The Tamil Nadu Advance Ruling Authority (AAR), held that the value of ‘Deposit Contribution Works’ (DCW) under self-execution schemes is to be restricted to the establishment and supervision charges and other charges if received from the recipient.
The applicant, M/s Tamil Nadu Generation and Distribution Corporation Limited, is a government company and has been engaged in the generation and distribution of electricity and has been registered under the Central Goods and Services Tax (CGST) Act, 2017. The applicant is an “Electricity Distribution Utility” under the Electricity Act of 2003. The application creates power utilizing three major fuels: thermal (coal), hydroelectric (water), and gas generation, as well as non-conventional energy sources such as wind.
The applicant distributes power generated at its generating stations and procured from others to various consumers throughout Tamil Nadu.
One of the major issues raised in this case was that should the value adopted by the applicant for “Deposit Contribution Works” for the purpose of discharging applicable Goods and Services Tax be restricted to the “Establishment and Supervision Charges” and other charges, if applicable, that the applicant charges for and receives in the case of the self-execution scheme?
The current application for an advance ruling is just about the amount of GST liability that this applicant will have to discharge on the charges received for DCW, which is only a valuation issue.
The Authorized Representatives (AR) N. Sriprakash, K.A. Parthasarthi, and Thiru. K. Siri Chandana, Advocates, appearing for the applicant noted that the verdict is sought only for ‘Deposit Contribution Works (DCW)’ in regard to the ‘Self Execution Scheme’, as well as the value to be used for GST purposes.
The AR explained that in cases of ‘Self Execution’ under DCW, consumers are required to bear the entire costs of shifting service/lines structure and equipment, including the cost of equipment/materials, with the exception of ‘Establishment and Supervision Charges’ and ‘Other Charges, if any charged by the applicant’.
The AR noted that the verdict is sought only for ‘Deposit Contribution Works (DCW)’ in regard to the ‘Self Execution Scheme’, as well as the value to be used for GST purposes. The AR went on to explain that in cases of ‘Self Execution’ under DCW, consumers are required to bear the entire cost of shifting service/lines structure and equipment, including the cost of equipment/materials, with the exception of ‘Establishment and Supervision Charges’ and ‘Other Charges, if any charged by the applicant.
The bench remarked that the execution of DCW (Deposit Contribution Works) does fall within the scope of supply, although it is very dependent on who or which party executes it. In this regard, the distinction between the nature of transactions engaged under DCW and under “DCW – Self-execution mode” is quite important in the context of this case. For DCW cases under the Self-Execution Scheme, the consumers have to incur all costs for shifting of service/lines/structure and equipment, including costs of equipment/materials, except “Establishment and Supervision Charges” and other charges, as applicable. The bench was of the opinion that, in other words, for self-execution cases, the contracting parties are only required to pay the applicant the “Establishment & Supervision Charges” and any other applicable charges; they bear the entire cost of shifting the equipment, including the cost of equipment.
The bench, consisting of D. Jayapriya, I.R.S., [Additional Commissioner/ Member (CGST)] and A. Valli, [Joint Commissioner/Member(SGST)], held that the value to be adopted by the applicant for ‘deposit contribution works’ under the self-execution schemes’ shall be restricted to “establishment and supervision charges and other charges” if charged and received from the recipient of service.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
