GST on supplying, installation, and commissioning, testing mechanical / electrical work for machinery attached to concrete base
Facts and Issues of the case
MS HYT Engineering Company Private Limited, is a registered assesse under GST
The applicant has filed application for advance ruling .in Form GST ARA-01 and submitted as under-They had entered into Joint Venture with MS. Indwell Constructions Private Limited and constituted MS. INDWELL — HYT (JV)
Rail Vikas Nigam Limited has invited a tender for the Construction of PEB shed, structure, building, water supply arrangement, drainage, sewerage, road works, track works, power supply and general electrical works, OHE works, signal & telecommunication working and supply, installation and commissioning of machinery and plant in connection with setting up of Electric Loco Shed at Saiyedpur Bhitri, Uttar Pradesh (India).
The JV had made a bid for the tender and the said tender was allotted to the JV, and the Letter of acceptance was issued to the JV. The JV has duly accepted the same and signed.
JV had awarded the contract to the JV partners on a back to back basis vide the JV agreement dated 10.10.2018 with the specific execution of the works contract between the partners. Applicant was allocated with the work of supply, installation and commissioning of the plant and machinery, mechanical engineering works, electrical works etc.
The Applicant being one of the partners in the JV is engaged in providing works contract service as sub-contractor to JV for original works pertaining to RVNL. They execute and undertake composite supply of works contract as defined in clause (119) of section 2 of Central Goods and Services Tax Act. 2017(hereinafter referred as “CGST Act”). We have gone through the submissions made by the applicant and have examined the explanation submitted by them. We find that the issue raised in the application is squarely covered under Section 97(2) (a) & (b) of the CGST Act 2017 being a matter related to classification of goods and applicability of notification issued under the provisions of the CGST Act, 2017.
Observations by the Court
The Court has found that the major part of the contract is supply of goods i.e. Machinery and Plant, tools, gauges, instruments, office equipment & furniture and electrical goods.
These goods are delivered to the client (JV) by the applicant and such goods are used by the applicant to provide services of installation, testing, commissioning and electrical works. Without supply of these goods, the services cannot be supplied by the applicant and therefore we find that the goods and services are supplied as a combination and in conjunction and in the course of their business where the principal supply is supply of goods. Thus we find that there is a composite supply with supply of goods being the principal supply.
We find it is the Joint Venture Company and not the applicant which has been awarded the contract for construction of Electric Loco Shed. A Joint Venture Company, which is formed by two or more entities, has a separate existence than that of the said entities. The applicant has himself submitted that they are providing sub-contract services in relation to supply and commissioning of machinery and plants, mechanical engineering, electrical works etc. to ‘JV’. The supply of goods/services by the applicant can’t be bundled with the which is separate entity, both having their separate GSTINs. As such, the goods/services supplied by the applicant to JV are to be examined for the purpose of their coverage in works contract.
We find that the applicant has not claimed that the mechanical engineering work and electrical engineering work for installation of plant and machinery in the railway sites is immovable property and have submitted that it is the part of electric loco shed which is immovable property. The applicant has been entrusted the work of supply, installation, testing and commissioning of M& P items.
We are of the view that the activities of installation, commissioning, testing, supplying mechanical work and electrical work are not in respect of immovable property as the Machinery and plant is attached to concrete base to prevent libation/wobble free operation and preventing vibration/wobble free operation does not qualify for being described as attached to the earth under any one of the three clauses described above (para 14.5). Hence, the said supply of goods/services by the applicant to JV is not works contract.
Question 1. Whether the works awarded to the applicant is a composite supply of the works contract services?
Answer 1- Replied in negative.
Question 2- Whether the benefit of Sl. No. 3(v)(a) of notification no. 11/2017-Central Tax (Rate) as amended vide notification no.20/2017-Central Tax (Rate) is Applicable to the subject works.
Answer‘2- Replied in negative.In-re-HYT-Engineering-Company-Pvt-Ltd-GST-AAR-Uttar-Pradesh-4