Case Law Details
In re Toshiba JSW Power Systems Private Limited (GST AAR Uttar Pradesh)
The arguments of the applicant regarding exemption on the transportation service is in fact based on the assumption that the supply of service is in total isolation from the whole contract and without considering the terms and obligations created under all the contracts of supply of goods and services under erection, procurement and commissioning (EPC) package for 1×660 MW Harduaganj TPS Extn-II thermal power station by M/s UPRVUNL. As such, the applicant is isolating transportation services not only from other services (i.e. installation services and training charges) envisaged under third contract but also isolating it from whole contract of supply of goods and services allotted to the applicant. Hence most important issue to be examined by us is to verify whether the transportation services and other services provided by the appellant are altogether separate contract independent of any obligation cast on the applicant under the whole contract or not.
We find that the scope of work is Erection, Procurement and commissioning package, for 1×660 MW Harduaganj TPS Extn. II Thermal Power Station and all the contracts were awarded to the applicant in response to a single tender notification. Apart from this, all the contracts are linked by a ‘cross fall breach clause’ which means that a breach in one contract will automatically be classified as a breach of the other contract. Thus, the ‘cross fall breach clause’ provides the recipient M/s UPRUVNL an absolute right to either terminate all the contracts or claim damages accordingly. The ‘cross fall breach clause’, settles unambiguously that supply of goods, their transportation to the contractee’s site, delivery and related services are not separate contracts, but only form parts of an indivisible composite works contract supply, as defined under Section 2 (119) of the CGST Act, 2017. The composite nature of the contract is clear from the facts that first Contract and second contract cannot be performed satisfactorily unless the goods have been transported and delivered to the contractee’s site as per third contract. The contracts for supply of the goods and allied services are not separately enforceable. The recipient M/s UPRUVNL has not entered into contract of ex – factory supply of material, but for the supply at site alongwith design, engineering, manufacturing, shop fabrication, assembly, inspection, testing, forwarding to site of all equipments, erection, commissioning, handling, storage etc for EPC package for Harduaganj thermal Power Extension-II.
The ‘cross fall breach clause’, settles unambiguously that supply of goods, their transportation to the contractee’s site and related services of insurance, unloading and handling at site, installation including civil work, testing etc. are not separate contracts, but only form parts of an indivisible composite supply of goods and services with single source responsibility. Thus, from the above it is seen that the supply of the goods and the supply of services are inextricably linked with each other. The contract awarded in substance and essence is a composite contract as defined in section 2(30) of the C.G.S.T. Act, 2017 for supply of goods and services.
The Contracts involve two supplies, one for the supply of goods and the other for the supply of services. The contracts fulfill the conditions of the ‘composite supply’ as the supply of goods and services are naturally bundled in the sense that both the goods and services may require to fulfill the intention of the buyer in completion of the contract. The supply of goods and services are provided as a package and if one or more is removed, the nature of the supply would be affected. It is important to note that in GST, under composite supply, whether the two taxable supplies are arising from one indivisible contract or from two separate contract is immaterial till these two supplies are naturally bundled and one supply being principal supply & other being ancillary supply to principal supply. Even if the considerations for two taxable supplies are separately quoted or there is single consideration for two supplies, both types of scenarios are covered under composite supply till the conditions as mentioned above for composite supply are fulfilled (i.e. naturally bundled supplies and one being principal supply and other ancillary supply to principal supply). The entire transaction of providing the goods and the services is naturally bundled and hence this is clearly a case of composite supply of goods and supply of services.
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