In re Ms. Ujjwal Pune Limited (GST AAR Maharastra)
We find the applicant has made the subject application on the premise that they are supplying composite supply amounting to works contract which is not correct. As discussed above, we have already found that theirs is a composite supply where the principal supply is of goods and therefore the applicant will have to discharge their GST liability at a rate which will be the tariff rate for the goods, in this case LEDs and fixtures. To answer the question of the applicant, we need to find the Tariff classification of LEDs/fixtures. We find that ‘LED Lights or Fixtures including LED Lamps’ are covered under the Sub-Heading 9405 40 90 of the GST Tariff, 2017 which are taxable @ 12% (6% each of CGST and SGST).
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, MAHARASTRA
The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act” respectively] by M/s. UJJWAL PUNE LIMITED, seeking an advance ruling in respect of the following questions.
1. The nature of Services provided under the Contract whether covered under Si. no. 3(vi)(a) of notification no. 11/2017 – Central Tax (Rate) dt. 28th June 2017 amended with notification 24/2017-Central Tax (Rate) dt 21.09.2017 and further amended with notification no. 31/2017 Central Tax (Rate) dt 13.10.2017 and notification no. 17/2018 dt.26.07.2018?
2. What is the Rate of GST applicable for the Project?
At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further, henceforth for the purposes of this Advance Ruling, a reference to “GST Act” would means CGST Act / MGST Act .
02. FACTS AND CONTENTION – AS PER THE APPLICANT
The submissions, as reproduced verbatim, could be seen thus-
STATEMENT OF FACTS —
Developer:
Ujjwal Pune Limited (‘UPL’), a subsidiary of Tata Projects Limited, is a company incorporated under the provisions of the Companies Act, 2013.
Client:
The Pune Municipal Corporation (PMC) is the civic body established on 15 February 1950. he executive power of the PMC is vested in the Municipal Commissioner, an Indian Administrative Service (IAS) officer appointed by the Government of Maharashtra. The major responsibility of PMC is to look after the civic and infrastructural needs of the citizens.
Project:
Pune Municipal Corporation (‘PMC’) had invited for bids from eligible parties for installation of Energy Efficient dimmable LED Street lights along with pet feeder basis SCADA system in Pune on a design, build, finance, operate, maintain & transfer basis for a period of 12 (twelve) years (hereafter referred to as the “Project”).
PMC awarded the project to UPL, vide its standing committee resolution no. 1204 dated September 09, 2016 and issued its Letter of intent no. 1871 dated September 06, 2016 and Work Order/ Letter of Award (Ref. Outward No. 1914) dated September 09, 2016.
Revenue Accruals to UPL:
Contract Value: The quantified energy savings shall be converted into Rupee value in accordance with existing per unit Rate 5.80/-, and PMC shall pay 98.50% of the quantified savings to the UPL every months from the appointed date up to Twelve years (12 years).
As per the contract entered with PMC, UPL earns revenue based on the energy savings made by them through the LED installations.
The current project has been awarded to UPL for the purpose of Installation and Operation of Energy efficient dimmable LED street lights for a period of 12 years.
As per the contract, UPL is required to handover all the assets to PMC at the end of the Project period. Scope of the works in Contract:
The Developer shall carry out a proper survey of all roads where the Dimmable LED Light Fixtures are to be installed within 3 (three) months period after award of work order.
Submission of implementation plan.
Design of street light shall be done on the basis of samples/sections of each type of roads defined by PMC for evaluation.
Arrangement of inspection and testing of all the fixtures at the factory before its despatch by PMC officials. Supply, Installation and commissioning of Dimmable LED lights to meet the requirement as defined in the specifications, data sheets attached with Technical Bid.
The LED lighting installed to be linked to per feeder through wireless technology. SCADA to street lighting management server software appropriate remote monitoring and verifying system to ensure information on energy savings.
All the old fixtures are to be taken by Developer and to be disposed of in scientifically and environmentally safe condition.
The Developer shall make all the LED fixtures operational within a period of 12 (twelve) months after award of contract (“Construction Period”) as per the schedule submitted by the Developer or as per the instructions of PMC.
Fully responsibility of warranty of LED’s/fixture fbr Contract Period and Warranty will start from the date of successful commissioning of the switching points.
The duration of the Project shall be 12 (twelve) years which shall be deemed as “Contract Period”
After completion on the Project Life all material/accessories installed by the Developer during the Project will be property of PMC. The Developer shall follow procedure detailed in this Tender document to hand over the site in satisfactory and working condition to PMC at the end ofthe Contract Period. Before handing over the site, the developer has to seek ‘handing over certificate and ‘no dues’ certificate from PMC officials.
Statement containing the applicant’s Interpretation of Law and/or facts —
As per the Sl.no.3(vi)(a) of notification no. 11/2017 – Central Tax (Rate) dt.28th June 2017 amended with notification no.24/2017-Central Tax (Rate) dt 21.09.2017 and further amended with notification no. 31/2017-Central Tax (Rate) dt 13.10.2017, tax rate of 12% applicable in case of Composite supply of Works Contract as defined in clause(‘ 19) of section 2 of the Central Goods and Services Tax Act, 2017, provided to the Central Government, State Government, Union Territory, a Local Authority, A Governmental Authority or a Government Entity by way of Construction, erection, commissioning, installation. Completion, fitting out, repair, maintenance, renovation, or alteration of
(a) Civil structure or any other original works meant predominantly for use other than for commerce, Industry or any other business or profession;
(b) ……………….,
(c) ………………,
Accordingly, to fall under above said S1.3(vi)(a) of notification, Services provided under the Contract should meet the following conditions.
1. PMC shall qualify as Central Government or State Government or Union Territory or a Local Authority or a Governmental Authority or a Government Entity.
2. Supply involved in the Contract shall qualify as Composite supply of works Contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017.
3. Supply involved in the Contract shall fall under ambit of Civil Structure or any other Original Works.
4. Supply involved in the Contract is predominantly meant for use other than for commerce, Industry or any other business or profession.
In view of the above, we have analyzed each of the aforementioned conditions individually.
1. Whether PMC qualifies as Central Government, State Government, Union Territory, a Local Authority, A Governmental Authority or a Government Entity?
As per Section 2 (69) of CGST Act, local authority has been defined to include a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund or a Municipality as defined in clause (e) of article 243P of the Constitution.
Since Pune Municipal Corporation is a municipal body established to look after the civic and infrastructural needs of the citizens and the executive power of the PMC is vested in the Municipal Commissioner who is appointed by the Government of Maharashtra, it shall fall under the definition of local authority.
2. Whether Supply involved in the Contract shall qualify as Composite supply of works Contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017?
As per Section 2 (119) Works contract means a Contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract.
Works contract, being composite supply involving both supply of goods and services relating to immovable property would constitute a service and accordingly liable to tax as per the provisions of the Act. Immovable property is not defined in GST Act. Section 3(26) of The General Clauses Act, 1987, defines, “Immovable Property” shall include land, benefits to arise out of the land, and things attached to earth, or predominantly fastened to anything attached to the earth.
Also, as per Section 2(6) of The Registration Act, 1908, immovable property includes land. buildings, hereditary allowances, rights to way, lights, ferries, fisheries or any other benefit to arise out of land, and things attached to the earth or permanently fastened to anything which is attached to earth, but not standing timber growing crops or grass.
In general terms, Immovable property cannot be transferred without causing extensive damage to the property. The damage relates to the nature of the property. In the present case, UPL earns revenue based on the energy savings through LED installations by replacing existing lighting system on electric pole Which is attached to the earth. The existing poles shall be used for installing the LED based street lighting fixtures using the existing cables without compromising on existing aesthetics look. The LED fixtures used in the project are not standardized products which is not available in the open market. The manufacturing of LED fixtures itself as per the design and specifications proposed by UAL and approved by PMC for this specific project. Installation and operation of SCADA system is suitable only for the LED fixtures which is installed for this specific purpose. UPL shall not use the Land, street lights or any other parts of the system for any other activity or any other commercial purpose, apart from that permitted under the Contract. Hence, no LED fixtures and SCADA system used in the Contract can be useful for any other purpose and for any other projects. Once it removes from its operations, there will be no commercial value except salvage value.
Therefore, it is construed that since LED fixtures are installed on Electric poles which is attached to earth and removal of such LED fixtures lead to damage and does not have any commercial value due to it’s not usefulness for any other purpose, it shall be treated as immovable property, hence covered under the definition of Works Contract.
3. Whether Supply involved in the Contract fall under ambit of Civil Structure or any other Original Works?
As per Explanation to Section 2 (zs) of Notification 12/2017 – “original works”means all new constructions,
(i) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable;
(ii) erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise;
Scope of work under the Contract includes Installation of equipment such as LED fixtures and SCADA system which is covered in the explanation given above, the nature of supply undertaken by UPL in the Contract shall be treated as Original Works.
4. Whether Supply involved in the Contract is pre-dominantly meant for use other than for commerce, Industry or any other business or profession?
Section 2(17) of CGST Act, defined business to include
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;
(b) to (h)
(i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities.
However, as per the explanation given vide notification no. 17/2018 – Central Tax (Rate), dated 26th July, 2018, For the purposes of item si.no.3, in column (3), in item (vi) of notification no. 1/12017 Central Tax (Rate) dated 28.06.17, the term ‘business’ shall not include any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities.”
Public Authority has not defined in GST Act. Pune Municipal Corporation is Local Authority, established as civic body with major responsibility to look after the civic and infrastructural needs of the citizens. Moreover, nature of contract and objectives & benefits accrued from the project is,
