In re Suez India Private Limited (GST AAR West Bengal)
Whether the supplies provided by the applicant to Kolkata Municipal Corporation shall be considered as divisible supplies and what would be its taxability under the GST Act.
The contract for water loss management made by the applicant with Kolkata Municipal Corporation which includes construction of water distribution networks and operation & maintenance shall be treated as an indivisible single contract and qualifies for works contract as defined under clause (119) of section 2 of the GST Act.
The instant composite supply of works contract gets covered under entry serial number 3(iii) of the Notification No. 20/2017- Central Tax (Rate) dated 22.08.2017 [corresponding West Bengal State Notification No. 1497 F.T. dated 22.08.2017 ] and therefore shall attract tax @ 12% (Central Tax @ 6% + State Tax @ 6%) w.e.f. 22.08.2017.
For the period from 01.07.2017 to 21.08.2017,the supply is taxable @ 18% (Central Tax @ 9% + State Tax @ 9%) vide entry serial number 3(ii) of the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 [corresponding West Bengal State Notification No. 1135 F.T. dated 28.06.2017 ].
FULL TEXT OF THE ORDER OF AUTHORITY OF ADVANCE RULING, WEST BENGAL
1.1 At the outset, we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like matter except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the WBGST Act. Further to the earlier, henceforth for the purposes of these proceedings, the expression GST Act’ would mean the CGST Act and the WBGST Act both.
1.2 The applicant is stated to be engaged in the business of design, construction and operation and maintenance of water distribution networks for municipal bodies across India.
1.3 The applicant entered into a performance based contract for water loss management with Kolkata Municipal Corporation (KMC, for short) which includes construction of water distribution networks and operation & maintenance in the Cossipore area in the city of Kolkata. The contract was awarded by KMC vide letter of acceptance dated 4th October, 2016.
1.4 The applicant submits that the contract was awarded to him for a single lump sum amount. However, for the contract signing purposes, KMC shared two separate contracts for DB phase and O&M phase along with the Letter of Award.
1.5 The applicant has made this application under sub-section (1) of section 97 of the GST Act and the rules made there under raising following questions vide serial number 14 of the application in FORM GST ARA-01:-
(i) Whether based on the facts of the agreement entered between the applicant and KMC, Establishment of District Meter Areas, Construction Works and Operation & Maintenance (hereinafter referred to as “DB” and “O&M” respectively) be considered as divisible supplies under the GST Laws?
(ii) If the answer to (1) is not affirmative, whether the agreement entered between the applicant and KMC be treated as single contract for composite supply of DB and O&M and what would be its taxability under GST regime?
(iii) If the answer to (1) is affirmative (i.e. DB and O&M will be considered as divisible), would O&M be regarded as pure services contract falling under clause (b) of para 5 of Schedule II to The CGST Act, 2017? Accordingly, input tax credit would become the cost in the hands of the applicant in connection with the O&M contract. Thus recoverable from client under change in Law clause.
1.6 The aforesaid question on which the advance ruling is sought for is found to be covered under clause (a) and (e) of sub-section (2) of section 97 of the GST Act.
1.7 The applicant states that the question raised in the application has neither been decided by nor is pending before any authority under any provision of the GST Act.
1.8 The officer concerned from the Revenue has raised no objection to the admission of the application.
1.9 The application is, therefore, admitted.
2. Submission of the Applicant
Fact of the case as submitted by the applicant along with interpretation of law made by him is reproduced herein under:
2.1 Kolkata Municipal Corporation had floated a tender in February 2016 for “Performance based contract for water loss management in the Cossipore Service Zone Ward Numbers 1 to 6” which includes construction of water distribution networks and operation & maintenance in the Cossipore area in the city of Kolkata. A single tender was floated for Design & Construction of water networks (DB’) and Operation & Maintenance (O&M’) by KMC. As per the tender, the bidder was required to submit a single bid for the construction (DB) as well as O&M of water distribution networks (i.e. bidder did not have any option under tender terms to either bid for DB or O&M as it was a single scope contract i.e. construction and O&M of water distribution network).
2.2 The applicant furnishes a copy of “Invitation for Bids” dated 25.02.2016 and submits that the works and the principal quantities involved, but not limited to, are:
