In re Tecnimont Private Limited (GST AAAR Gujarat)
In a recent ruling by the Gujarat Authority for Advance Ruling (GAAR), Tecnimont Private Limited’s appeal regarding GST implications on High Seas Sale (HSS) transactions was deliberated. The case revolves around Tecnimont’s engagement with Indian Oil Corporation Ltd. (IOCL) for a turnkey project involving the Acrylic Acid and Butyl Acrylate units in Vadodara.
Tecnimont, a subsidiary of Tecnimont S.P.A. Milan, Italy, argued that their contract with IOCL, which separates imported goods on HSS basis from EPC services, should not be subject to GST as per Entry No. 8(b) of Schedule III of the CGST Act. This entry deems HSS neither a supply of goods nor services for GST purposes.
However, the GAAR ruled that while HSS transactions fall under Schedule III, the value of such HSS supplies must be included in the transaction value for computing GST on the overall works contract service. This decision was based on the understanding that Tecnimont’s contract with IOCL constitutes a lump-sum turnkey EPC contract, where dividing it into separate parts for tax purposes is legally untenable.
Tecnimont further contended that even if considered indivisible, GST cannot be levied on HSS goods sold, as they are already subject to Integrated GST (IGST). The GAAR upheld that under Section 7(2) of the CGST Act, HSS sales are neither goods nor services, yet the contractual obligation to supply both goods and services under the EPC contract necessitates including HSS values in the GST calculation.
The appellant referenced various judicial precedents, including the case of BSNL and others, arguing for the divisibility of their contract. However, the GAAR dismissed these arguments, emphasizing the contractual obligation and the statutory interpretation that supports the inclusion of HSS values in the transaction for GST purposes.
In conclusion, the GAAR upheld its ruling, stating that Tecnimont’s appeal lacked sufficient grounds to overturn the initial decision.
FULL TEXT OF THE ORDER OF APPELLATE AUTHORITY FOR ADVANCE RULING, GUJARAT
