In re Andritz Hydro Private Limited (GST AAR Tamilnadu)
Whether the Components, which were supplied in Sale-in-Transit transaction, without payment of tax under the erstwhile Central Sales Tax regime, by the Applicant, i.e., AHPL to its Customer (i.e., TANGEDCO) in Tamil Nadu, will attract levy of Goods and Services Tax?
The Components, which were supplied in Sale-in-Transit transaction, without payment of tax under the erstwhile Central Sales Tax regime, by the Applicant , i.e., AHPL to its Customer (i.e., TANGEDCO) in Tamil Nadu is a `Supply’ as per Section 7 of the CGST/TNGST Act 2017 and will attract levy of Goods and Services Tax.
FULL TEXT OF THE ORDER OF AUTHORITY OF ADVANCE RULING, TAMILNADU
Note: Any appeal against the Advance Ruling order shall be filed before the Tamil Nadu State Appellate Authority for Advance Ruling, Chennai under Sub-section (1) of Section 100 of CGST ACT/TNGST Act 2017 within 30 days from the date on which the ruling sought to be appealed against is communicated.
At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act.
M/s. Andritz Hydro Private Limited, D-17, MPAKVN Industrial Area, Mandideep, Madhya Pradesh – 462 046. (hereinafter called the Applicant/ AHPL) are not registered tax payer under Tamil Nadu goods and Service Tax Act 2017. The applicant has sought Advance Ruling on:
Whether Goods and Service Tax is applicable on Components supplied by the Vendors in a Sale-in-Transit to AHPL?
The Applicant has submitted the copy of application in Form GST ARA – 01 and also submitted a copy of Challan evidencing payment of application fees of Rs.5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017.
2.1 The applicant has stated that they have entered into a contract dated 21 July 2015 (“Contract”) with Tamil Nadu Generation and Distribution Corporation Limited (“TANGEDCO”) for renovation, modernisation and uprating the Sholayar Power House – I from 2x35MW to 2x42MW (“Project”) located at Sholayar, District Coimbatore, Tamil Nadu. The applicants have produced a copy of letter dated 30 January 2018 issued by TANGEDCO providing the details of aforementioned transaction. In terms of the Contract, AHPL was required to supply new components, tool, tackles, spares and such other material (“Components”) for undertaking modification, engineering, erecting, testing, commissioning and associated technological, civil, mechanical, and electrical works, as part of the Project. For the purpose, the Applicant inter alia, purchased Components from various vendors namely, M/s Sun Casting and Alloys, M/s Chloride Power Systems and Solutions Limited, M/s Abhishek Enterprises, M/s Eurobearings India Private Limited, M/s Energy Progress Inc., M/s Parasnath Associates, M/s Megger (India) Private Limited and other such entities (“Vendors”). The applicants have produced copy of Purchase Orders issued by them and Tax Invoices raised by the Vendors.
2.2 On the interpretation of law, they have stated that prior to introduction of GST, the components purchased by the AHPL in a sale – in – transit transaction from its Vendors were subject to the levy of Central Sales Tax (“CST”) under the Central Sales Tax Act, 1956 (“CST Act”). In terms of CST Act, CST was levied at first point of sale of taxable goods. Further, in terms of Section 6 (2) of the CST Act, the subsequent sale of such goods during movement thereof from one state to another (“Sale-in-transit”) was exempt from levy of CST. Thus, at the time of entering into the Contract, AHPL quoted/ agreed to supply the Components to TANGEDCO at the prices charged by the Vendors during the sale-in-transit inclusive of any amount of CST, which was already discharged by the Vendor (s) of AHPL at the time purchase of such goods from their suppliers (i.e., suppliers of Vendors) and was not required to be paid by AHPL on purchase of such Components from Vendors. Post 1 July 2017, the Central Goods and Services Tax Act, 2017, (“CGST Act”), Integrated Goods and Services Tax Act, 2017 (“IGST Act”), State Goods and Service Tax Act (s), 2017 of respective States in India, Union Territory Goods and Services Tax Act, 2017 (“UTGST”) and rules, notifications, circulars etc. (collectively referred to as “GST laws”) replaced erstwhile indirect taxes, including CST. In terms of extant provisions under the GST laws, they are of the view that the GST became chargeable on supply of goods from one person to another i.e., except specified exempt supplies. Thus, GST was leviable at each stage of supply of goods in a sale-in-transit transaction with the facility to avail input tax credit of GST so paid by the recipient (s) thereof, who are registered under the GST laws.
3.1 Due to the prevailing PANDEMIC situation and in order not to delay the proceedings, the applicant was addressed through the Email Address mentioned in the application to seek their willingness to participate in a virtual Personal Hearing in Digital media. The applicant consented and the hearing was held on 19.02.2021. The Authorized representatives Shri Milind J Saraf, Authorised Signatory, Shri Ayush A Mehrotra, Partner, Khaitan and Co LLP, Shri Upkar Agarwal, Associate, Khaitan and Co LLP appeared for the hearing virtually. He was asked to clarify whether the question relates to receipt of the goods by them or the supply made by them to TANGEDCO. The authorized representative stated that the question relates to the receipt of the goods by them and he reiterated his earlier submissions. The authorized representative was stated by the Members that the question raised is on the supply by the vendor to them and therefore not admissible under the Provisions of Section 95 read with Section 97(2) of GST Act. The authorized representative stated that the question is on the applicability of GST on the Sale-in-transit of the goods and requested for reframing the question. They were permitted the same and were asked to furnish the submissions in a week’s time.
3.2 The applicant vide their submissions dated 26th February 2021 reframed the question as undertook during personal hearing. The reframed question is as under:
A. Whether the supply of goods undertaken in course of Sale-in-Transit, i.e., supply undertaken when the goods are in movement from one state to another, is exempt under the extant Goods and Services Tax regime?
B. Whether the Components, which were supplied in Sale-in-Transit transaction, without payment of tax under the erstwhile Central Sales Tax regime, by the Applicant, i.e., AHPL to its Customer(i.e., TANGEDCO) in Tamil Nadu, will attract levy of Goods and Service Tax?
It was reiterated that the Company filed the present Application for Advance Ruling No. 27/ 2020 dated 4 December 2020 (“Application”) in respect of the contractual arrangement to understand the implications post introduction of GST. In particular, the present application has been filed regarding the levy of GST on supply of above-mentioned Components during the sale-in-transit basis the submissions made in the Application and Additional Submissions dated 26th February 2021. The applicant has further stated that GST laws do not provide for single point but multiple points of taxation.; GST laws do not provide exemption on subsequent supply of goods or sale of goods in transit by transferring the title of goods by handing over the relevant documents.; GST laws provide for issuance of tax invoice and corresponding e-way bills for supply of goods involving movement thereof from one place to another; they believe that the transaction between vendors & AHPL and AHPL with TANGEDCO is chargeable to GST as
> The Components provided by Vendors and subsequently sold by AHPL falls under the definition of `Goods’;
> TANGEDCO, AHPL and its Vendors are separate legal entities;
> The transaction between AHPL and its Vendor qualifies as “supply” from “one person to another”;
> The transaction between AHPL to TANGEDCO, qualifies as “Supply” from “one person to another”;
> AHPL and TANGEDCO paid or agrees to pay a “consideration” for such supply of Components received by them respectively;
> The transaction between TANGEDCO, AHPL and Vendors is in the course of business activity & there is no exemption under the GST laws
They also requested an opportunity of hearing via video conferencing/ digital hearing facility, to explain their additional submission.
3.3 The applicant was extended a hearing in digital mode on 09.04.2021. The Authorised representatives appeared for the hearing. They stated that as permitted in the earlier hearing, they had amended the questions. It was intimated that Q.No.1 being general in nature cannot be admitted while Q.No. 2 is specific and is admitted. The authorized representative reiterated the submissions. He stated that there is no exemption under CGST or IGST as was available under CST as per Section 6(2) of CST Act. He stated that the agreement entered into with TANGEDCO is a composite contract of Works Contract Services but this application is made to ascertain the applicability of GST on the components, spares i.e., on supply of goods. When the entire contract is a Works Contract Services, a service under GST, the applicant was asked to furnish a write up on how the applicant is a supplier of goods for which ruling is sought along with any purchase order issued by TANGEDCO. The applicant was intimated that Advance Ruling can be extended only for transactions undertaken and question of law on general issues are outside the ambit of Advance Ruling. They were intimated that after their submissions another hearing may be extended.
3.4 The applicant vide their letter dated 6th June 2021 received on 16th June 2021 furnished their submissions, wherein they stated that
> In terms of the table provided under Para 2.01 of the Letter dated 30 January 2018 highlighting the terms and conditions of the Contract, a detailed break-up of prices of material, tool, tackles and spares have been clearly specified separate from the prices of services, i.e., works, civil engineering works etc agreed to be provided by them
> Further, at SI. No. 9 of the table, the prices for commissioning spares i.e., the spare parts required for commissioning the Project has been stated under a separate category from the spares or components stated as Sl. 10 and/or 11 required post such commissioning work
> In Para 3.01.05 and 3.01.06 it has been categorically stated that the spares will be supplied for operation and maintenance of the Project even beyond the stage of commissioning of the Project
Neither the contract contemplates that the activity of operation and maintenance be provided by AHPL nor is the same undertaken by them. Tus the Contract between AHPL and TANGEDCO, categorically provides for a scenario where the supply of Components will be sans the supply of service.
> In terms of para 29.05, AHPL has completed the commissioning of the Project on 3rd September 2019 and the completion certificate to this effect has been issued by TANGEDCO
> Post completion of RMU activities, it has been supplying the Components for operation and maintenance of the Project in terms of para 3.01.05 and para 3.01.06 of the letter, without undertaking any supply of services.
> The authority has statutory jurisdiction to determine the issue of taxability of transaction, even if undertaken in course of inter-state trade
They relied on the following decisions to support their above contentions:
