AAR Weekly Round-Up

This weekly round-up analytically summarises the key stories related to the Goods and Service Tax Authority for Advance Ruling (AAR) reported at Taxscan.in during the previous week from May 20 to 27, 2023.

GST applicable on Charges Proportionate to Common Amenities and Facilities Charges if Sale Price of Plot is Consolidated: AAR M/s. Godrej Properties Limited CITATION:   2023 TAXSCAN (AAR) 234

The Karnataka Bench of the Authority for Advance Ruling (AAR) has recently ruled that Goods and Services Tax (GST) is applicable on charges in proportion to common amenities and facilities charges if sale proceeds of plot is consolidated.

The Authority Bench noted that, “As far as corpus fund is concerned, the same is found to be in the nature of deposit for future expenses and if the future expenses are known when the amount is collected, the same attains the nature of advance and hence becomes taxable at the time of its collection itself. If the nature of expenses is not known at the time of collection and it is for unforeseen expenses, it would be in the nature of a deposit and is not a part of consideration for a supply at the point of collection but when the same is applied to an expense, the supply would be constituted and would be taxable.” It was thus ruled by the panel of Dr. M P Ravi Prasad and Kiran Reddy T, considering the definition of “consideration” in clause (31) of Section 2 of the Central Goods and Services Tax Act that, “If the sale price is a consolidated price, then charges proportionate to common amenities and facilities charges are applicable to GST.”

18% GST Applicable on Electrical Works Contract done to Government Corporations: AAR M/s. Sealwel Corporation Private Limited CITATION:   2023 TAXSCAN (AAR) 235

The Telangana Bench of J. Laxminarayana and B. Raghu Kiran, IRS of Authority for Advance Ruling (AAR) ruled that 18% Goods and Services Tax (GST) is applicable on Electrical works contracts done to the government corporations.

The bench observed that from the schedule concerning “Shareholding of Promoter” of the annual accounts of M/s Telangana State Southern Power Distribution Company Limited (TSSPDCL) that 100% shares of the company were held by the Governor of Telangana. This clearly indicated that the Government of Telangana has 100 percent control over TSSPDCL and thus TSSPDCL is evidently covered under the definition of “Government Entity”. Further ruled that works were used for commercial/business activities in view of the facts and circumstances and accordingly the same are taxable at a rate of 18% (9% CGST + 9% SGST) under Goods and Services Tax. It was also opined that the impugned works undertaken are for business/commercial purposes and therefore, the benefit of Concessional Rate of 12% is not applicable to the services supplied by the applicant.

5% GST Applicable on Food supply to Hospitals w.e.f. 2018 on Outsourcing basis, subject to ITC on Goods and Services not taken: AAR M/s. Navneeth Kumar Talla CITATION:   2023 TAXSCAN (AAR) 236

The Telangana Bench of Authority for Advance Ruling (AAR) has ruled that 5% Goods and Services Tax (GST) is applicable on the food supplied to hospitals including Government hospital, private hospitals and autonomous bodies with effect from 2018 on outsourcing basis.

The two-member bench of J. Laxminarayana and B. Raghu Kiran, IRS observed that in the instant case as per the contract furnished by the applicant, it is seen that the applicant prepares food using his own labour at the premises of hospitals, who are the recipient of the service, and the applicant supplies food to consumers who don’t make payment to the applicant. The Bench further ruled that the applicant is making supply of services in the dining space of the hospitals which is occasional or in event. It is squarely covered in the Explanation 1 to Sl. No. 7(i) of Notification No. 13/2018. Thus 5% Goods and Services Tax (GST) is applicable on the same.

GST Applicable on Sale or Purchase of DFIA licenses: AAR Spaceage Syntex Pvt Ltd CITATION:   2023 TAXSCAN (AAR) 237

The Maharashtra Authority for Advance Ruling (ARR) ruled that Goods and Service Tax (GST) is applicable on the sale or purchase of Duty-Free Import Authorization (DFIA) licenses.

A two-member bench comprising of Shri B. V. Borhade, Joint Commissioner of State Tax Shri Pankaj Kumar, Joint Commissioner of Central Tax observed that DF1A is distinguishable from ‘Duty Credit Scrips’ and cannot be considered as a Duty Credit Scrip as envisaged under the Serial No. 122A of Notification 1/2017 Central Tax (Rate) inserted vide Notification No.35/2017-Central Tax (Rate) dated 13.10.2017 even though it falls under CTH 4907. Further observed that in the mail sent, it was stated that “I am directed to inform you that as per the minutes of discussions in the 22nd GST Council Meeting held on 6th October 2017 the Advance Authorizations are included in the Duty Credit Scrips…” However, it appears that no circular, notification, etc appear to have been issued by the Government in this regard and therefore the contention of the applicant on the said issue is not acceptable. The Authority ruled that GST is applicable on Sale and /on Purchase of DFIA licenses.

EPC Contract for Power Distribution and Transmission Company falls under Services to “Government Entity”, attracts 18% GST: AAR M/s. Vishwanath Projects Limited CITATION:   2023 TAXSCAN (AAR) 238

The Telangana Authority for Advance Ruling (AAR), ruled that the EPC (Engineering, Procurement, and Construction) contract for power distribution and transmission company falls under services to “Government Entity” and attracts 18% GST.

The Two-member Bench of the Authority comprising J. Laxminarayana, Additional Commissioner, Sales Tax and B. Raghu Kiran, Joint Commissioner, Central Tax observed that “Services Rendered to M/s OPTCL falls under services provided to a government entity and the applicable rate of tax is 18% (9% CGST + 9% SGST) for the services referred to by the applicant.”

AAR of One State Cannot Give Ruling on GST Liability Arising in a Different State: AAR M/s. Comsat Systems Private Limited CITATION:   2023 TAXSCAN (AAR) 239

The Telangana Authority of Advance Ruling (AAR) has ruled that the advance ruling authority could not give a ruling on the Goods and Service Tax (GST) liability arising in a different state.

As per Section 96 of the Central Goods and Service Tax Act, the authority for advance ruling constituted under the provisions of State Goods and Services Tax Act would be deemed to be the authority for advance ruling of that state. As seen from this provision there was a territorial nexus between the authority for advance ruling of a state and its geographical boundary.

It was ruled that the Advance Ruling Authority constituted under the Telangana State Goods and Services Act could not give a ruling on the liability arising under the Central Goods and Service Tax Act or State Goods and Service Tax Act in a different state.

GST Applicable on Amount Received by Arbitration for Contract works executed in pre-GST Regime: AAR M/s. Continental Engineering Corporation CITATION:   2023 TAXSCAN (AAR) 240

In a recent ruling the Telangana State Authority For Advance Ruling (TSAAR) held that the Goods and Service Tax (GST) is applicable on the proposed receipt of money in case of Arbitration claims awarded for works contract completed in the Pre-GST regime.

 The Authority Bench noted that the interest on delayed payments of interim payment certificates is not liable to tax under CGST/SGST Acts. The Bench also observed that the Liquidated damages are claimed from the contractee due to delays in making available possession of site, drawings & other schedules. Interest on Arbitration Amount is taxable under CGST/SGST Acts. It was thus ruled by the panel of Sri B. Raghu Kiran and S.V. Kasi Visweshwar Rao that the Arbitration as service was supplied independently after the introduction of GST, and is taxable on reverse charge basis at 9% each.

Contract Works under General Construction Service attract 18% GST: AAR M/s. Transmission Corporation CITATION:   2023 TAXSCAN (AAR) 241

In a Recent Ruling, the Telangana State Authority For Advance Ruling (AAR) held that the works contract services under General Construction service for long-distance underground/overland/ submarine pipe lines, communication and electric power lines (cables); pumping stations and related works service would be taxable @18%.

This service is taxable at the rate of 9% under both Central Goods and Service Tax and State Goods and Service Tax Acts 2017. The applicant also engaged a private turnkey contractor on a back to back arrangement to execute the electric contract. The authority bench noted that the applicant will supply works contract services to South Central Railways under General Construction service for long-distance underground/overland/ submarine pipe lines, communication and electric power lines (cables); pumping stations and related works, which would be taxable @18%.  It was also noted that if the applicant will supply work contract service in nature of General Construction service for long-distance pipe lines, communication and electric power lines, pumping stations and transformer stations and related works, which would be taxable @ 9% under CGST/SGST Acts. It was thus ruled by the panel of Sri B. Raghu Kiran and Sri S. Kasi Visweswara Rao that the supplying works contract services under General Construction service by the applicant would be taxable @18% under Central Goods and Service Tax Act, 2017.

5% GST applicable on Job Work of Manufacturing Chocolates: AAR M/s. Gandour India Food Processing Private Limited CITATION:   2023 TAXSCAN (AAR) 242

Telangana Authority for Advance Ruling ruled that five per cent Goods and Service Tax (GST) is applicable on job work of manufacturing chocolates.

The authority bench of S.V. Kasi Visweswara Rao, Additional Commissioner of State Tax and Sahil Inamdar, Additional Commissioner (Central Tax) after verifying the Scheme of Classification of Services observed that the service offered by an applicant is “998816” i.e., “Other food product manufacturing services” and the rate of tax as seen from the above entry is 2.5 % CGST and 2.5% SGST. Thus, it was ruled that 5% GST is applicable to the job work of manufacturing chocolates.

5% GST applicable on Printing Services, if content supplied by recipient along with Raw Materials: AAR M/s. Dachepalli Printers CITATION:   2023 TAXSCAN (AAR) 243

Telangana Authority For Advance Ruling (AAR) has recently ruled that 5% Goods and Service Tax (GST) is applicable on printing services if content supplied by recipient along with raw materials.

 The two-member authority of S.V. Kasi Visweswara Rao, Additional Commissioner (State Tax) and Sahil Inamdar, Additional Commissioner (Central Tax) ruled that “Where content as well as physical inputs are supplied by the recipient of printing services the rate of tax is 2.5% under CGST & SGST respectively”.

Place of supply of services provided by a sub-contractor is Location of contractor for Construction of Immovable property Outside India, GST applicable: AAR M/s. Sri Avantika Contractors Limited CITATION:   2023 TAXSCAN (AAR) 244

The Telangana Authority for Advance Ruling (AAR), ruled that the place of supply of services provided by a sub-contractor is the location of the contractor in the case of construction of immovable property outside India and comes under the purview of the Goods and Services Tax (GST) Regime.

The Two-Member Bench of the Authority comprising S.V. Kasi Visweshwar Rao, Additional Commissioner Sales Tax and B. Raghu Kiran, Joint Commissioner, Central Tax observed that “The proviso to Sub-Section (3) of Section 12 of IGST Act clearly mention that if the location of immovable property is intended to be located outside India, the place of supply shall be the location of the recipient. Therefore, the supply by the applicant to the NBCCL is within the ambit of GST.” The Bench further noted that National Buildings Construction Corporation Limited is recipient of service from the applicant.

18% GST payable on Unburnt or Half-Burnt Coal and Dust: AAR M/s. Jeevaka Industries Private Limited CITATION:   2023 TAXSCAN (AAR) 245

The Telangana Authority for Advance Ruling (AAR) recently ruled that the wastes, namely, Cinder Half-burnt Coal / Char Dolachar and ESP / Bag Filter Dust generated during the process of manufacturing Sponge Iron under DRI process, fall under HSN Code “2619 00 90” attracting 18% GST.

The Two-Member Bench of the Authority comprising B. Raghu Kiran, Additional Commissioner (Central Tax) and S.V. Kasi Visweshwar Rao, Additional Commissioner (State Tax) observed that “In view of the above, both unburnt or half-burnt coal and dust falls under entry 28 of Schedule III of Notification No.01/2017 Dated: 28.06.2017 and attracts 18% tax under IGST and 9% under CGST/SGST Acts.” The Bench further clarified that no GST Compensation Cess at Rs.400/- per ton be applicable on sale of waste, i.e., Cinder Half-burnt coal, generated during the said process.

Sale of LPG, Collection of Take or Pay Charges for not Lifting Minimum Assured Quantity and Rental Charges for Supplier Gas System Installed at Customer Premises not Composite Supply: AAR M/s. SHV Energy Private Limited CITATION:   2023 TAXSCAN (AAR) 246

The Telangana Authority for Advance Ruling (AAR) ruled that the sale of Liquefied Petroleum Gas (LPG), collection of take or pay charges for not lifting minimum assured quantity and rental charges for supplier gas system installed at customer premises not composite supply.

The Two-Member of the Authority comprising S.V. Kasi Visweshwar Rao, Additional Commissioner Sales Tax and B. Raghu Kiran, Joint Commissioner, Central Tax observed that “Sale of LPG, Collection of Take or Pay Charges for not lifting minimum assured quantity and rental charges for supplier gas system installed at the customer premises do not form a composite supply.”

GST Exemption not allowable to Warehousing Service Provided to Cotton Corporation India: AAR M/s. Kakkirala Ramesh CITATION:   2023 TAXSCAN (AAR) 247

The Telangana State Authority for Advance Ruling (AAR) has held that Goods and Service Tax exemption is not allowable for warehousing service provided to Cotton Corporations India. A two-member bench Sri B. Raghu Kiran, IRS, Additional Commissioner (Central Tax) and Sri S.  Kasi Visweswara Rao, Additional Commissioner (State Tax) held that “the warehousing services rendered by the applicant to CCI do not fall under Entry 248 Notification No. 21/2019 dated 30.09.2019 and hence are taxable at the rate of 9% under CGST and SGST each.”

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