I. AUTHORITY
FOR ADVANCE RULING
19
2019 [21] G.S.T.L. 272
(A.A.R.-GST)
[In Re: Storm Communications
Pvt. Ltd.
Date of order: 28th
January, 2019]
For
a person to avail and utilise ITC he has to be registered, and then only the
credit of the input tax paid is available
FACTS
The Applicant was engaged in supply of event management services and for
the said purpose he had to move to various States where he was being charged
GST in respect of the input services received by him. The applicant then
applied for advance ruling to confirm whether ITC of one State can be utilised
for payment of liability in another State when he was not registered in the
State where tax was paid. His query was based on the fact that he had received
services in the State of Tamil Nadu and was issued a B2B invoice with his GSTIN
for the State of West Bengal; he wanted to utilise the said credit against his
liability of West Bengal (his registered premise).
HELD
It was held that since the applicant was not registered in the State of
Tamil Nadu, GST levied on services received by him will not qualify as input
tax in respect of that State and hence won’t be available for utilisation
against the liability of West Bengal. Further, that a person registered in one
State cannot claim ITC for CGST and SGST of other States and thereby cannot adjust
ITC of one State’s CGST for payment of another State’s CGST.
20
[2019] 103
taxmann.com 209 (AAAR-Maharashtra) IL&FS Education & Technology
Services Ltd.
Date of order: 4th
February, 2019
The
activity of implementation of project ‘Information & Communication
Technology’ (ICT) Lab in government schools constitutes ‘composite supply’
wherein imparting training is the principal supply and the supply of computer
equipments for ICT labs is naturally bundled with training services. Therefore,
the said supply can be said to be covered under entry No. 72 of Exemption
Notification No. 12/2017-CT(R) – exemption to training programmes where total
expenditure is borne by Central/State government
FACTS
The Government of India has framed a national policy for the implementation
of its Information & Communication Technology (ICT) school project
(hereinafter referred to as ICT) across the country. The implementation is
being carried out through the State governments by engaging the services of
private partners under “Build, Own, Operate and Transfer”, i.e., the BOOT
model. Accordingly, the appellant is entrusted with the responsibility to
implement ICT in 5,000 schools in Maharashtra.
As per the terms of the agreement between the State government and the
appellant, the government would arrange the necessary minimum constructed rooms
/ space in each school for setting up computer labs and the appellant would
carry out the work, viz., flooring, furniture and fixtures, etc., for preparing
each site to be used as an ICT lab. The appellant will procure the requisite
quantity of IT equipment for installation in the labs. Then the appellant has
to operate the ICT labs for imparting computer training, appointing one teacher
in each school for the same. The curriculum of the training was designed and
developed by the government.
The responsibility of maintenance and upkeep of ICT labs in proper
working condition is vested with the appellant at his cost. The appellant would
also maintain a help-desk to execute service requests. Upon completion of the
contract period, the appellant transfers the entire infrastructure to the
government at a nominal value of Rs. 1. The appellant sought advance ruling
from the AAR as to whether the said activity would be exempt in terms of entry
No. 72 of Notification No. 12/2017-Central Tax (Rate) which provides exemption
from payment of GST to services provided under the training programme for which
the entire expenditure is borne by Central / State government.
The AAR held that the said entry covers supply of services only and not
supply of goods, whereas the appellant is engaged in a composite supply which
includes supply of various computer equipments along with imparting training on
use of such equipments. Thus, AAR held that as activities of the appellant are
in the nature of “composite supply” which is not naturally but artificially
bundled having distinctly separate components with distinct value attributable
to each of its components, the exemption provided under said entry No. (72)
shall not be applicable to the appellant. Being aggrieved, the appellant filed
this appeal.
HELD
As regards the issue as to whether activities of the appellant can be
regarded as “composite supply”, the learned appellate authority observed that
the ICT scheme, a project of the Central Government, is itself introduced with
the aim of promoting computer literacy. The training along with the supply of
computers is an inherent part of the project and the project is imagined as such.
Further, the Education Department of the State government accepts the services
of the appellant as a package, i.e., a bundle of service, and the same model is
being followed by the appellant all over the country. As such, a single party
performing as a package is envisaged.
The
appellate authority concurred with the appellant’s contention that a single
price is not a mandatory requirement in case of a composite supply, because
u/s. 2(74) of the CGST Act, 2017, the requirement of single price is in the
case of mixed supply and not in the case of composite supply. Accordingly,
the appellate authority held that the supply of computers along with training
can be said to be naturally bundled.
21
[2019] 103 taxmann.com 371
(AAAR-Gujarat) Sapthagiri Hospitality (P) Ltd.
Date of order: 2nd
January, 2019
The services
supplied by a hotel located in SEZ to persons located outside SEZ, i.e., in
DTA, would be chargeable to GST u/s. 5(1) of IGST Act, 2017
FACTS
The appellant constructed a hotel in the SEZ on land allotted to it and
started providing hospitality services from the premises. The appellant sought
advance ruling as to whether such services provided to clients located in the
SEZ as well as outside the SEZ would attract GST. The AAR held that services
provided by the appellant to other SEZ units for authorised operations will be
treated as zero-rated supplies u/s. 16(1) of the IGST Act, 2017 read with
section 2(m) of the SEZ Act, 2005. However, services supplied to clients
located outside the territory of the SEZ cannot be regarded as “zero-rated
supply” and are thus liable for GST u/s. 5(1) of the IGST Act, 2017. Being
aggrieved by the decision of the AAR on the second issue, the appellant filed
the present appeal.
The appellant submitted that the services were provided directly in
relation to immovable property in the SEZ and such services are a part of the
authorised operations of the SEZ as is evident from the Letter of Permission.
Thus, in light of sections 51 and 53 of the SEZ Act, 2005, IGST should not be
applicable on the services provided in SEZ to persons other than SEZ units as
the said services are received within the SEZ, which is deemed to be territory
outside India. The appellant also submitted that u/s. 53(2) of the SEZ Act,
2005 a deeming fiction is created whereby a SEZ is deemed to be a port,
airport, inland container depot, land station and customs station u/s. 7 of the
Customs Act, 1962, and that in terms of Circular Nos. 46/2017-Cus dated
24.11.2017 and 3/1/2018-IGST dated 25.05.2018, goods transferred / sold while
being deposited in a warehouse registered u/s. 57 or 58 or 58A of the Customs
Act, 1962 (customs bonded warehouse) are not liable to IGST. Similarly, no GST
would be chargeable to services supplied within SEZ.
HELD
The appellate authority observed that section 53(1) of the SEZ Act, 2005
provides a deeming fiction that only for the specific purposes of undertaking
the authorised operations the SEZ shall be deemed to be a territory outside the
customs territory. The term “customs territory” cannot be equated
with the territory of India. Further, the AAAR stated that the interpretation
adopted by the appellant would lead to a situation where a SEZ would not be
subject to any laws of India whatsoever. Then, the entire SEZ Act, 2005 would
be rendered redundant since it is argued to be extending to the whole of India.
AAR noted that section 51 of the SEZ Act, 2005 provides for overriding effect
in case there is anything inconsistent contained in any other law.
Further it
was noted that even if SEZ is deemed to be a port, etc., u/s. 7 of the Customs
Act, 1962, the aforementioned circulars issued under the Customs law deal with
import or export of goods and not of services. Therefore, it was held that
services supplied by the appellant to persons located outside the territory of
a SEZ would be regarded as “DTA supply” and chargeable to GST. Consequently,
the appeal was dismissed by upholding the ruling of AAR that services supplied
to non-SEZ units would be chargeable to GST.
22
[2019] 103
taxmann.com 127 (AAR-Maharashtra) Biostadt India Ltd.
Date of
order: 20th December, 2018
The input tax
credit on gold coins procured for distribution to customers fulfilling criteria
laid down under a sales promotion scheme would be disallowed u/s. 17(5) of CGST
Act, 2017 by treating the same as ‘gifts’
FACTS
The
applicant is in the business of developing, manufacturing and distributing crop
protection chemicals and hybrid seeds. In order to achieve sales and collection
targets, a sales promotion scheme was launched wherein the customers were
entitled to gold coins upon fulfilment of certain conditions which are linked
to either purchase of products in specified quantities or making payment in
prescribed staggered manner. In the present application, the applicant sought a
ruling as to whether they will be entitled to input tax credit of GST paid on
purchase of gold coins. The applicant submitted that since they are
contractually bound to give gold coins to the customers who fulfil prescribed
criteria and it was not a voluntarily act, such gold coins cannot attract
disallowance of ITC u/s. 17(5) of the CGST Act, 2017.
HELD
The AAR observed that in cases where inputs are procured with the levy
of input tax and are supplied without tax being paid on such output supplies,
the scheme of the GST Act provides no input tax credit, except export. U/s. 17(5),
no ITC on any goods can be availed if they are given as gifts, whether or not
in the course of or furtherance of business. As a corollary, if it is
considered that the gift has some commercial consideration, then GST shall be
paid at the time of giving away or disposal of the same and in such cases only
ITC will be available.
Further, the AAR found that a gift is normally seen as an enticement to
customers, as in the subject case which would bear heavily on the customers in
making purchase of particular quantities or in making payment of certain value.
If it is not excluded from the scope of being supply, the provisions of
valuation rule would be relevant. The AAR held that in such cases it can be
assumed that the purchase value and output supply value of the gift shall be
the same and therefore, the ITC would be the same as the output GST is payable.
In other words, if the giver of the gift does not pay output tax on the same,
then the compensation to the government would be by foregoing the ITC on such
gifts. Accordingly, the AAR held that gold coins distributed by the applicant
under its sales promotion scheme are gifts and thus, ITC paid on purchase
thereof would be disallowed u/s. 17(5).
23
[2019] 103
taxmann.com 123 (AAR-Maharashtra) Allied Digital Services Ltd.
Date of order: 19th
December, 2018
Services of
design, development, implementation and maintenance of CCTV-based surveillance
system for city constitutes composite supply of works contract, but such
contract not being contract for original works, applicable rate of GST would be
18% and not reduced rate of 12%
FACTS
The
Government of Maharashtra envisaged to set up a comprehensive CCTV-based City
Surveillance System for the city of Pune and Pimpri-Chinchwad (hereinafter
referred as “surveillance project”) The applicant was engaged as a “system
integrator” so as to provide services of design, development, implementation
and maintenance of the CCTV-based surveillance system under the said project.
The applicant sought an AAR ruling as to whether fees received by them for the
said project would be chargeable to GST, being consideration for supply of
services, and what would be the applicable rate of GST. The applicant submitted
that services provided by them under the surveillance project would constitute
composite supply of works contract services and accordingly attract tax rate of
12%.
HELD
The AAR found that the applicant supplies more than two taxable supplies
of goods or services or combination/s thereof and the provision consists of
different supplies such as design, development, implementation and maintenance
of CCTV-based surveillance system and are integrated in such a way that all of
them constitute, overall, a supply to set up a comprehensive CCTV-based city
surveillance system. Thus, the AAR held that various supplies contemplated
under contract for the surveillance project constitute “composite supply” u/s.
2(30) of the CGST Act, 2017.
As regards whether such a contract can be regarded as a “works contract”
under GST, AAR noted that the CCTV-based city surveillance system can be termed
as “immovable property” as such a system is permanently fastened to things
attached to earth and the same cannot be shifted without first dismantling it
and erecting it at another site. The AAR held that the activities of the
applicant result in installation / commissioning of immovable property wherein
transfer of property in goods is involved in execution of works contract and
thus, “surveillance project” is a works contract as defined u/s. 2(119) of the
CGST Act, 2017 and is supply of services as per 6(a) of Schedule II of the CGST
Act.
Further, the
AAR noted that reduced rate of tax (i.e., 12%) is applicable only if it is
original work. The expression “original works” is not defined under GST law. As
per the CPWD Works Manual, 2014, “original works” would mean all new
constructions, all types of additions and alterations to abandoned or damaged
structures on land that are required to make them workable, erection,
installation, etc., that results in increase in the life and value of the
property. The AAR held that the work done by the applicant in the present case
cannot be said to be “original works” and the said service being one of
composite supply of works contract would attract 18% GST.
24
[2019] 103
taxmann.com 124 (AAR-Maharashtra) Cummins India Ltd.
Date of
order: 19th December, 2018
The Annual
Maintenance Contracts for repairs and maintenance of diesel and gas engines,
wherein maintenance and inspection services are provided along with supply of
parts / consumables as and when necessary, constitute ‘composite supply’ u/s.
2(30) of the CGST Act, 2017 and principal supply in such case would be supply
of service as supply of parts / consumables is incidental to such supply of
maintenance services
FACTS
The applicant, engaged in the business of manufacturing diesel and
natural gas engines, executed Annual Maintenance Contracts (AMC) with
end-customers to provide maintenance services to keep the engines in good
working condition by undertaking regular maintenance. The AMC services included
carrying out routine maintenance, preventive maintenance, inspection of parts,
supply of consumables and other repairs and replacements. The applicant treated
such AMC contracts as “composite supply” u/s. 2(30) of the CGST Act, 2017. In
terms of the present application, the applicant sought ruling as to what would
constitute “principal supply” of the composite supply qua their
maintenance contracts with their customers.
HELD
The AAR noted that the main purpose behind executing the AMC contract is
to keep the engines unimpaired and operative at all times for which a fixed
price has been decided for the AMC. The dominant intention of the activity is
service where skill is important rather than supply of goods and the skill is
supplied by the applicant who uses competent engineers to perform the services
mentioned in the contract. The AAR observed that goods, material, spare parts,
etc., are required to be supplied only if and when required. Thus, even though
the AMC covers both, supply of goods and service, the predominant intention is
to provide maintenance services for the proper upkeep of the machines belonging
to their clients and supply of goods follows as a consequence of the supply of
maintenance service.
Accordingly, the AAR held
that the supply made by the applicant under an AMC contract is naturally bundled,
with the supply of goods being incidental to the supply of services. Therefore,
such contracts are to be considered as a composite contract where the principal
supply is that of service.
