In re Nagaur Mukandgarh Highways Pvt. Ltd. (GST AAR Rajasthan)
1. The applicant is rendering taxable services during the construction, of roads which is liable to tax; hence they are entitled to claim full ITC under.the provisions of section 16(1) of the CGST Act. 2017.
2. The Applicant is entitled to claim ITC on supplies of goods and services or both procured for use in outward supply of 0 & M service purpose, as they are paying GST on 100 percent of the amount received on account of 0 & M of the Project.
Also Read AAAR Ruling- Annuity paid instead of toll charges to developers is exempt from GST
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, RAJASTHAN
Note: Under Section 100 of the CGST/RGST Act 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of CGST/RGST Act 2017, within a period of 30 days from the date of service of this order.
The issue raised by Nils Nagaur Mukangarh Highways Pvt. Ltd. (hereinafter referred as the applicant also) is fit to pronounce advance ruling as it fails under ambit of the Section 97(2) (a), it is given as under:
(d) Admissibility of input tax credit of tax paid or deemed to have been paid.
Further, the applicant being a registered person, GSTIN is 08AAFCN47431-11ZO: as per the declaration given by him in Form ARA-01, the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations. the application is ‘admitted’ to pronounce advance ruling.
1. SUBMISSION OF THE APPLICANT:
(a) The Applicant also having Goods and Service Tax (GST) Registration Number 08AAFC N 47 43H1ZC has been engaged as a ‘Concessionaire’ wherein the Public Works Department (PWD), Government of Rajasthan has granted concession to construct, operate and maintain the project during the Construction Period which shall commence from the appointed date and will end on Commercial Operation Date (COD) and operate and maintain it for further period of 10 years from the COD.
(b) The applicant is a company incorporated as a Special Purpose Vehicle (SPV) and registered under the provisions of Companies Act, 2013 for the purpose of undertaking two-lining/intermediate laning of the sections of State highway (hereinafter referred to as Project) on design, build, operate /maintain and transfer (hereinafter referred to as ‘DBOT’) basis under a contract (hereinafter referred to as ‘Project’) with Public Works Department (PWD). Government of Rajasthan (hereinafter referred to as ‘Authority ).
2. Scope of the Contract:
Under the Contract, the applicant has been engaged as a “Concessionaire’ wherein the Authority has granted concession to Construct, Operate and Maintain the Project during:-
a. The construction period shall commence from the appointed date and will end on the COD.
b. A period of 10 years from tne (hereinafter referred to as ‘DBOT’).
c. The applicant shall receive 50% of the project cost (i.e. cost of construction) which shagbe paid to the applicant in five equal installments during the construction period on the basis of achievement of milestones i.e. achieving specified percentage of physical progress.
d. The applicant shall receive the balance 50% of the project cost in bi-annual installments over the 0 & M period along with the interest (hereinafter referred to as ‘Annuity Payments). The first installment shall be due and payable from the 180tr‘ day of GOD.
e The applicant shall also receive Pi-annual payments towards 0 & M expenses calculated at a specified percentage of the project cost during the 0 & M period (hereinafter referred to as ‘0 &M Payments’)
3. The applicant’s contention is that-
3.1 The applicant is of the view that it is eligible to avail full input tax credit (hereinafter referred as ‘ITC) of taxes paid on procurement of goods and services during the Construction period.
3.2 The applicant is of the view that it is eligible to claim ITC of taxes paid on procurement of goods and services during the 0 & M period, after reversal of input tax credit as per Section 17(2) of the COST Act read with Rule 42 of the CGST rules
4. Personal Hearing (PH)
In the matter, personal hearing was given to the applicant, Ms Khushboo Kundalia and Mr. I’vladhav Kalani appeared as representative of the applicant for personal hearing on 10.08.2018 and submitted documents and notifications related to projects. They reiterated the submissions already made in the Advance Ruling Application and requested that the case may be decided at earliest.
5. issues to be decided :
The applicant has sought advance ruling as to whether they are eligible to:
(a) Claim full ITC pertaining to procurement of goods and services for construction of the project during the Construction Period, as the entire revenue received during the said period is subject to GST; and
(b) Claim ITCs pertaining to procurement of goods and services during the 0 & M period after reversal of ITC as per Section 17(2) of the Central Goods and Services Tax Act, 2017 read with Rule 42 of the Central Goods and Services Tax Rule, 2017 as Annuity Payment received during the said period is exempt whereas 0 & M payments received are subject to GST
6. Comments of Jurisdictional Officer:-
The Jurisdictional Deputy Commissioner of Works & Leasing Tax , Uda our vide his letter 6.09.2018 submitted that the services provided by the applicant is classifiable under SAC 9954 i e. composite supply provided to Central Government or any other local body for construction of civil structure. The Services by way of access to a road or a bridge on payment of annuity (SAC 9967) has been exempted under Notification 12/2017-CT (rate) dated 28.06.2017 by inserting entry No 23A vide notification No. 32/2017-CT(Rate) dated 13.10.2017. The Jurisdiction Officer is of the view that:
(i) The construction of Roads and Bridges classifiable under SAC 9954 are liable to tax hence they are eligible to avail input tax credit on all goods and services used in the said construction.
(ii) The applicant’s contention that they are is not liable to pay tax for payment of annuity to access a road or a bridge (SAC 9967) vide entry 23A of Notification 12/2017-CT (rate) dated 28.06.2017 as amended vide notification No. 32/2017-CT(Rate) dated 13.10.2017
(iii) The contention of the applicant is tenable because the services provided by the applicant are taxable under SAC 9954 and annuity received by them after completion of work:
(iv) The Entry No 23A inserted vide notification No. 32/2017 ibid in Notification 12/2017-CT (rate) dated 28.06.2017 is not applicable to the applicant.
(v) Entry No 27 and 23A of Notification No. 12:12017 ibid exempts to Toll Fee which was being paid on the spot to access road or bridges or paid as annuity.
(vi) The annuity received by the applicant is liable to tax and cannot be included in entry No. 23A.
7. Findings:
7.1 We have gone through the content of advance ruling application made by the applicant, submission made at the time of personal hearing, and comments of officer concerned and find that the applicant Mis Nagaur Mukangarh Highways Pvt. Ltd is providing ‘work contract service’ as defined under section 2(119) of the CGST Act, 2017 to Public Work Department of Rajasthan for construction of Road As per concession agreement dated 3.03.2017 between the Government of Rajasthan through PWD and the applicant, under which total length 397 KM road in the state of Rajasthan is to be auamented on design, build, operate and transfer (DBCDT) basis which shall be financed by the Applicant who shall recover its investment and cost through Annuity Payments and O&M payment to be made as per terms and condition set forth.
7.2 The applicant have sought the advance ruling as to (a) whether they are entitled to claim full Input Tax Credit on goods and services used for construction of the project during the construction period and (b) whether they are entitle to Claim ITCs pertaining to procurement of goods and services during the 0 & M period after reversal of ITC as per Section 17(2) of the Central Goods and Services Tax Act. 2017 read with Rule 42 of the Central Goods and Services Tax Rule. 2017 as Annuity Payment received during the said period is exempt whereas 0 & M payments received are subject to GST.
7.3 Before deciding the issue, it would be appropriate to appreciate the legal provision ‘in this regard It is a fact that the applicant is providing the services of construction of roads and bridges on design, build, operate and transfer (DBOT) basis which is a composite supply as defined under clause 30 of section 2 of the CGST Act, 2017 which reads as under
“composite (30) supply’ means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply;
7.4 Further, these supplies are in relation to construction of immovable property like roads and bridges and it can be termed as ‘Work Contract’ in terms of Section 2(119) of CGST Act, 2017 which is as under:
“(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:”
7.5 The applicant has been awarded work contract vide agreement dated 3.3.2017 on Private Pubic Partnership (PPP) basis in which the applicant have to invest 60% of cost of the project. The project is to be completed within 2 years. The applicant shall receive 50% of the project cost (i e cost of construction) during the construction period on the basis of achievement of milestones i.e. achieving specified percentage of physical progress. Thus, public share of 50% will be paid to the applicant during completion of the project. The applicant’s share of 50% will be paid in 5 equal biannual installments along with interest starting from 180 days of COD. Thus the applicant is liable to pay applicable LAST on the full value of the project during the construction period of 2 years.
7.6 Section 13 of CGST Act, 2017 specifies time and value of supply of services which is as under:-
Comments are closed.