Facts: M/s. Khilari Infrastructure Private Limited is a registered Civil Contractor, carrying out the business of Construction, erection, commissioning of sewerage treatment plant along with Operation & Maintenance of Sewerage Treatment and Disposal Plants etc. as per the Work awarded by various Municipal Corporations / Councils/Local Authority. During the F.Y 2017-18 Appellant Company has been awarded work order of Operation & Maintenance contract from various Municipal Corporations. Further the department has contended that the use of some consumables such as oil, lubricant etc as such their services cannot be termed as pure services attracting exemption under N No. 12/2017 and they will have to pay the GST on the services provided by them. Under GST law, the Applicant’s services attract CGST under N No. 11/2017-Central Tax (Rate) dated June 28, 2017 @ 9% with effect from July 1, 2017 and @ 6% with effect from August 22, 2017 vide Notification No. 11/2017-Central Tax dated June 28, 2017 as amended vide Notification No. 20/2017-Central Tax (Rate) dated August 22, 2017. However, vide Exemption Notification No. 2/2018 Central Tax (Rate) dated January 25, 2018 this service is exempted with effect from January 25, 2018 provided the value of supply of goods does not exceed 25% of value of composite supply.
Issues Involved: The applicant, seeking an advance ruling in respect of the applicability of GST on:
1) Determination of GST leviable on operation and maintenance work order given by municipal corporations.
2) Admissibility of ITC (input Credit tax) of purchases against such work order.
3) Determination of responsibility of municipal authority of discharging such GST Liability payable to contractor.
4) Applicability of GST on Service Contract where labour job Contribute 95% to 98 of Contract Value and 2-3% as Oil and Lubricant and pertains to consumable Purchase to operate the Existing Plant.
Held: The Hon’ble AAR, Maharashtra observe that the services rendered by the applicant, is a composite contract consisting of supply of services and also supply of goods in the form of materials, spares, consumables, etc., there is clearly a tax liability @ 9% each of CGST and SGST till July 21, 2017 and further @ 6% each of CGST and SGST with effect from July 22, 2017. Further the applicant can avail the benefit of the above said Exemption Notification No.2/2018 Central Tax (Rate) dated January 25, 2018 only if the value of supply of goods does not exceed 25% of value of composite supply. A fact to be noted from the submissions made by the Applicant, is that they themselves were aware that, on implementation of GST, 2017 the said supply of Operation & Maintenance work was taxable as per notification no. 11/2017 dated June 28, 2017 and Notification no. 20/2017 dated August 22, 2017. However, the Municipal Corporation has disregarded levying of GST on the said work saying it is exempt and have rejected the claims made by appellant. He passes an order under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017, NO.GST-ARA-04/2017-18/B- 28 Mumbai, dt. 05.05.2018. For reasons as discussed in the body of the order, the questions are answered thus –
1. Determination of GST leviable on operation and maintenance work order given by such Municipal Corporation.
Answer: – Under GST Act, 2017, their services attracted CGST & SGST @ 9% each with effect from 01.07.2017 and CGST & SGST @ 6% each with effect from 22.08.2017. Post 25.01.2018, their services would be exempt only subject to fulfilment of conditions that the value of supply of goods does not exceed 25% of value of composite supply.
2. Admissibility of ITC (input Credit tax) of purchases against such work order.
Answer: – The applicant is eligible for availing ITC (input Credit Tax) of purchases against such work order under the GST Act/Rules subject to the terms and conditions mentioned in section 16 to 22 of the GST ACT and rules 36 to 45 of the GST Rules, 2017.
3. Determination of responsibility of municipal authority of discharging such GST Liability payable to the contractor.
Answer: – The liability to pay GST is on the supplier, being a legal liability and no comments are offered in respect of recovery or otherwise from the recipient.
4. Further, we seek guidance from GST Council/ Appropriate authority towards applicability of GST on Service Contract where labour job Contribute 95% to 98% if Contract Value and 2-3% as Oil and Lubricant and pertains to consumable Purchase to operate the Existing Plant.
Answer: – Under GST Act, 2017, their services attracted CGST& SGST @ 9% each with effect from 01.07.2017 and CGST & SGST @ 6% each with effect from 22.08.2017. Post 25.01.2018, their services would be exempt only subject to the fulfilment of condition that the value of supply of goods does not exceed 25% of Value of composite supply.
Citation: [TS-416-AAR-2018-NT]