Composite supply — Works contract — Erection and commissioning of the Tower Package—Applicability of exemption notification—In the instant application, applicant stated to be engaged in the manufacturing, installation and other ancillary services of integrated transmission towers.
Whether the Tower Package, which includes the erection of a series of transmission towers and commissioning of the transmission line, is an immovable property.
Held that—It is abundantly clear that neither the risk in the goods passes to PGCIL at the factory gate nor that the JV will get any payment, other than the advances paid, until and unless the goods are dispatched. Evidently, property in the goods does not pass to PGCIL at the factory gate. The JV needs to move the goods and deliver them at the work site before claiming 60% of the payment for execution of the First Contract. The balance amount is to be paid in phases till completion of erection of all towers of the transmission line.
It is immediately apparent from the above discussion that the First Contract cannot be executed independently of the Second Contract. There cannot be any ‘supply of goods’ without a place of supply. As it is evident from the above discussion that title to the goods has not been transferred to PGCIL at the factory gate, supply under the First Contract involves movement and/or installation at the site, and the place of supply shall be the location of the goods at the time when movement of the goods terminates for delivery to PGCIL or moved to the site for assembly or installation [refer to Section 10(1)(a) & (d) of the IGST Act, 2017]. The First Contract, however, does not include the provision and cost of such transportation and delivery. It, therefore, does not amount to a contract for ‘supply of goods’ unless tied up with the Second Contract. In other words, the First Contract has “no leg’ unless supported by the Second Contract. It is no executable contract unless tied up with the Second Contract.
It is evident that although supplies of goods and services to PGCIL are being made under two separate agreements, they are not executable separately. The First Contract for supply of goods cannot be executed unless tied up with the Second Contract. Unless and until supplies under both the contracts are made and the Tower Package is commissioned, PGCIL is not treating either of the contracts as successfully completed and reserves the right to initiate actions for breach of contract.
It is thus a single source contract for bundled supplies of goods and services for construction, erection and commissioning of the Tower Package – an immovable property.
The Applicant is executing an indivisible composite contract for construction, erection and commissioning of an immovable property, namely the Tower Package, execution of which involves bundled supply of both goods and services. It is, therefore, works contract, as defined under Section 2(119) of the GST Act - The contract for the Tower Package, being works contract is service in terms of paragraph 6(a) to Schedule II to the GST Act. Activities covered under Schedule II are to be treated as a supply of the nature described under section 7(1)(d) of the GST Act. Reference to Circular No. 47/21/2018-GST dated 08/06/2018 of CBIC or the e-flyer is, therefore, not relevant in the present context.
The price components of both the First and the Second Contracts, including that for transportation, in-transit insurance etc. are, therefore, to be clubbed together to arrive at the value of the supply of works contract service - Transportation of goods and in-transit insurance, being merely parts of the bundled services, should to be treated as components of the value of the works contract and not as separate and independent supplies - The exemption under serial no. 18 of the Exemption Notification is, therefore, not applicable in the present context.
Ruling—The Applicant supplies works contract service, the value of which includes inter alia consideration paid for transportation and in-transit insurance. GST is to be paid on the entire value of the works contract, including the supply of materials, transportation, in transit insurance, erection, commissioning etc.
The exemption under serial no. 18 of Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017 is, therefore, not applicable in the present context. — Skipper Ltd, In Re..... [2018] 6 TAXLOK.COM 38 (AAR-WB)