A recent ruling delivered by the Gujarat Authority for Advance Ruling ( AAR ) clarified that imported goods sold under a High Seas Sale ( HSS ) agreement and later used in a project initiated through a Engineering, Procurement, and Construction ( EPC ) contract shall attract Goods and Services Tax ( GST ), even if Integrated Goods and Services Tax ( IGST ) was already paid at the time of import of the goods.
The Indian Oil Corporation Limited ( IOCL ) had invited bids for execution of EPC Package ( EPCC-09 ) for Catalytics De-Waxing Unit at their Gujarat Refinery with the successful bidder contractually obligated to execute the work on lump sum turnkey basis single point responsibility.
Upon successful bid, the applicant, Thyssenkrupp Industrial Solutions (India) Pvt. Ltd., (Thyssenkrupp) was awarded an EPC contract by Indian Oil Corporation Limited ( IOCL ) for the execution of a Catalytic De-waxing Unit at IOCL’s Gujarat Refinery.
As part of the duties stipulated by the contract, Thyssenkrupp imported certain equipment and supplied it to IOCL under an HSS agreement, a transaction where ownership of the goods is transferred to the buyer while still in transit before entering Indian customs territory.
The present Application for Advance Ruling has been sought for by Thyssenkrupp to determine whether the imported goods, already subjected to IGST can be taxed again when used in the EPC works contract and whether the value of such imported goods shall be excluded from the taxable value of EPC contract.
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CA S.L. Kapadia along with Rajesh and Lalitha Vishwanath appearing for Thyssenkrupp reiterated their submissions that IOCL being the importer had paid IGST at the time of customs clearance and hence the same goods shall not be taxed again under GST when incorporated into the EPC contract.
The two-member Bench of the Gujarat Authority for Advance Ruling constituted by SGST Member Kamal Shukla and CGST Member P.B. Meena rejected the Applicant’s submissions ruling that the EPC contract is an indivisible works contract, which is taxed as a composite supply of services under GST law.
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The Bench further clarified that even if the imported goods were initially sold under HSS and taxed separately at customs, they go on to become part of the overall EPC contract once incorporated into the project. Therefore, the works contract shall include the entire value of the project including that of the imported goods for the purposes of calculating GST.
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