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June 13, 2023

Application for Advance Ruling may only be submitted by Supplier of Goods or Services

Application for Advance Ruling may only be submitted by Supplier of Goods or Services

Fact and issue of the case

M/S Uttar Pradesh Metro Rail Corporation Limited, Administrative Building, Near Dr. Bhim Rao Ambedkar Samajik Parivartan Sthal,Vipin Khand,Gomti Nagar, Lucknow Uttar Pradesh-226010 (here in after referred to as the applicant) is a registered assessee under GST having GSTN: 09AACCL5936H2Z9.

The applicant has submitted an application for Advance Ruling dated 04.01.2023 enclosing dully filled Form ARA-01 (the application form for Advance Ruling) along with annexure and The applicant in his application has sought advance ruling on following question-

Whether the services supplied by the KESCO by way of utility shifting are integral part of services supplied by KESCO by way of distribution of electricity?

Whether the services supplied by the KESCO by way of utility shifting are ancillary to the principal supply of services by way of distribution of electricity?

Whether the exemption given under Entry 25 of the Exemption Notification 12/2017-Central Tax (Rate) dated 28.06.2017 with respect to the services by way of transmission and distribution of electricity is available to the KESCO?

If the answer to issue at (c) is Yes, whether the Applicant is liable to pay GST on the activity of utility shifting performed by KESCO or by itself as such utility shifting is an integral part of services supplied by KESCO by way of distribution of electricity which is exempted from levy GST?

If the answer to issue at (c) is No, whether the situation faced by the Applicant wherein KFSCO has provided only supervision services and not borne cost towards labour and material, shall be governed by provisions of Section 15(1) or by Section 15(2)(13) of the Central goods and Services Tax Act, 2017 read with Section 15 of the Uttar Pradesh Goods and Services Tax Act, 2017 for the purposes of determining transaction value of supply?

Whether the applicant is liable to pay GST on services supplied by KESCO by way of supervision, only on the Supervision charges (i.e.. 5% of estimated cost of deposit work) or on the estimated cost of deposit work as depicted in letter dated 03.09.2022? (Letter dated 03.09.2022 is Annexed here with as Annexure-A).

As per declaration given by the applicant in Form ARA-01, the issue raised by the applicant is neither pending nor decided in any proceedings under any of the provisions of the Act, against the applicant. The applicant has submitted that-

That Uttar Pradesh Metro Rail Corporation (hereinafter referred to as “UPMRC/Applicant”) is engaged in erection, commissioning, and construction of metro rail facility in Kanpur Uttar Pradesh. During construction, sometimes it is necessary to divert the transmission lines and other electrical equipment like electrical poles and transformers, (hereinafter referred to as “utility shifting”) for various safety reasons. For this, UPMRC has to place a request to the Kanpur Electricity Supply Company Limited, a Government of UP undertaking, local electricity distribution licensee in Kanpur (Urban) (hereinafter referred to as “KESCO”). KESCO is engaged in distribution of electricity in the area of Kanpur (Urban). In the context of electricity regulatory scheme governed by Electricity Act, 2003 “utility shifting” is referred as “deposit work”. Any asset created during execution of deposit work is under ownership of transmission or distribution company by virtue of operation of provisions and for regulatory requirement of Electricity Act, 2003. For the purposes of this application terms “utility shifting” and “deposit work” has been used interchangeably.

The above referred deposit work can be executed by two methods. First, where whole work is executed by the licensee i.e., KESCO and Second, where whole work is done by UPMRC or through any of its third-party agent but under the supervision of KESCO. The specifications and supplier of the material used under second method in is approved by the KESCO only. Under first method, all cost towards labour and material used in utility shifting is incurred by KESCO and then recovered from UPMRC along with applicable GST on total cost. This cost invariably includes supervision charges. Under second method all cost towards labour and material is borne by UPMRC and supervision charges is paid to KESCO separately. UPMRC has adopted second method and was paying supervision charges along with GST to KESCO on supply of supervisions services. Such supervision charges are generally 5% of the total cost incurred towards utility shifting. It may be noted that it is the KESCO who carried out estimation exercise to determine the estimated cost towards “utility shifting”. UPMRC has accepted this practice and never raised any issue towards any estimate given by the KESCO and always paid supervision charges on such estimate.

However, recently, vide letter dated 03.09.2022, titled as “revised Estimate” addressed to Deputy Chief Engineer (Electrical), Overhead Section, Kanpur Metro Rail Corporation Ltd. KESCO has raised a demand of Rs. 11,21,843/-comprising of supervisions charges @5% amounting to Rs. 2,18,257/- and Rs. 9,03,586/- towards GST charged @18%. On perusal of the said letter dated 03.09.2022 it appears that KESCO has charged GST on the total estimated cost, whereas GST should have been charged only on supervisions charges. Letter dated 03.09.2022 is annexed herewith as Annexure-A.

Reference may be further taken with respect to the Letter No. 781 dated 15.07.2022 whereby KESCO has demanded GST on the total estimated cost for deposit work, which is subject to enhancement as and when work is done, based on Instructions dated 3.11.2020, issued by UPPCL. The ratio for charging GST on the total estimated cost of the deposit work is that in a situation where whole of the deposit work (including material and labour) is done by the UPPCL/distribution company, the cost which was supposed to be paid by UPPCL/distribution company to the agency performing such work, same shall be paid by the UPMRC to the agency performing deposit work, in case UPMRC has decided to get the deposit work done by such agency, hence as per Section 15(2)(b) GST shall be chargeable on total estimated cost of the deposit work, even though, deposit work is not performed by the UPPCL/distribution company, except supervision of such work. Letter dated 15.07.2022 and instructions dated 3.11.2020 is annexed herewith as Annexure-B & C

In this factual Matrix, as the UPMRC is of the view that GST shall be payable only at the supervision charges. Being aggrieved, applicant herein has decided to file an application on this issue before Hon’ble Authority for Advance Ruling, Uttar Pradesh seeking advance ruling on following issues.

Observation of the court

At the outset, we would like to make it clear that the provisions of both the CGST Act and the UPGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the UPGST Act. Further for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / UPGST Act would be mentioned as being under the CGST Act’.

We have gone through the Form GST ARA-01 filed by the applicant and observed that the applicant has ticked following issues on which advance ruling required-

Applicability of a notification issued under the provisions of this Act.

Determination of value of supply of goods or services or both.

We would like to examine whether the issue raised in the application is squarely covered under Section 97(2) of the CGST Act 2017 or not. For this we would like to examine this matter in light of definitions of Advance Ruling under section 95 of the CGST Act 2017 and the same is reproduced as under:

Section 95. Definitions of Advance Ruling.— In this Chapter, unless the context otherwise requires,—

advance ruling means a decision provided by the Authority or the Appellate Authority to an applicant on matters or on questions specified in sub-section (2) of section 97 or sub-section (1) of section 100,in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant;

Appellate Authority means the Appellate Authority for Advance Ruling referred to in section 99;

applicant means any person registered or desirous of obtaining registration under this Act;

The meaning of the applicant defined at Point No. (c) should be derived only in consonance with Point No. (a) of Section 95 of the CGST Act 2017

We find that Applicant MIS Uttar Pradesh Metro Rail Corporation Limited is receiver of the Goods/Services provided by the KESCO. In light of point (a) provided under Section 95 of CGST Act 2017 only supplier of the services can file Application for Advance Ruling. In this case the supplier of service is KESCO. Also in the similar matter M/s Purvanchal Vidyut Vitran Nigam Limited had applied for advance ruling as supplier of service and advance ruling authority has ruled on merit, Accordingly, we do not admit the application for consideration/ruling on merits as applicant does not fall under the definition of Advance Ruling.

Accordingly, we pass the ruling as under:

No ruling can be given in the matter as discussed above.

This ruling is valid only within the jurisdiction of Authority for Advance Ruling Uttar Pradesh and subject to the provisions under Section 103(2) of the CGST Act 2017 until and unless declared void under Section 104(1) of the Act.


In the result, appeal of the assessee is allowed and ruled in favour of the assessee


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