FLUORIDE CONTROL PROJECT UNDER ESCO MODEL – GST RATE CLARIFIED BY AAR RAJASTHAN

FLUORIDE CONTROL PROJECT UNDER ESCO MODEL – GST RATE CLARIFIED BY AAR RAJASTHAN

RAJASTHAN AUTHORITY FOR ADVANCE RULING

GOODS AND SERVICES TAX

Case Title : Shri Kailash Chandra

(GST AAR RAJASTHAN)

Advance Ruling No.RAJ / AAR/2018-19/22

Date of Judgement/Order- 29th October 2018

IMPORTANT PARAGRAPHS

Para No. 5. It is understood based on the scope of work detailed above that ESCO model requires improvement of the whole water supply system involving pump houses, pumping stations, transmission lines, switchyards, storage tanks and headwork campus. Re-modelling of pump foundation and extension of pump house, replacement of fittings/ fixtures and painting of all permanent structures like pumping station building etc. are involved in the contract.

Para No. 6. Based on above facts and the intent of the proposed activity, it is implied that the given work is a contract for improvement of the pumping system under the Fluoride control project, wherein transfer of property in goods in the form of new pumping machinery and mechanical/ electrical equipment shall be involved in the execution of such contract.

Para No. 7. That Works contract in itself is a composite supply in which construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning etc are involved along with transfer or property in goods.

Para No. 8. Now whether a supply is a works contract or not is dependent on whether the plant or device or property is a movable or immovable property. To decide whether a property is movable or immovable, the given terms have not been defined under the Act and hence the reliance needs to be placed on other laws and judicial precedents.

Para No. 9. Under the General Clauses Act 1897 the term immovable property has been defined under Section 3(26) as “immovable property” shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth:

Para No. 10. As per the definition the term permanently fastened or attached to earth can be treated as immovable property. Any attachment with earth which is temporary in nature or can be shifted from part of earth to another without causing substantial damage to it cannot be treated as immovable property.

RULING

In the given contract, the activity of O & M of Fluoride Control Project on ESCO Model and O &M work by the applicant is being undertaken for a Government Department. If the value of supplied goods under this contract is below 25% of the total value of the composite supply, then the rate of tax would be Nil. Further, if in the duration of contract the applicant crosses the benchmark of 25% value of goods then the rate of tax will shift from Nil to 12%.