In re Tata Advanced Systems Ltd. (GST AAR Gujarat)
(i) What is the nature of supply under the contract between the applicant & Airbus [i.e. whether the same will qualify as ‘supply of goods’ or supply of service’]?
The nature of supply under the contract between the Applicant and Airbus is a composite supply in terms of section 8 of the CGS’I’ Act, 2017 wherein the principal supply is supply of aircraft (i.e., ‘supply of goods’.
(ii) Given the nature of the activities undertaken by the applicant under the contract, what will be the appropriate classification & rate of tax of the said supply?
The aircrafts are classifiable under CTH 8802 & will attract GST 5% in terms of notification No. 1/2017-IT (Rate) dated 28.6.2017 entry no. 2441.
(iii) What is the value to be adopted for the purpose of payment of GST?
The value to be adopted for the purpose of payment of GST will include the supply made free of cost by Airbus. will include the value of I’IMs also.
(iv) What will be the time of supply for payment of GST?
The time of supply for payment of GST will be in terms of Section 12 of the CGST Act, 2017.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, GUJARAT
M/s. Tata Advanced Systems Ltd, 5th floor, No. 521, Loha Mayan, Old High Court Lane, Navrangpura, Ahmedabad, Gujarat — 380 009 [for short ‘applicant’] is engaged in the business of assembly, manufacture and supply of aircrafts and their GST registration number is 24AACCT5245K1Z9
2. Ministry of Defence (MoD), Government of India entered into a contract dated 24.09.2021 with Airbus Defence and Space, S.AU., Spain [Airbus] for manufacture and supply of 56 C-295 MW transport aircraft with associated equipment (“main contract”) under its C-295 aircraft programme. Airbus, is the original equipment manufacturer (OEM) responsible for development activities, manufacturing, assembly, delivery and support of the C-295 aircraft programme and is incorporated in Spain. It is not registered under GST in India.
3. Under C-295 programme the applicant has been appointed Indian Aircraft Contractor (IAC) for manufacture and supply of 40 aircrafts.
4. In terms of the contractual arrangement, out of the 56 aircrafts. 111–st 16 aircrafts will be supplied directly by Airbus from Spain to MoD in a flyaway condition. For the remaining 40 aircrafts, Airbus Defence & Space SAU and Tata Consultancy Services has entered into a contract with the applicant las the Indian Aircraft Contractor (IAC)I for manufacture and supply vide contract dated 29.10.2021 (hereinafter referred to as the ‘contract’).
5. The relevant clauses of the contract dated 29.10.2021, entered into between Airbus Defence & Space SAU, Tata Advanced Systems Ltd and Tata Consultancy Services Ltd, is reproduced below for case of reference viz:
‘Airbus SE’ means Airbus Societas Europaea, a European public limited-liability company with its registered office in Amsterdam……….
‘Aircraft’ means the C-295 MW transport aircraft modified by the purchaser for installation 0f CSE and including associated role equipment & technical literature:
‘C295 Aircraft Programme’ means all activities to be undertaken by the purchaser in relation 10 the aircraft including the design, development, certification, manufacturing & support;
‘Free Issue Material’ means any material & tool provided by purchaser to the supplier during the term 01 this Contract:
‘IAC’ the ‘Indian Aircraft Contractor’ mean the consortium formed by Tata Advanced Systems Ltd & Tata Consultancy Services Ltd lead by Kau Advanced System Ltd;
‘India 0295 Aircraft Programme’ means all the activities to be undertaken by the purchaser in relation to the main contact, including the design. development. certifications, manufacturing and support;
‘Item’ means Aircraft, and/or any other deliveries related to the aircraft such as any assembly, subassembly, component, and/or any part thereof (including spares), software, Tooling (as hereafter defined), any sort of data, or any other goods and associated services which shall be designed, developed, manufactured, supplied, performed and/or supported by the supplier pursuant to the contract. The item is described in the specification;
‘Purchaser’ means Airbus Defence and Defence and Space S.A.U.:
‘Service’ means any work and /or service performed in accordance with this Contract;
‘Supplier’ means 7ASL, in its role set forth in Article 5.4 of the Contract;
‘Support’ means the activities and obligations of the supplier in relation to the after sales activities and maintenance of the Aircraft;
‘Tooling’ means all dies, jigs, tools, gauges, fixtures. patterns, moulds, models, equipment, software tools and other items, required for the development, testing, manufacture and support of the item:
2. Scope, Orders, Precedence & Duration
2.1. Scope of the Contract
This contract sets out the terms and conditions under which the supplier shall undertake the manufacture & the supply of 40 (forty) C-295 MW transport Aircraft related deliveries, and design, manufacture and supply of Tooling, as specified in this contract and its Annexes & provide support activities (including support to certification and continued airworthiness) for the India C295 Aircraft program.
2.2. Orders
2.2.1 All the orders under this Contract shall be placed by the Purchaser upon the Supplier. The following address to be considered as project execution address & this would he changed once the final location fin- execution is finalised. which would he supported by the address modified orders by the Purchaser to the Supplier:
Tata Advanced Systems Ltd.
Plot Nos. -12-43 Electronic City. Phase-1, Hosur Road,
Bengaluru 560100, Karnataka
GSTA129AACCT5245K1ZZ
Any change in the place of the orders must be notified at the purchaser in writing by the supplier with sufficient prior notice.
3.1. SCOPE OF WORK
3.1.1. The Supplier’s activities shall comply with the requirements of the Contract and associated Orders and shall include, as necessary and/or as requested by the Purchaser, but .Shull not be limited to:
(i) activities necessary to ensure compliance of the Item with the requirements of the Specification (including those in connection with continued airworthiness of the fleet, in service requirements and military qualification requirements as applicable)
(ii) supply of all material, including, but not limited to raw material standards, sealants and adhesives.
(iii) the manufacture, delivery (as defined in Article 7 “Inspection. Delivery and Acceptance”) and support of The Items (as further defined in the Article 3.-1 “Support”)
(iv) the design, manufacture and maintenance of Tooling us necessary to develop and manufacture the Items;
(v) the supply of all relevant, updated and accurate documentation (including but not limited to documentation fin. certification, for continued airworthiness) and support requirements.
(vi) the performance of, or assistance to the Purchaser for. any the case may be. any modification activities as farther defined in Article 8 “Modifications”
(vii) the provision of any prototype, moulds, test samples, test tools, and the related documentation and more generally of any deliverable required in the Contract or which is necessary to enable the Purchaser to perform its own activities in connection with the fem and can he reasonably requested by the Purchaser.
(viii) the provision of assistance, training (further described in Annex W “Training”) and advice, as required in the Contract, which is necessary 10 enable the Purchaser to perform its own activities in connection with the Item, including hut not limited to flight text programmers and final assembly line activities, use of the IP Rights (pursuant to Article 13 “Intellectual Property Rights”), certification qualification and integration of the Item in the Aircraft or any part thereof
(ix) collaboration in the transfer of work, especially undertaking the purchase of all inventories for the subcontracted work of the Purchaser or the current source of supply, agreeing to the Purchaser a delivery schedule and payment for the entire inventory, by issuing appropriate orders 14,*ac1r of these deliveries will be at least (Ill amount that covers one year of. production.”
4.2. PROPERTY ON LOAN
4.2.1 Title and Risk
4.2.1.1 Any article, including free issue material exceptionally supplied for the Purchaser or loaned by the Purchaser to the Supplier for the performance of the Contract (“Purchaser’s Property”) shall be delivered to the Supplier in good and serviceable condition and remain the property oldie Purchaser and shall (except for free issue material returned to the Purchaser incorporated in the Item) he returned to the Purchaser at no cost to the Purchaser upon its request in good and serviceable condition (normal wear and tear excepted), ..failing which the Purchaser shall he entitled to full compensation.* the damage caused to such Purchaser’s Property(()
4.2.1.2 Purchaser’s Property shall be identified by the Supplier, especially in the Supplier’s premises, with appropriate lags or labels as the property of the Purchaser
4.2.1.3 The Supplier undertakes at its expense to maintain the Purchaser’s Property to a standard so as to meet the maintenance requirements of both the Purchaser and the Customer for as long as a minimum of five (5) Aircraft are in regular operation For the avoidance of doubt, following the expiry of the warranty period of the last Aircraft delivered, the Supplier shall he entitled to pack and store the Tooling and the Purchaser property but shall remain responsible.. for its custody, maintenance and set up at its own costs whenever reinstallation is required by the Purchaser
4.2.1.4 If any action is taken by a third purl). in respect of any of the Purchaser’s Property, the Supplier shall notify the Purchaser of such action and shall notify the third party that such Purchaser’s Property is not the property of the Supplier
4.2.1.5 All risks in such Purchaser’s Property shall pass to the Supplier upon delivery thereof to the Supplier and shall remain with the Supplier until returned to the Purchaser 4.2.1.6 The Supplier shall return any Purchaser’s Property upon request by the Purchaser and at the latest, upon expiry or termination of all the Orders for the performance of which such Purchaser’s Property was loaned.
4.2.1.6 The supplier shall return any Purchaser’s property upon request by the purchaser and, at the latest, upon expiry or termination of all the orders for the performance of which such purchaser’s property was loaned.
4.2.2. Use of Purchaser’s Property: the Supplier shall not use any Purchaser’s Property.* any purpose other than the performance of the Contract The Supplier shall not loan or pass on to a third party or remove from a specific site any Purchasers Property without the prior written consent of the Purchaser.”
6. The applicant, under Annexure I to their application, has further stated as follows viz
(b) Manufacture of detailed parts and sub-assemblies
