In re Vihan Enterprises (GST AAR Madhya Pradesh)
Whether the explanation to Entry No. 234 of Schedule I to Notification No. 01/2017 — Central Tax (Rate), as amended from time to time, shall apply to construction of new 33 / 220 kV Pooling Substation at Badwar, REWA along with associated 220 kV DCDS Transmission line (Route length 3.0 Kms) and associated feeder bay work on total Turnkey basis against Bid Identification No. RUMS/2016-17/372/014 (Lot-I) under World Bank Financing?
Goods listed in Entry No. 234 of Notification No. 1/2017 – Central Tax (Rate) and corresponding notifications issued under MPGST Act are not part of the supply and therefore, t e Explanation to Entry No. 234 of Notification No. 1/2017 – Central Tax (Rate) and corresponding notifications issued under MPGST Act shall not apply to the supply of works contract service in contract of construction of new 33 / 220 kV Pooling Substation at Badwar, WA along with associated 220 kV DCDS Transmission line (Route length 3.0 Kms) and associated feeder bay work on total Turnkey basis against Bid Identification No. RUMS/2016-17/372/014 (Lot-I) under World Bank Financing for Rewa Ultra Mega Solar limited.
Whether in the facts and circumstances of the case, value of all the goods supplied under the contract, independent of the Works Contract being executed in the contract shall form part of the Works Contract and taxed as service?
Supply of goods under a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property are included in the value of contract for supply of service only where the transfer of property in goods (whether as goods or in some other form) is involved in the execution of the contract . Goods supplied under a turnkey Contract, where there are multiple independent contracts, of which some are not in the nature of Works Contract, shall not be included in the value of contract in the nature of a works contract merely on account of the fact that goods are being supplied under Turnkey Contract, part of which is in the nature of a Works Contract, unless such supply of all such goods is a part of and made in the execution of a works contract.
The supply of equipment and materials for Sub-stations, Feeder Bays and Transmission line under contract of construction of new 33 / 220 kV Pooling Substation at Badwar, REWA along with associated 220 kV DCDS Transmission line (Route length 3.0 Kms) and associated feeder bay work on total Turnkey basis against Bid Identification No. RUMS/2016-17/372/014 (Lot-I) under World Bank Financing for Rewa Ultra Mega Solar Limited shall not be included in the value of the Works Contract for Civil Work for substation and Feeder Bay ..
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING,MADHYA PRADESH
PROCEEDINGS
(Under sub-section (4) of Section 98 of Central Goods and Service Tax Act, 2017 and the Madhya Pradesh Goods & Service Tax Act, 2017)
1. The present application has been filed u/s 97 of the Central Goods and Services Act,2017 and MP Goods and services Act, 2017 (hereinafter also referred to CGST Act and SGST Act respectively) by M/s Vihan Enterprises (hereinafter referred to as the Applicant), registered under the Goods & Services Tax.
2. The provisions of the CGST Act and MPGST Act are identical, except for certain provisions. Therefore, unless a specific mention of the dissimilar provision is made, a reference to the CGST Act would also mean a reference to the same provision under the MPGST Act. Further, henceforth, for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST or MP GST Act would be mentioned as being under the GST Act.
3. BRIEF FACTS OF THE CASE:
3.1. The applicant, Mis Vihan Enterprises is engaged in works contract. The applicant is engaged in inter alia, in construction of new 33 / 220 kV Pooling Substation at Badwar, REWA along with associated 220 kV DCDS Transmission line (Route length 3.0 Kms) and associated feeder bay work on total Turnkey basis against Bid Identification No. RUMS/2016-17/372/014 (Lot-I) under World Bank Financing for Rewa Ultra Mega Solar Limited, hereinafter referred to as RUMS.
3.2. The work was allotted vide Notification of Award No. 04-01/RUMS/2016-17/372/14 (Lot-1) / TK — 11/89 dated 23.09.2016 read with revised Notification of Award No. 04-01/RUMS/2016-17/372/14 (Lot-I) / TK — 11/119 dated 17.11.2016.
4. QUESTIONS RAISED BEFORE THE AUTHORITHY:-
The following questions have been posted before the Authority in the application:-
4.1 Whether the explanation to Entry No. 234 of Schedule I to Notification No. 01/2017 — Central Tax (Rate), as amended from time to time, shall apply to construction of new 33 / 220 kV Pooling Substation at Badwar, REWA along with associated 220 kV DCDS Transmission line (Route length 3.0 Kms) and associated feeder bay work on total Turnkey basis against Bid Identification No. RUMS/2016-17/372/014 (Lot-I) under World Bank Financing?
4.2 Whether in the facts and circumstances of the case, value of all the goods supplied under the contract, independent of the Works Contract being executed in the contract shall form part of the Works Contract and taxed as service?
5. CONCERNED OFFICER’S VIEW POINT:
The concerned officer is his view point submitted that the Explanation to Entry No. 234 of Notification No. 1/2017 – Central Tax (Rate) and corresponding notifications issued under MPGST Act shall not apply to the supply of the said Works Contact Service.
6. RECORD OF PERSONAL HEARING:
6.1. Shree Sandeep Mukherjee, CA appeared for personal hearing and reiterated the submissions already made in the application. They reiterated the facts submitted along with the application. The Applicant states that —
6.2. The applicant is engaged, inter alia, in construction of new 33 / 220 kV Pooling Substation at Badwar, REWA along with associated 220 kV DCDS Transmission line (Route length 3.0 Kms) and associated feeder bay work on total Turnkey basis again Bid Identification No. RUMS/2016-17/372/014 (Lot-I) under World Bank Financing for Rewa Ultra Mega Solar Limited, hereinafter referred to as RUMS.
6.3. The work was allotted vide Notification of Award No. 04-01/RUMS/2016-17/372/14 (Lot-I) / TK — II/89 dated 23.09.2016 read with revised Notification of Award No. 04-01/RUMS/2016-17/372/14 (Lot-I) / TK — 11/119 dated 17.11.2016.
6.4. The Scope of work given in para 4 of the Contract includes the following :
a) Supply of Transmission Line material and Sub-station equipment, Station Transformers, Fabricated, Galvanized Sub-station Structures and other materials, with related civil works, erection work and test / commissioning for construction of substation;
b) Engineering, Manufacture, Assembly, Inspection and Testing at manufacturer’s works and supply on FOR destination basis including transportation, unloading, storage, insurance of Plant / Equipment, materials and recommended spares complete in all respect as per technical specification;
c) Civil work as per specifications described in Volume — II of the Bid document.
d) Erection, Testing and Commissioning of all items indicated in Annexure — III and IV.
e) Supply, erection testing and installation fabricated, galvanized sub-station structures, stringing and earthing material, supplies testing and commissioning of all outdoor;/indoor plant. Civil work associated with construction of substation works.
f) Carryout erection work as stipulated in the Bid Document which involves fabrication, galvanizing and delivery of Double Circuit /Multi Circuit Towers, there body extensions, river / line crossing gantries, hangars, U Bolts, D Shackles, Bolts Nuts, spring washers, pack washers, step bolts, tower accessories, earthing rods with clamps, danger boards, number plates, face plates and anti-climbing devices (including fixing arrangements and barbed wire) and ground wire, ACSR Conductor, ground wire, disc insulators, hardware and accessories for conductor and ground wire and complete erection of transmission lines including detailed/check survey, casting of foundations, tower erection, stringing etc and testing of commissioning of transmission lines.
6.5. Under the contract, the list of materials and their cost is mentioned in detail in Annexures — Ito V of the Contract, which fact is detailed in para 4.17.
6.6. The contract price at para 5.1 clearly mentions the rates for supply of goods and that for service of construction separately.
6.7. It is mentioned in para 7.11 of the contract that the Civil Works and the installation services are Works Contract and that VAT @ 2% shall be deducted from our bills.
6.8. In accordance with the terms of the contract, the work was commenced and is being executed at present. Extract of the Relevant pages of the Contract are enclosed herewith, marked as Annexure — I.
6.9. After the amendment of Notification No. 1/2017 Central Tax (Rate) vide Notification No 24/2018 — Central Tax (Rate), read with Notification No. 11/2017 —Central Tax (Rate), as amended by Notification No. 27/2018 — Central Tax (Rate) and the corresponding notifications issued under MPGST Act, it was the opinion of Rewa Ultra Mega Solar Limited that the all the supplies of the goods and services being made under this contract was covered under the explanation to entry no. 234 in Schedule — I of the Notification No. 1/2017 — Central Tax (Rate) and the corresponding notifications issued under MPGST Act.
6.10. Based on such understanding, RUMS was of the opinion that on all the supplies of the contract, the rate of tax was 8.9%. However, in our opinion, the explanation in entry no. 234 supra is not applicable to the supplies made by us under this contract.
6.11. The entry no. 234 is for the supply of the following items :
(a) Bio-gas plant
(b) Solar power based devices
(c) Solar power generating system
(d) Wind mills, Wind Operated Electricity Generator (WOEG)
(e) Waste to energy plants / devices
(f) Solar lantern / solar lamp
(g) Ocean waves/tidal waves energy devices/plants
6.12. The supplies made by them under the contract are not for any of the items listed above in 6.11 and therefore they were of the opinion that this beneficial notification was not applicable to them upto the explanation inserted in the Notification.
6.13. Under the contract, they are required to supply goods as well as provide construction service, which includes supply of material for construction. The value of the supply of materials independent of the services relating to construction is separately mentioned in the contract and invoices for the same are raised separately. Therefore, they charged GST at the rate applicable to the goods and have not included them in the value of the supply of construction service.
6.14. Regarding applicability of Entry No. 234 in Schedule — I of Notification No. 1/2017 — Central Tax (Rate) and the corresponding notifications issued under MPGST Act and Entry No. 38 in Notification No. 11/2017 — Central Tax (Rate) and the corresponding notifications issued under MPGST Act:
6.14.1.The provisions of law, which form the basis of the dispute of interpretation are Entry No. 234 in Schedule — I of Notification No. 1/2017 — Central Tax (Rate) and the corresponding notifications issued under MPGST Act and Entry No. 38 in Notification No. 11/2017 — Central Tax (Rate) and the corresponding notifications issued under MPGST Act.
6.14.2. Notification No. 1/2017 — Central Tax (Rate) contains the rate of CGST on goods being supplied. Entry No. 234 of Schedule — I of the said notification is as under:
