Facts – 

• The Appellant, M/s. PES Engineers Private Limited, are engaged in the construction of various types of Power Projects. They have entered into two separate contracts for executing work with Singarenni Collieries Company Limited (SCCL) for at their Thermal Power Project.
• The scope of First Contract is sale of goods ex-manufacture / ex-works. According to the applicant, it is a contract for pure sale of goods. The scope of work under the Second Contract is “Inland Transportation. According to the applicant, the supply under Second Contract is Works Contract Service as defined under Sec.2(119) falling under SAC 9954.

Issue – 

• Whether the applicant is required to pay GST on “initial advance” of 5% and “interim” advance of 7.5% on Ex works value of goods supplied under “First Contract Agreement”?

Order –

• The AAR observed, that the contract agreement document itself, in this case, had put a condition that there are two separate contracts that need to be entered into i.e. one for supply of service and other for supply/sale of goods. Therefore, both the contracts are separate and cannot be clubbed together
• The supply/ service under second contract commences only on completion of all the milestone activities of first contract. Therefore, it is evident that each Contract is independent and every milestone supply made from the individual contract is, an independent transaction.
• The mere fact that different tasks, i.e. two contracts for which separate invoices were issued by him to his recipient, have been entrusted to the applicant through a single contract agreement would not make it a ‘composite supply’ in terms of Section 2(30) of the CGST Act, 2017.
• When both the contracts are viewed as separate contracts, not withstanding that both were mentioned in the single Conditions of Contract, then the taxpayer is eligible for the benefit of Notification No.66/2017 Central Tax, dated 15th November, 2017 for the outward supply of goods. Accordingly the tax liability on supply of goods, as per First Contract, will arise as specified in clause (a) of sub-section (2) of section 12 of the said Act i.e. at the time of supply, which is the date of issue of invoice by the taxpayer or the last date on which he is required, under section 31, to issue the invoice with respect to the supply and not on the date on which he receives advance payments for those goods
• Thus the applicant is eligible for the benefit of Notification No.66/2017 Central Tax, dated 15th November, 2017 and accordingly the tax liability on sale of goods, as per First Contract, will arise as specified in clause (a) of sub-section (2) of section 12 of the said Act i.e. at the time of supply, which is the date of issue of invoice by the taxpayer or the last date on which he is required, under section 31, to issue the invoice with respect to the supply.

#Need for gst in india