18/07/2022 in respect of works contract executed by the applicant for the contractee RWSS, Govt, of Odisha.
Ans- The applicable rate of GST would be 18% ( CGST @9% & SGST @9%) on invoices to be raised for price escalation in respect of works contract executed by the applicant for the contractee RWSS, Govt, of Odisha .
6.0 The Applicant or jurisdictional officer, if aggrieved by the ruling, may appeal to the Odisha State Appellate Authority for advance ruling under Section 100 of the CGST/OGST Act, 2017 within 30 days from the date of receipt of the advance ruling.
