In re IDMC Ltd. (GST AAR Gujarat)
1. Whether contract involving supply of equipment / machinery & erection, installation & commissioning services without civil work thereof would be contemplated as composite supply of cattle feed plant under GST regime? If the supplies would qualify as composite supply, what would be the classification of this bundle and applicable tax rate thereon in accordance with Notification No. 01/2017 – CT (Rate) dated June 28, 2017 (as amended).
2. Whether contract involving supply of equipment / machinery & erection, installation & commissioning services with civil work thereof would be contemplated as works contract service or not. If the supplies would qualify as composite supply of works contract, what would be the classification and applicable tax rate thereon in accordance with Notification No. 11/2017 – CT (Rate) dated June 28, 2017 (as amended).
Held : Supply of a functional Cattle Feed Plant, inclusive of its Erection, Installation and Commissioning and related works involved for both the question 1&2, is Works Contract Service Supply, falling at SAC998732 attracting GST leviability at 18%.
Read AAAR Order: Supply for Cattle Feed Plant Setup: Composite Works Contract
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING,GUJARAT
Brief Facts
IDMC Limited, hereafter referred to as IDMC for the sake of brevity, supplies cattle feed plant involving supply of various equipment and machineries. IDMC supplies complete cattle feed plant involving equipment receiving raw-material till packaging of finished goods with erection, installation& commissioning service, with or without civil work, as per the requirement of the customer. IDMC submits that these activities of installation, commissioning, whether, with civil or without civil, forms part of bundle only and is as per industry practice.
2. IDMC submits that the contract prescribes separate pricing for individual machineries and equipment so as to have clarity on material used for plant. Also, the mechanism is just pricing mechanism based on which the value of plant would be decided.
3. Supplies by IDMC involves the following scenarios:-
i. Contract involving supply of cattle feed plant including equipment & machinery as well as erection & installation service thereof without civil work.
ii. Contract involving supply of cattle feed plant including equipment & machinery as well as erection & installation services thereof with civil work.
Part A – Supply of cattle feed plant involving supply of installation, testing and commissioning services without civil work
4. IDMC has submitted that one of the purchase order placed by Barauni Dairy vide reference # DRMU/PUR/CFP-Khag/18-19/278 dated January 16, 2019 for design, supply, installation, testing & commissioning of cattle feed plant & allied equipment at Maheshkhunt, Khagaria. The copy of purchase order is enclosed herewith as Exhibit B.
5. The applicant has received the order for design, installation, testing and commissioning of cattle feed plant (‘plant’). They have quoted and agreed separate prices for supply of equipment and installation & commissioning of equipment. The bill of material / bill of quantity specify number of equipment required for cattle feed plant including accessories thereof and all the goods are offered to customers at their respective rate even if there is one contract for supply of cattle feed plant. Furthermore, the Applicant submits that it would issue separate invoices for supply of goods and supply of services. Moreover, submits that all equipment is vital for operation of cattle feed plant and the plant would not work in absence of any of the equipment.
6. IDMC submitted that the price is agreed for entire work with relevant bifurcation of goods and services. It has following responsibilities with respect to plant execution.-
