In re S P Singla Constructions P. Ltd. (GST AAAR Gujarat)
The Gujarat Appellate Authority for Advance Ruling (AAAR), in the case of S P Singla Constructions P. Ltd., deliberated on the taxability of mobilization advances under the GST framework. The core issue was determining the time of supply for GST purposes concerning mobilization advances received by the appellant for constructing a four-lane signature bridge under an Engineering, Procurement, and Construction (EPC) agreement. The AAAR upheld the Gujarat Advance Ruling Authority’s (GAAR) decision that the mobilization advance is taxable on the date of receipt.
The agreement specified that mobilization advances, constituting 10% of the contract value, are paid in two installments against a bank guarantee. These advances, deemed interest-bearing, are repaid through deductions from subsequent stage payments as certified by the engineer. Under Section 2(31) of the CGST Act, 2017, advances are treated as “consideration” if applied towards the supply of services. Section 13 further clarifies that the liability to pay GST arises at the earlier of invoice issuance or payment receipt. As the mobilization advance is adjusted against service consideration, it satisfies the legal definition of taxable supply under GST.
The appellant argued that the mobilization advance is a mere financial transaction or deposit and does not constitute taxable consideration. However, AAAR refuted this claim, citing contractual terms that specify its usage for project execution and repayment terms. The bank guarantee furnished does not negate the taxability of the advance, as it serves as a financial security mechanism rather than altering the payment’s nature.
