3 Nov 2022 3:45 AM GMT
The Uttar Pradesh Appellate Authority of Advance Ruling (AAAR) has held that the setting up of an Electric Loco Shed for the Railway constitutes a composite supply of work contract service.The two-member bench of S. Kannan and Ministhy S. has observed that the project of setting up an electric loco shed at Saiyedpur Bhitri, Uttar Pradesh, fulfils the conditions of it being an...
The Uttar Pradesh Appellate Authority of Advance Ruling (AAAR) has held that the setting up of an Electric Loco Shed for the Railway constitutes a composite supply of work contract service.
The two-member bench of S. Kannan and Ministhy S. has observed that the project of setting up an electric loco shed at Saiyedpur Bhitri, Uttar Pradesh, fulfils the conditions of it being an immovable property.
The appellant has entered into a joint venture with M/s Indwell Constructions Private Limited and constituted M/s Indwell-HYT JV. The Joint Venture (JV) was allocated work related to the "Construction of PEB Shed, structure, water supply, drainage, sewerage, road work, track work, power supply, general electric work, OHE works, signal & telecommunication work, commissioning of machinery and plant in connection with the setting up of an electric loco shed at Saiyedpur Bhitri, U.P. by Rail Vikas Nigam Limited (RVNL).
As per the Appellant, the JV had awarded the contract to the JV partners on a back-to-back basis with the specific execution of the work contract between the partners. According to the J.V. Agreement, the appellant was assigned the work of supply, installation, and commissioning of the plant and machinery, mechanical engineering works, electrical works, and so on.
The applicant sought an advance ruling on the issue of whether the work awarded to the applicant is a composite supply of work contract service.
The AAR held that the work awarded to the applicant was not a composite supply of work contract service.
The appellant contended that the AAR failed to appreciate the fact that the items of plant and machinery supplied, installed, and commissioned by the appellant were of permanent nature. The Indian Railways have no intention of moving them from the site in the foreseeable future, which is apparent from the definition of the terms "Permanent Works" and "Plant" as contained in the General Terms of the Contract Agreement entered into by the JV with RVNL.
The AAR stated that in order to be classified as a work contract, the property involved in the contract must be of any immovable nature. Immovable property is not defined in the GST provisions. However, movable property is defined under Section 3(26) of the General Clauses Act, 1897 to include land, benefits arising out of the land, and things attached to the earth, or permanently fastened to anything attached to the earth. Standing timber, growing crops, and grass is not considered "movable property."
The AAR noted that the essential character of "immovable property" is that it is attached to the earth, permanently fastened to anything attached to the earth, or forming part of the land and not agreed to be severed before supply or under a contract of supply.
The AAAR set aside the order of the AAR and held that the contract consists of the transfer of property in goods coupled with the supply of services, which leads to the inevitable conclusion that it is a case of a work contract, covered under the definition of "works contract," defined under Section 2(119) of the CGST Act, 2017.
Appellant's Name: M/s HYT Engineering Company Private Limited
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