The Telangana Authority for Advance Ruling (AAR), ruled that the supply of goods and services through separate agreements cannot be termed as composite supply.
The applicant M/s. PES Engineers Private Limited Hyderabad are engaged in the construction of various types of Power Projects. They have entered into agreements with Singarenni Collieries Company Limited (SCCL) for design, manufacture, test, deliver, install, complete and commission and to conduct guarantee test of certain facilities.
The scope of First Contract is sale of goods ex-manufacture / ex-works. According to the applicant, it is a contract for pure sale of goods.
The scope of work under the Second Contract is “inland transportation of the main equipment, inland transit insurance, unloading at site, storage, erection, civil works, Safety aspects / Compliance to Safety Rules and other services insurance covers other than inland transit insurance, testing, commission and conducting guarantee tests”.
According to the applicant, the supply under second contract is works contract service as defined under Section 2(119) falling under Service Accounting Code (SAC) 9954.
The appellant has sought advance ruling on whether the applicant is required to pay GST on “initial advance” of 5% and “interim” advance of 7.5% on Ex works value of goods supplied under “First Contract Agreement” with M/s. Singareni Collieries Company Limited.
A Two-Member Bench of the Authority comprising S.V. Kasi Visweswara Rao, Additional Commissioner (State Tax) and Sahil Inamdar, (I.R.S.) Additional Commissioner (Central Tax) held that “The supply undertaken under the first contact terminates with making goods available ex-works and loading them on to the mode of transport. The moment the Applicant raises tax invoice for the supply of goods and endorse the despatch documents, the title of the goods passes on to M/s SCCL.”
The Bench further held that “The supply under the second contact commences with service of transportation of the said goods supplied under first contract. Since the transfer of property in the goods supplied under first contract is not taking place during the execution of the Works Contract under second contract, the value thereof cannot be included in the Works Contract.”
The Bench concluded that mere fact of different tasks, i.e. two contracts for which separate invoices were issued by him to his recipient, have been entrusted to the applicant through a single contract agreement would not make it a ‘composite supply’ in terms of Section 2(30) of the Central Goods and Services Act, 2017.
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