NOTIFICATIONS
(1) Government
has issued Notification No. 59/2020-Central Tax dated 13th July,
2020 and extended the
date of filing of GSTR4 (annual return for F.Y. 2019-20 by dealers who have
opted for Composition Scheme) to 31st August, 2020.
(2) As per Notification No. 60/2020-Central Tax
dated 30th July, 2020, Government has made amendments in Rule 48 of CGST Rules. By this
amendment, Government has substituted ‘Form GST INV-1’. The new format / schema
for e-invoice will be applicable from 1st October, 2020 to those
dealers whose aggregate turnover was more than Rs. 500 crores during the
previous year.
(3) Under
Notification No. 61/2020-Central Tax dated 30th July, 2020,
Government has amended the earlier Notification No. 13/2020-Central Tax dated
21st March, 2020. Now, by this Notification Government has prescribed that issue of
e-invoice is applicable to only those dealers whose turnover was more than Rs.
500 crores during the previous year. It is further provided that the said
provisions of e-invoicing are not applicable to a Special Economic Zone unit.
ADVANCE RULINGS
(A) ITC vis-a-vis Plant & Machinery
M/s Atriwal Amusement Park [Order No. 12/2020;
Dated 9th June, 2020 (MP)]
The issue involved availability of ITC on various items pertaining to
amusement parks. The applicant proposes to construct a water-park containing
various items like water slides, kids’ play-slides, wave pool, etc. For the
said purpose it has to use various components and services which are liable to
GST. The following questions were posed before the AAR:
(a) Whether they are eligible to take credit on Input Tax paid on purchase
of water slides? Water slides are made of strong PVC.
(b) Water slides are installed on a steel and civil structure. Will
credit of tax paid on input goods and services used in construction of this
support structure be available or not?
(c) Whether or not Input Tax will be available on goods and services used
for area development and preparation of land on which water slides are to be
erected?
(d) Whether the applicant will be eligible to take credit of Input Goods
and Services used for construction of swimming pool / wave pool as water slides
directly run into the pools?
The issues were basically in light of the provisions of section 17(5) of
the CGST Act, 2017 and the Explanation below section 17(6). As per section
17(5)(d), the ITC on inward supplies used in construction of immovable property
is blocked. However, as per the Explanation below section 17(6), ITC is allowed
on immovable properties if they are Plant & Machinery. The Explanation has
included foundation and structural support in the category of Plant &
Machinery.
The learned AAR noted that although the Explanation seeks to allow ITC on
foundation and structural support as Plant & Machinery, section 17(5)(d)
seeks to disallow ITC on building or any other civil structures. Analysing the
position, the AAR further observed that there seems to be an apparent
contradiction, but actually there is no such contradiction. If the foundation
and structural support is for fixing apparatus, equipment and machinery, it
will be part of Plant & Machinery. Other construction will fall in building
or any other civil structures on which ITC is not allowed.
In this context, the AAR also referred to the meaning of foundation in
various dictionaries. Thereafter, he referred to the main issue about the
nature of items (slides, etc.) involved and whether such items can be covered
under the category of Plant & Machinery. He also referred to various
judicial pronouncements on the meaning of ‘plant’. Though many judgments were
cited, the AAR made extensive reference to the judgment of the Supreme Court in
the case of Scientific Engineering House Pvt. Ltd. In this judgment the
Supreme Court referred to various foreign judgments also and observed that when
the meaning of ‘plant’ is not defined, the meaning should be as per popular
understanding. It further observed that the meaning is wide and it will include
any article or object fixed or movable, live or dead, used by businessmen for carrying
on their business and it is not necessarily confined to an apparatus which is
used for mechanical operations or processes, or is employed in mechanical
industrial business. Citing such wide meanings, the AAR ruled in respect of
each item as under:
(i) ITC in respect of Input Tax paid on purchase of water slides is
eligible as it is part of Plant & Machinery.
(ii) In respect of the steel and
civil structure on which the water slides are installed, ITC is eligible as
they are foundation and support structures which are used to fasten plant and /
or machinery to the earth and hence they are Plant & Machinery.
(iii) Similarly, foundation in respect of wave pool machines is also held
eligible to ITC as Plant & Machinery. However, the machine room which is a
civil structure is not eligible as it is neither foundation nor civil structure
for machinery.
(iv) As for Input Tax on goods and services used for area development and
preparation of land on which water slides are to be erected, the AAR held that
ITC is not eligible as they become part of land on which ITC is not allowed.
(v) Input Tax Credit (ITC) on goods and services used for construction of
swimming pools / wave pools was held ineligible as they are not support
structure or foundation of the plant. They are held as independent items per
se.
(vi) The ITC in respect of goods and services used for the provision of
facilities like transformer, sewage treatment plant, electric wiring and
fixtures and others were held ineligible as they are not Plant & Machinery
but part of building or civil structure.
(B) ITC on a lift in a hotel building
M/s Jabalpur Hotels Private Limited [Order No.
10/2020; Dated 8th June, 2020 (MP)]
The issue was about availability of ITC on the lift installed in the
upcoming hotel building.
The applicant intends to construct a hotel building with 100 rooms’
capacity and wants to install a lift in the same. The inward supplies for the
lift will include its parts, components and installation services. The question
was posed in light of the provision of section 17(5)(d) of the CGST Act which
blocks credit in respect of goods and services received by taxable person for
construction of an immovable property (other than Plant & Machinery) on his
own account, including when such goods or services or both are used in the
course or furtherance of business. It was the contention of the applicant that
the lift is in the hotel and is necessary for the successful running of the
same. Therefore, the inward supplies are in the course of business. It was
further argued that even if section 17(5)(d) blocks credit for immovable
property, the ITC is eligible in respect of Plant & Machinery. It was
contended that a lift is machinery and hence it does not fall in the
restriction of 17(5) of the CGST Act.
The applicant cited the meaning of the words Plant & Machinery, which
include apparatus, equipment and machinery fixed to earth by foundation for
structural support, that are used for making outward supply of goods or
services. Citing a reference from Oxford, it was sought to explain that the
equipment required to operate a business is Plant & Machinery. Similarly,
the definition given in legal dictionaries like Law Lexicon was cited in
which plant is defined to mean the fixtures, machineries, etc. necessary to
carry on any trade. The applicant also cited the judgments given in relation to
CENVAT Credit. It was further contended that as per Indian Accounting Standards
the lift installations are recorded in the books of accounts under a separate
head and not under the head ‘building’.
The AAR made reference to the provisions of ITC in the CGST Act and
agreed with the contention of the applicant that the lift is used for business.
However, he further observed that the intent of the Legislature is clear in
that it intends to restrict ITC on any goods or services which are used in the
construction of an immovable property, even when such goods or services are
used in the course of business.
In respect of the
nature of the lift, the AAR observed that the lift comprises of components or
parts like lift car, motors, ropes and rails, etc., and each of them has its
own identity prior to installation and they are assembled / installed to create
the working mechanism called a lift. It further observed that the installation
of these components / parts with immense skill is rendition of service and
without installation in the building there is no lift. They are also made to
order and installed as per specifications. Therefore, they are not goods by
themselves.
The AAR came to the
conclusion that the lift becomes part of the building and is not a separate
building per se. The lift has no identity when removed from the
building. It cannot be sold or purchased. It is a customised mechanism for
transportation designed to suit a specific building. Piece by piece, it becomes
an integral part of the building.
Regarding the contention of the applicant that it is Plant &
Machinery, the AAR observed that building and civil structures are specifically
excluded from the meaning of Plant & Machinery even in the Explanation
below section 17(6). Since the lift becomes part of the building, it gets
excluded and therefore comes within the scope of section 17(5)(d). In this
respect, the AAR also made reference to the AR given by AAR Karnataka in the
case of Tarun Realtors Private Limited vide order dated 30th
September, 2019. The AAR observed that though such other ARs have no
value as precedents, there is a lot of persuasive value. In the above case of Tarun
Realtors also, the ITC is held ineligible on the lift.
In view of the above position, the AAR in the present case held that ITC
is not eligible in respect of installation of lift.
(C) Classification – Hand sanitizer
Springfields (India) Distilleries [AR Order
Goa/GAAR/1 of 2020-21; Dated 25th June, 2020 (Goa)]
The applicant has sought classification on hand sanitizer. It was the
contention of the applicant that it is medicament covered by HSN Code 30049087
hence liable to GST at 12%. The AAR noted the contention of Revenue and
compared the HSN 3004, 4301, 3402 and 3808. After analysing the above HSNs, the
AAR observed that hand sanitizer is of the category of alcohol-based products
and is classifiable under HSN 3808. He held that hand sanitizers are liable to
GST at 18%.
(D) Permanent Establishment
M/s IZ-Kartex named after P.G. Korobkov Ltd. [Order
No. 04/WBAAR/2020-21; Dated 29th June, 2020 (WB)]
The facts in this case were rather peculiar. The applicant is the local
branch of a Russian business entity by the same name (referred to as foreign
company) which has entered into a maintenance and repair contract (MARC) with
Bharat Coking Coal Limited (BCCL) with respect to the machinery and equipment
that it had supplied. The local branch which had applied for the AR, was trying
to argue that the supply of services is by a foreign company and therefore it
is import of service within the meaning of section 2(11) of the IGST Act. It
was further argued that it is the recipient, that is, BCCL, which should
discharge liabilities under RCM.
The AAR referred to the terms of the MARC and found that the contract has
spanned over 17 years from the date of commissioning of the equipment. The
applicant is also required to depute officers, support staff and system experts
at the site for maintenance and repair of equipment and to train the BCCL personnel.
The applicant is paid at an agreed rate for supervision, supply of spares and
consumables, etc.
Looking into all this, the AAR observed that the applicant maintains
suitable structures in terms of human and technical resources at the sites of
BCCL. It ensures supervision of the equipment, supply of spares and
consumables, indicating a sufficient degree of permanence to the human and
technical resources employed at the sites. Accordingly, the AAR held that the
applicant has fixed establishment as defined u/s 2(7) of the IGST Act and
therefore the location of the supplier is within India as per section 2(15) of
the IGST Act. Thus, there is no import of services but these are supplies by
the applicant located in India. Accordingly, it is liable to GST in India.
