Supplies made by Cost Centres to BMRCL to be considered as Independent Supplies, respective rate of GST to apply on Supply of Goods, Services: AAAR [Read Order]

BMRCL - GST - AAAR - taxscan

The Karnataka Appellate Authority of Advance Ruling (AAAR) ruled that the Supplies made by Cost Centres to Bangalore Metro Rail Corporation Limited (BMRCL) to be considered as independent supplies, respective rate of GST to apply on supply of goods, service.

The respondent M/s. BEML Limited entered into a contract with M/s BMRCL for the manufacture and supply of Standard Gauge Intermediate Cars. The activity of manufacture and supply of Standard Gauge Intermediate Cars involves the supply of both goods and services which is undertaken by Cost Centres.

The nature of supply undertaken by each of the Cost Centres of the Respondent Company were preliminaries & General Requirements for Rolling Stock including Design’ which is incidental to supply of rolling Stock; Delivery and receipt of offshore manufacturing; Delivery and receipt of indigenous manufacturing; Commissioning and Acceptance of trains/ cars in Depot; Taking over of unit/train for revenue services; Supply of Unit Exchange spares, mandatory spares and consumable spares and special tools testing and diagnostic equipment Training, Operation and Maintenance Manuals (Optional) which is incidental but integral art of the Supply Contract.

The Karnataka Authority for Advance ruling examined the case of the Respondent and arrived at the conclusion that the supplies made by the Respondent Company under Cost Centers form a composite supply and since the supply of goods i.e intermediate cars is the principal supply, the rate of tax as applicable to the supply of intermediate cars will be applicable to the composite supply in terms of Section 8 of the CGST Act, 2077. The Authority also held that Section 12 of the CGST Act, 2017 is applicable to the issues related to the time of supply.

However, the Assistant Commissioner of central Tax has appealed from the AAR’s ruling and contended that  each and every transaction should be viewed as a sep transaction, though it may be part of larger contract; that each contract or agreement is unique and any analysis should be made within the framework of the agreement taking into account the facts and figures. They submitted that the AAR has not taken into account scope of the terms and conditions of the agreement for any analysis and has given findings which are contrary to the agreed terms and conditions; that the goods/services delivered need to be assessed on merits and appropriate classification needs to be done and merit rate of tax to be paid; that even in the absence of any written agreement or contract or MOU, the goods/services/goods and services should be assessed as they are presented at the time of supply/delivery.

The coram of D.P.Nagendra Kumar and Shikha C set aside the AAR ruling and held that supplies made by Cost Centres to M/s BMRCL are to be considered as independent supplies of goods and services as indicated in the Table below and rate of GST as applicable to the supply of goods and supply of service will apply.

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