Case Law Details
In re Halliburton Offshore Services Inc. (LIH) (GST AAR Andhra Pradesh)
It is observed that under Caluse-31 of the Contract, the Contractor (herein the Applicant) receives reimbursement from the Operator (herein the OIL) for loss of or damage to the down hole equipment and tolls. Sub-clauses (a) and (b) of the said Clause -31 specifies the amount of reimbursement to be made to the Applicant. In case of damage of the equipment or tools, such reimbursement shall be repair cost (subject to maximum of the cost of equipment/tools to be reimbursed in case of the same were lost) and whereas in case of loss of equipment or tools, the amount to be reimbursed shall be the amount limited to original cost (F.O.B nearest port) reduced by depreciation at the rate of 10% per year to be proportioned for each completed month or part thereof subject to maximum depreciation of 50%.
From the facts discussed herein at Para-8(i), it is found that the equipment/tools are tangible and movable. The amount of reimbursement of equipment/tools which are damaged beyond repair or loss is at an agreed depreciated value of the Original FoB Price of such equipment/tools. Going by the methodology and by nature of the equipment/tools, the activity of reimbursement towards Lost in hole/Damage Beyond repair of equipment /tools is rightly classifiable as ‘Supply of Goods’ in terms of Section-7 of the CGST Act, 2017-Depending upon the nature of actual goods involved in the subject activity, their classification is as per HSN notified for the goods and the Classification Rules made in this regard. Accordingly, the provisions relating to chargeability and levy of GST under the CGST Act and the Rules made there under as applicable to the supply of goods will apply.
FULL TEXT OF ORDER OF THE AUTHORITY OF ADVANCE RULING, ANDHRA PRADESH
ORDER
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What is the basis calculation of depreciation 10% per year and maximum 50% in article 3.6.b ?
In the case of CONTRACTOR’S down hole equipment being lost, OPERATOR will reimburse CONTRACTOR an amount limited to the original cost (F.O.B. nearest port) reduced by depreciation at the rate of 10% per year to be proportioned for each completed month or part thereof from the date of purchase of the lost equipment I tool subject to maximum depreciation of 50%