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Services of integrated transmission towers liable to GST being works contract service: AAR

November 30, 2018[2018] 100 taxmann.com 90 (AAR - WEST BENGAL)
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CGST : The applicant-company is engaged in the manufacturing, installation and other ancillary services of integrated transmission towers. It has executed a contract with PGCIL for construction and commissioning of Tower Package. It submits that as the contract with PGCIL has been split up into two separate parts one for ex-factory supply of materials and the other for supply of allied services like erection of towers, testing and commissioning of transmission lines etc. which also includes inland/local transportation, insurance, delivery of materials and storage of them at the contractee PGCIL's site, the execution of the Towers cannot come under "works contract service", since it does not involve the supply of any immovable property and has sought a Ruling on the applicability of Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017

• The AAR held that GST being a tax on the supply of both goods and services, it is no longer necessary to segregate the supply of goods in an indivisible composite contract for the purpose of taxation. GST can be levied on the entire value chain, which is the bundled supply of goods and services for execution of an indivisible composite contract for construction, erection, commissioning etc. of an immovable property. The applicant is executing an indivisible composite contract for construction, erection and commissioning of an immovable property, namely, the Tower Package, execution of which involves bundled supply of both goods and services and it is, therefore, works contract. The contract for the Tower Package being works contract is service in terms of paragraph 6(a) to Schedule II to the GST Act. Activities covered under Schedule II are to be treated as a supply of the nature described under section 7(1)(d) of the GST Act. Thus, GST is to be paid on the entire value of the works contract, including the supply of materials, transportation, in transit insurance, erection, commissioning etc. The exemption under serial no. 18 of Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017 is, therefore, not applicable in the present context.

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