GST applicable on Activities undertaken under Contract Management System: AAR [Read Order]

The Authority for Advance Ruling (AAR), West Bengal has held that the activities are undertaken under the Contract Management System (CMS) would attract Goods and Services Tax (GST).

The authority clarified that in such cases, the time of supply shall be the date of issue of the invoice in terms of Section 13(2) (a), read with Section 31(2) of the GST Act and Rule 47 of the GST Rules.

The applicant, a supplier of an end to end system solutions for the controlled casting of iron and steel which includes the supply of refractory components and associated services, wants to offer a new supply, namely Contract Management System. The applicant sought for a clarification on whether the activity proposed to be undertaken as CMS will result in the supply of goods or services within the meaning of that term under the CGST/WBGST Acts, 2017 and the time of supply when so determined.

The authority noted that provisioning of the service by the applicant involves, round-the-clock monitoring of the production process during the entire contract period, and continuous evaluation of the requirement of refractories, quality control, replacement and disposal of used refractories etc. Invoices are to be raised on monthly basis at an agreed rate per tonne of the hot metal manufactured during the period.

It was observed that the activities the Applicant proposes to undertake are services associated with the manufacturing of metal, and may be termed as “continuous supply of service” within the meaning of Section 2(33) of the GST Act, provided the service is agreed to be provisioned for a period exceeding three months.

The authority said that “In the present context provisioning of the service is measured on monthly basis, and the date of payment is within thirty days from the end of the month (as stated in clause 4 of the intended Agreement with the Customers). The tax invoice shall, therefore, be issued in terms of Section 31(5)(b) on or before the supplier receives the payment, and the time of supply shall be the date of issue of invoice in terms of Section13(2)(a) read with Section 31(2) of the GST Act and Rule 47 of the GST Rules.”

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