Case Law Details
In re GVS projects Private limited (GST AAR Andhra Pradesh)
Whether the value of materials recovered from our RA bills issued on cost recovery basis by APSPDCL is liable to tax under RCM as per Notification No.13/2017 Central Tax Rate dated 28.06.2017 or not ?
The value of materials recovered on cost recovery basis by the Contractee from the R.A. bills issued by the applicant is includible in the taxable value of supply in terms of Section 15(2)(b) of the CGST Act, 2017
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, ANDHRA PRADESH
1. The present application has been filed u/s 97 of the Central Goods & Services Tax Act, 2017 and AP Goods & Services Tax Act, 2017 (hereinafter referred to CGST Act and APGST Act respectively) by M/s GVS Projects Private Limited.,(hereinafter referred to as applicant), registered under the Goods & Services Tax.
2. The provisions of the CGST Act and APGST Act are identical, except for certain provisions. Therefore, unless a specific mention of the dissimilar taxguru.in provision is made, a reference to the CGST Act would also mean a reference to the same provision under the APGST Act. Further, henceforth, for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST or AP GST Act would be mentioned as being under the GST Act.
3. Brief Facts of the case:
M/s GVS Projects Private Limited, Gunadala, Vijayawada, (hereinafter referred to as the Applicant) is engaged in electrification work of “System improvement project for erection of 2 Nos.33/11 KV Indoor Sub-Stations and their connected lines at Nellore Town on semi turnkey basis under IPDS” to the Andhra Pradesh Southern Power Distribution Company Limited. The applicants agreed to such engagement, subject to the terms and conditions and entered into an agreement vide No.68/2016-17, dated 31.12.2016.
4. QUESTION RAISED BEFORE THE AUTHORITY:
The applicant seeks advance ruling on the following;
1. Whether APSPDCL is a Government authority/ Government Entity or not?
2. What is the applicable rate of GST on work agreement entered into with the APSPDCL which is mentioned in the Annexure II?
Broad Scope of work: “System improvement project for erection of 2 Nos.33/11 KV Indoor Sub-Stations and their connected lines at Nellore Town on semi turnkey basis under IPDS.
3. Under which Notification the work would fall, for discharging the GST liability?
4. Whether the value of materials recovered from our RA bills issued on cost recovery basis by APSPDCL is liable to tax under RCM as per Notification No.13/2017 Central Tax Rate dated 28.06.2017 or not ?
On Verification of basic information of the applicant, it is observed that the applicant falls under State jurisdiction, i.e. Assistant Commissioner, Auto Nagar Circle of Vijayawada. Accordingly, the application has been forwarded to the jurisdictional officers and a copy marked to the central tax authorities to offer their remarks as per the Sec. 98(1) of CGST/APGST Act, 2017.
In response, the jurisdictional officer concerned stated that there are no pending proceedings relating to the applicant and no proceedings were passed on the issue, for which the Advance Ruling sought by the applicant.
5. RECORD OF PERSONAL HEARING:
Sri M. Ramachandra Murthy, Chartered Accountant and Sri. P Viswanath, B.Com, GST Practitioner, the authorized representatives of the applicant appeared for personal hearing on 10.12.2018 and they reiterated the submission already made in the application.
6. DISCUSSION AND FINDINGS:
we have examined the Issues raised In the application. The taxability, classification of the services, applicable rate of tax, eligibility of exempt, on etc. for the goods and services supplied or to be supplied, as governed under the provisions of respective GST Acts are examined.
The Government of India, vide Notification No.11/2017 – Central Tax (Rate), dated- 28th June 2017 notified the rate of GST applicable on supply of services . Under this notification for heading 9954 the applicable rate of GST is 9% The said, notification has been amended from time to time and till date Five notifications are issued by the Government of India and the said amendment Notifications are as follows:-
1) Notification No.- 20/2017-Central Tax (Rate), Dated 22/08/2017.
2) Notification No.- 24/2017-Central Tax (Rate), Dated 21/09/2017.
3) Notification No.- 31/2017-Central Tax (Rate), Dated 13/10/2017.
4) Notification NO.-46/2017-Central Tax (Rate), Dated 14/11/2017.
5) Notification No.-01/2018-Central Tax (Rate), Dated 25/01/2018.
Vida notification No. 24/2017 – Central Tax (Rate), Dated: 21/09/2017, Government of India by inserting entry No. (VI) notified concessional GST rate of 6% for the construction services provided to Central Government, State Government , Union Territory, a local authority or a Governmental Authority by way of construction, erection, commissioning, installation, completion, fitting out , repair, maintenance, renovation, or alteration of,-
a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;
b) a structure meant predominantly for use as (i) an educational (ii) a clinical, or (iii) an art or cultural establishment; or
c) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in paragraph 3 of the Schedule III of the Central Goods and Services Tax Act, 2017.
Further, vide Notification No. 31/2017 – Central Tax (Rate), Dated -13/10/2017, Government of India substitute the word “Central Government, State Government, taxguru.in Union Territory, a local authority, a Governmental Authority or a Government Entity” in place of “Central Government, State Government, Union Territory, a local authority or a Governmental Authority”
Now, we examine the question that the Applicant Contractee i.e. M/s APSPDCL is a Government entity or not. As per Notification No. 31/2017 – Central Tax (Rate), Dated: 13/10/2017 issued under CGST Act, 2017 and corresponding notification under APGST Act, 2017 Government Entity is defined as under.-
“Government Entity” means an authority or a board or any other body including a society, trust, corporation,
i) set up by an Act of Parliament or State Legislature; or
ii) established by any Government, with 90 percent or more participation by way of equity or control, to carry out a function entrusted by the Central Government State Government, Union Territory or a local authority.
The Applicant Contractee i.e. APSPDCL is a Government Company i.e. wholly owned by the Government of Andhra Pradesh. When a copy of Audited Annual Accounts of M/s APSPDCL for the Financial Year 2016-17 is examined, it is evident from the schedule of Equity Share Capital of the Annual Statement that 100% share capital is held by the Government of Andhra Pradesh in the name of Honourable Governor of Andhra Pradesh. Thus, based on the above facts, it is concluded that the Government of Andhra Pradesh is having full control over the APSPDCL and covered under the definition of Government Entity.
Now we discuss the nature of work undertaken by the applicant.
The applicant is engaged in execution of works awarded by M/s Southern Power Distribution Company of Andhra Pradesh Limited for (1) Construction of indoor sub-station with control room and civil works; (2) Electrical Works; (3) Providing bore well (4) Erection of 33KV line with 100 sqmm AAA Conductor (DC);
(5) Erection of 11 KV line with 100 sqmm Conductor; (6) Erection of 33 KV UG cable;
(7) Erection of 11 KV UG cable ; (8) 33 KV Railway crossing. Further, for all civil works, where materials
such as sand, metal, gravel etc, are involved, the rates are inclusive of seignorage charges as fixed by the competent authority of Government of A.P. and the same will be recovered from the contract bills for remittance to the Government. Furthermore, materials such as Power Transformers, 100 sqmm Conductor 8, Station transformer will be supplied by the Department. The contract with APSPDCL is a single composite contract for supply of the said works on semi turnkey basis under IPDS.
Now the works under discussion have been undertaken to execute/implement various schemes for constructing sub stations, providing bore wells, erection of lines and required conductors etc. Moreover, the above works undertaken by APSPDCL are for business purpose and the benefit of Concessional Rate of 12% (6% under Central tax and 6% State tax) as per notification is NOT available to the applicant.
AS per Section 2 of CGST Act, 2017 and APGST Act, 2017 defines “works contract” as 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;
The composite supply of works contract as defined at Section 2 of CGST Act 2017 and APGST Act, 2017 is treated as supply of service in terms of serial no.6, Schedule II of CGST Act 2017 and APGST Act, 2017.
in the instant case, the contract entered by the applicant squarely falls under the works contract and falls under entry no. (ii) of S.No.3 of the table of Notification No 11/2017 – Central Tax (Rate), Dated; 28th june 2017 as amended from time to time and corresponding notifications under APGST Act, 2017, and the applicable rate of tax is 18% (9% under Central tax and 9% State tax).
The applicant stated that they are receiving materials such as Power Transformers, 100 Sqmm Conductor & station Transformer from the Contractee and the value of such materials is recovered from their RA bills issued on cost recovery basis by the Contractee. The applicant posed a question whether RCM as per Notification No.13/2017 Central Tax Rate datedi28.06.2017 or not on these cost recoveries. As seen from the said Notification, reverse charge is not applicable to the goods issued by a Contractee. However, the provisions of Section 15(2)(b) of CGST Act,2017, which as follows, attract in such situations.
“Section 15(2)(b) : any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both;”
Since APSPDCL being the Contractee are recovering the cost of the materials that are used/consumed in the services provided to them by the applicant from the R.A.Bills issued, such cost recovered is to be included in the taxable value of the supply.
RULING
(Under section 98 of Central Goods and Services Tax Act, 2017 and the Andhra Pradesh Goods and Services Tax Act, 2017)
The Applicant is not entitled for the benefit of concessional rate of GST @12% (6% under Central tax and 6% State tax) in terms of Notification No. 24/2017-Central Tax (Rate) dated :21.09.2017 read with Notification No.31/2017-Central Tax (Rate) dated: 13.10.2017.
The applicable rate of tax is 18% (9% under Central tax and 9% State tax) for the services referred by the Applicant as per entry no. (ii) of S.No.3 of the table of Notification No. 11/2017 – Central Tax (Rate), Dated: 28th June 2017.
The value of materials recovered on cost recovery basis by the Contractee from the R.A. bills issued by the applicant is includible in the taxable value of supply in terms of Section 15(2)(b) of the CGST Act, 2017
