In re Thyssenkrupp Industrial Solutions (India) Private Limited (AAR Gujarat)
The Advance Ruling Authority (AAR) Gujarat examined the GST applicability on a turnkey Engineering, Procurement, and Construction (EPC) contract executed by Thyssenkrupp Industrial Solutions (India) Pvt. Ltd. for IOCL’s Catalytic Dewaxing Unit (CDWU) project at Gujarat Refinery. The applicant contended that the contract consisted of two distinct components: supply of imported goods on a high sea sale (HSS) basis and erection and commissioning of the CDWU. However, the AAR ruled that these components formed an indivisible composite contract, subject to uniform GST treatment as a works contract service under Section 2(119) of the CGST Act, 2017.
The AAR noted that the turnkey nature of the contract made Thyssenkrupp responsible for all activities, including design, procurement, construction, and commissioning. Despite separate work orders for supply and services, the AAR concluded these were not severable, citing Black’s Law Dictionary, which defines a severable contract as one with independent promises that can be separately enforced. Here, the goods and services were interdependent, making the contract composite and inseparable.
Judicial precedent from Kone Elevator India Pvt. Ltd. v. State of Tamil Nadu (Supreme Court) was instrumental in the ruling. The Court previously clarified that a works contract is taxable as a service under GST, irrespective of its goods and services components. This interpretation aligns with the 46th Constitutional Amendment, which enabled the taxation of composite contracts. The AAR further referenced Schedule II of the CGST Act, emphasizing that contracts involving immovable property, such as the CDWU project, qualify as works contracts.
