Assembly and Erection of the plant falls under different Contracts: AAR

Assembly and Erection of the plant falls under different Contracts: AAR

The following ruling was applied for various issues. Under which the one question is regarding the Assembly and Erection of the plant. Advance ruling is applied for “Whether both of the activity can be done under two different contract or not”.

The applicant is Mr.Dinesh Kumar Agrawal, R/o #501, ACME Regency, 5th floor, SV Road, Vile Parle (West), Mumbai, Maharashtra. (hereinafter also referred as an applicant). He is an unregistered taxpayer. He is engaged in erection and supply of solar power generating system by making an agreement with his customers. Applicant has filed an application on 09th February 2018, Vide acknowledgment number VPG736416. For seeking advance ruling for the tax rates applicable to the supplies made by him.

On scrutiny of the application, it is noticed that an applicant is an unregistered person, he paid Rs.10,000/-(5000/- against fee under CGST and Rs.5000/- against fee under SGST) vide CPIN Number 18013700040367, dated; 12-01-2018, and found the payment paid by the applicant is genuine as per common portal. As the applicant is an unregistered person, the application is not forwarded to any jurisdictional authority. To admit and to pronounce advance ruling on this application, this authority feels it is necessary to hear the applicant. Accordingly, a personal hearing fixed on 04th April 2018, requested the applicant to attend with all relevant data.

The applicant attended himself before this authority on 04th April 2018 and made oral submissions on the issue, where advance ruling sought by him. On perusal of application, oral submissions made by the applicant, and read with the provisions of the law, the following are the observations by this authority.

There are eight issues raised by the applicant for the advance ruling. Following are the Eight issues:

Issues:

Issue 1:

Whether supply of solar power plant under ‘Turnkey EPC Contract’ is supply of ‘solar power generating system’ under Entry 234 of Schedule I of the Notification No. 1/2017- Integrated Tax (Rate), Entry 234 of Schedule I of the Notification No. 1/2017-Central Tax (Rate) both dated 28 June 2017 and Entry 234 of Schedule I of the Notification No. 1/2017-State Tax (Rate) dated 29 June 2017?

Issue 2:

Whether supply of solar power plant under ‘Other EPC Contract’ is supply of ‘solar power generating system’ under Entry 234 of Schedule I of the Notification No. 1/2017- Integrated Tax (Rate), Entry 234 of Schedule I of the Notification No. 1/2017-Central Tax (Rate) both dated 28 June 2017 and Entry 234 of Schedule I of the Notification No. 1/2017-State Tax (Rate) dated 29 June 2017?

Issue 3:

Whether supply of solar power plant under ‘Supply Contract’ is supply of ‘solar power generating system’ under Entry 234 of Schedule I of the Notification No. 1/2017- Integrated Tax (Rate), Entry 234 of Schedule I of the Notification No. 1/2017-Central Tax (Rate) both dated 28 June 2017 and Entry 234 of Schedule I of the Notification No. 1/2017-State Tax (Rate) dated 29 June 2017 where the assembly, erection, and commissioning of the solar power plant is undertaken by the Applicant under a separate contract?

Issue 4:

Whether supply of solar power plant under ‘Supply Contract’ is supply of ‘solar power generating system’ under Entry 234 of Schedule I of the Notification No. 1/2017- Integrated Tax (Rate), Entry 234 of Schedule I of the Notification No. 1/2017-Central Tax (Rate) both dated 28 June 2017 and Entry 234 of Schedule I of the Notification No. 1/2017-State Tax (Rate)

Issue 5:

Whether supply of solar power plant under ‘Balance of Plant Supply Contract’ is supply of ‘solar power generating system’ under Entry 234 of Schedule I of the Notification No. 1/2017- Integrated Tax (Rate), Entry 234 of Schedule I of the Notification No. 1/2017-Central Tax (Rate) both dated 28 June 2017 and Entry 234 of Schedule I of the Notification No. 1/2017-State Tax (Rate) dated 29 June 2017?

lssue 6:

If the Clarification to Issue No. 5 is negative, what would be nature of supply i.e. composite supply or mixed supply?

Issue 7:

Whether the contract for assembly, erection, and commissioning of the plant undertaken by the Applicant under a separate contract would be a service contract liable to be taxed under Service heading 9954?

Issue 8:

Whether the time of supply of power plant shall be determined under Section 31 (4) of the CGST Act/SGST Act read with Section 12(2) thereof?

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RULING

Ruling for Issue 1 & Issue 2 :

As per the statement of facts submitted by the applicant, the scope of work in respect of “Turn key EPC Contract” and “Other EPC Contract” includes civil works, procurement of goods and erection and commissioning. Accordingly, “Turnkey EPC Contracts” and “Other EPC Contracts” are not getting covered under supply of ‘solar power generating system’ under Entry 234 of Schedule I of the Notification No. 1/2017- Integrated Tax (Rate), Entry 234 of Schedule I of the Notification No. 1/2017-Central Tax (Rate) both dated 28 June 2017 and Entry 234 of Schedule I of the Notification No. 1/2017-State Tax (Rate) dated 29 June 2017.

Ruling for Issue 3:

The applicant sought a clarification on the liability of division of contract in to two, one is supply of material and other one is erection, commission and there on., in this regard it is opined that, it depends upon the terms and conditions of the agreements as to whether the split of contract is an artificial and colourable device fo avoid the legitimate tax or the requirement of the contractee demands separation of contract for better execution.

In case the contract is an artificial split, the Clarification for Issue 2 (two) is applicable. In other case the rate of tax applicable for the supply of goods subject to condition of eligibility of being “device and parts ” of the solar power generating system attracts 5% rate of tax as per Entry 234 of Schedule I of Notification No. 1/2017-Central Tax (Rate), dated 28th June, 2017. And the supply of service attracts at the rate specified thereon in Notification No. 11/2017 -Central Tax (Rate).

Ruling for Issue 4:

In this scenario, the goods are supplied by one contractor, and the services were supplied by the other contractor. Therefore the rate of tax applicable for supply of goods as long as it satisfies the condition of being ” device and parts” of the solar power generating system attracts 5% rate of tax as per Entry 234 of Schedule I of Notification No. 1/2017-Central Tax (Rate), dated 28th June, 2017.

Ruling for Issue 5:

The nature of transaction falls under composite transaction as both the goods and services are naturally bundled. Even though the primary commodity has been supplied by the customer, the ancillary goods for the purpose of service are to be supplied by the applicant only. The principle supply in this context is supply of service and the ancillary goods supplied are in conjunction with the services provided. Hence the rate of tax applicable in such transaction is liable at the rate as per the Entry 25 of 25 (Heading 9987) of Notification No. 1/2017-Central Tax (Rate), dated : 28m June 2017, and attracts 18% rate of tax.

Ruling for Issue 6:

This ruling is covered under clarification in issue number 5 (five).

Ruling for Issue 7:

The referred contract doesn’t fall under the ambit of SAC 9954, but falls under the Entry 25 of 25 (Heading 9987) of Notification No. 11/2017 -Central Tax (Rate), dated: 28th June 2017, and attracts 18% rate of tax.

Ruling for Issue 8:

 Yes.