No GST Exemption on Local Transportation, Insurance, Delivery and Storage of Materials in Tower Package: AAR [Read Order]

Mobile Towers - GST -

The West Bengal Authority of Advance Ruling in an application filed by Skipper Ltd. held that GST is payable on to inland/local transportation, insurance, delivery of materials and storage of goods supplied for construction, erection, and commissioning of the Tower Package in the works contract and hence not entitled to the aforementioned exemption.

The applicant engaged in the manufacturing, installation and other ancillary services of integrated transmission towers entered into a Joint Venture which has executed a contract with PGCIL for construction and commissioning of a Jigmeling-Alipurduar line under transmission system for transfer of power from Mangdechhu Hydroelectric Project in Bhutan.

The issue before the Authority is to determine the application of the Exemption Notification – No. 12/2017 dated 28/06/2017 to inland/local transportation, insurance, delivery of materials and storage of goods.

The Applicant states that the contract entered with PGCIL includes inland/local transportation, insurance, delivery of materials and storage of them at PGCIL’s site. He contended that immovable property, after construction/erection/repair/ commissioning, is attached to the land, structure or building for the permanent beneficial enjoyment of the structure and it cannot be removed without substantial damage to the structure. Transmission towers, on the other hand, are attached to the earth to provide structural support to the transmission wires and can be dismantled and shifted to another location without major damage, and such shifting of towers is not an uncommon event.

The Authority constituting of Hon’ble Members Shri. Vishwanath and Shri. Parthasarathi Dey examined that the contractual obligation between the JV and PGCIL is for construction, erection, and commissioning of the Tower Package and not for the erection as a standalone tower and hence, it is a supply of bundle of goods and services that result in construction, erection, and commissioning of the Tower Package. The Authority further referred to the General Clauses Act, 1897 Transfer of Property Act, 1882 to reiterate the meaning of immovable property and held that a Tower Package (as in the present case) includes the erection of a series of transmission towers linked together by the power line for transmitting electricity. The towers are erected on foundations built on the land, and benefits of the towers cannot be enjoyed unless they are so attached.

The Authority emphasized that the applicant’s reference to several judgments of the apex court are of little relevance since they are all delivered in the context of a situation prior to the 46th Amendment to the Constitution reveals that the Apex Court at that time was of the view that no straitjacket formula can be devised that might be applicable under all conditions for distinguishing a contract for the sale of goods from works contract, and it should depend on the facts and circumstances of each case. However, after the amendment, a legal fiction is thereby created, which has enabled the State to segregate an indivisible composite works contract into contracts for the sale of goods and for service and impose a tax on the transfer of property in goods.

It was hence ruled that the Applicant supplies works contract service, the value of which includes inter alia consideration paid for transportation and in-transit insurance. 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 is, therefore, not applicable in the present context.

Subscribe Taxscan Premium to view the Judgment

taxscan-loader