In re L&T Hydrocarbon Engineering Limited (GST AAAR Rajasthan)
Question I – Whether the services provided by the applicant are classified under Sr. No. 24 (ii) of heading 9986 of Notification No. 11/2017 — Central Tax (Rate) dated 28.06.2017 as ‘Support services to exploration, mining or drilling of petroleum crude or natural gas or both’ and attracts GST @ 12%.
Answer: Based on the analysis of activities, the Appellant are required to carry out in pursuance of the EPC Contract and keeping in view the true nature of supplies proposed to be undertaken by the Appellant, the proposed supplies are appropriately classifiable under SAC Heading No. 9954 answering to description ‘Construction Services’ which are in the nature of composite supply defined as works contract.
Question 2 – Whether the services provided by the applicant are classified under `Professional, Technical or Business Service relating to exploration, mining, or drilling of petroleum crude or natural gas or both’ under Sr. No. 21.(ia) (Professional, Technical or Business Service to Mining) of the Rate Notification. and attracts GST (113 12% or Sr. No. 21(ia) of Heading 9983 of Notification No. 11/2017 — Central Tax (Rate) dated 28.06.2017 and attracts GST @ 12%.
Answer: The proposed supplies are specifically covered by SAC Heading No. 9954 and the claim that ‘Construction Services’ of SAC Heading No. 9954 is a general description of the supplies and ‘support services’ of SAC Heading No. 998621 is more specific to describe the proposed supplies is not supported by the EPC Contract as dis-cussed above.
Question – 3 – Further, if the subject services are not classified under any of the aforesaid entry, what would be the appropriate classification for the same and what rate GST would be imposable?
Answer: The proposed supply is covered by the scope of ‘Construction Services’ of SAC Heading No. 9954 and neither the inclusions given under SAC Heading No. 998621 for Support Services nor the description of Heading 9983 covers the scope of the proposed supply, Hence, the claim for classification under SAC Heading No. 998621 or alter-natively under Heading 9983 is not sustainable. The proposed supplies, therefore, attract tax at the rate of 9% in terms of item (xii) of entry at Si. No. 3 of Notification No. 11/2017 — Central Tax (Rate) dated 28.06.2017 as amended and 9 % in terms of Notification issued under the RGST Act, 2017.
Read AAR Also – EPC contract for infrastructure facilities is a work contract & 18% GST is payable
FULL TEXT OF THE ORDER OF APPELLATE AUTHORITY FOR ADVANCE RULING, RAJASTHAN
(Proceedings under Section 101 of the Central GST Act, 2017 read with Section 101 of the Rajasthan GST Act, 2017)
At the outset, we would like to make it clear that the provisions of both the Central GST Act, 2017 and the Rajasthan GST Act, 2017 are same barring a few exceptions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central GST Act, 2017 would also mean a reference to corresponding provisions of Rajasthan GST Act, 2017.
The present appeal has been filed under Section 100 of the Central Goods & Services Tax Act, 2017 (hereinafter also referred to as ‘the COST Act’) read with Section 100 of the Rajasthan Goods & Services Tax Act, 2017(hereinafter also referred to as ‘the RGST Act’) by the Appellant on the portal on 19.10.2021 against AAR, Rajasthan Ruling Order No. RAJ/AAR/2021-22/18 dated 13.09.2021. As per the Appellant, the Order of the AAR was communicated to them on 2L09.2021.
BRIEF FACTS OF THE CASE
1. M/s L&T Hydrocarbon Engineering Limited, Flat No. 236 and 237, SDC Monark Building, Amrapali Marg, Vaishali Nagar, Jaipur- 302021 (herein after referred as Appellant) is a company registered under the Indian Companies Act, 1956. It is a subsidiary of L&T Limited, an Indian tecimology, engineering, construction, manufacturing and financial services conglomerate. The Appellant are engaged in the business of engineering, procurement fabrication, construction and project management providing integrated solutions to the Hydro-carbon Industry. The Appellant carries out construction of refinery, petrochemical, chemical pro-ject, gas gathering stations, crude oil & gas terminals, etc. on turnkey basis. The Appellant are registered under the Rajasthan Goods and Service Tax Act, 2017 (`RGST Act’) having registra-tion number 08AABCL5967D1ZE.
2. The Appellant have informed that Cairn (Vedanta’s upstream Oil & Gas vertical) is the operator of Onshore RN-ON-90/1 block which is located in Barmer ba-sin and having various oil and gas discoveries, including Mangala, Bhagyam and Aishwariya fields, collectively known as MBA field, as the major producing field along with marginal producing satel-lite fields. The productions from various well pads of MBA & other satellite fields are pro-cessed at the Mangala Processing Terminal (“MPT”) at Barmer district of Rajasthan.
3. With a view to further augment facilities and infrastructure for enhancing the liquid handling capacity from 800 KBLPD to 1300 KBLPD at MPT based on the pro-jected production scenarios & expected increase in total liquid, the Appellant have entered into an Engineering, Procurement and Construction Contract (“EPC contract”) with Vedanta Lim-ited in January, 2019 for construction of customized additional infrastructure facilities under Ve-danta’s Mangala Upgradation Project Stage 2 — EPC — 2 or “MUPS2-EPC2” Project at Mangala wells (“subject services”). The Appellant have provided a copy of the relevant extract of the EPC contract outlining the Scope of work.
4. SCOPE OF WORK — AUGMENTATION OF FACILITIES & INFRASTRUCTURE UNDER MUPS2-EPC2 PROJECT
Under the MUPS2-EPC2 Project, the Appellant are required to un-dertake designing, planning, development, construction, installation, test run, final commission-ing and hand over of various infrastructure facilities as under:
a. Augmentation of Liquid handling ca-pacity
b. Augmentation of Produced water treatment facility
c. Augmenting existing Injection Water System capacity
d. New Back Wash Sys-tem
e. New LP Steam & condensate system at MPT
f. Augmenting Instrument Air & Nitrogen Capacity
g. Augmentation of other facilities in-cluding New Chemical injection skid at MPT, Flare System and Drain System & Potable wa-ter
5. SCOPE OF WORK— EXECUTION UNDER THE CON-TRACT
The Appellant submitted that their Scope of work under the MUPS2 – EPC2 Project includes design & detail engineering. This includes FEED verification post bid during detailed engineering, procurement & supply, fabrication, manufacturing, assembly, inspection & testing, delivery & unloading at site, storage & preservation, erection & installation, facilities construction. it also includes Hook-ups with the existing & pro-posed facilities, testing, pre-commissioning & commissioning, RFSU, test runs, training of Vedanta personnel, Project Management, Construction, Logistical, Site & Stakeholder Management, Regulatory Compliance, Site Restoration handover to Vedanta.
5.1 The Appellant are required to deploy resources (including man-power, tools & tackles, equipment, etc.) for execution of the scope of work. The Appellant are also responsible for arranging any external assistance/ support, if required, at its own cost & risk.
5.2 The Appellant’s obligation is to cover at their expense the works mentioned in the above two Para. In addition to the supply of mandatory spare parts included in the contract, the Appellant would also supply spare parts required for the opera-tion and maintenance of the facilities for the period specified as per specifications.
RESPONSIBILITIES OF APPELLANT UNDER THE SCOPE OF WORK
6.1 General Responsibilities
Under the EPC contract, the Appellant have the following general responsibilities in relation to the design, construction and installation of customized infrastructure facilities:
a) Providing & mobilizing all project management resources for performance of works.
b) Providing and mobilizing all engineering & procurement resources for execution of project.
c) Providing and mobilizing all construction re-sources for execution of project. The construction team is primarily responsible for performing pre-construction activities, review of all the construction/ fabrication drawings prior to start of site construction and updating same as per actual site conditions etc.
d) Appraisal and taking cognizance of site-conditions, Government rules & regulations, bye-laws, applicable codes & standards, requirements of authorities having jurisdiction over the work site(s), environmental & pollution concerns including conditions/ stipulations laid downs by concerned authorities etc.
e) Obtaining all necessary approvals & work permits from concerned authorities for performing the work, including shifting/ relocation of existing facilities & other utilities, etc.
f) Coordinating with vendors, suppliers, fabricators & to perform all activities including expediting, inspection & testing, transportation, loading/ unloading, storing, shifting & liaison with the authorities, etc.
g) Identifying & planning access to sites as may be required for construction of project facilities.
6.3 Design & Engineering – The Appellant submitted that in relation to the customized design and engineering, its scope of work for the facilities forming part of this project broadly include, but not be limited to the following:-
