MODIFICATION OF AAR RULING ON PETROFAC EPC PROJECT: WORKS CONTRACT CLASSIFICATION UNDER GST
RAJASTHAN APPELLATE AUTHORITY FOR ADVANCE RULING
GOODS AND SERVICES TAX
Before the Bench of:
1. Sh. Mahendra Ranga, Member (Central Tax)
2. Dr. Ravi Kumar Surpur, Member (State Tax)
Case Title :- M/s Petrofac International UAE LLC
(GST AAAR RAJASTHAN)
Appeal No. RAJ/AAAR/APP/08/2021-22
Advance Ruling No. RAJ/AAR/2021-22/17 dated 13.09.2021
Date of Judgement order – 12th December 2023
IMPORTANT PARAGRAPHS
Para No. 1 . M/S Petrofac International (UAE) LLC (hereinafter referred to as “PIUL” or “Petrofac” or “Contractor” or “Appellant”) and their parent company is reportedly a leading international service provider to the energy industry, with a diverse client portfolio including many of the world’s leading energy companies. PIUL is involved in designing, building, for the energy industries in Africa, CIS, India & Middle East.
Para No. 3. Vedanta Limited (“Vedanta”) is engaged in the business of exploration and mining of various natural resources. The Appellant have informed that Cairn (Vedanta’s upstream Oil & Gas Division) is the operator of onshore RJ-ON-90/l block located in Barmer District in the state of Rajasthan. This block contains 38 major Oil & Gas discoveries, with significant gas potential in the southern area. Raageshwari Deep Gas (RDG), discovered in 2003, is a tight gas field situated in the southern area of the block and is under production since 2010 with significant infrastructure in place. Its Gas Processing Terminal is known as Raageshwari Gas Tenninal (RGT)
Para No. 5. SCOPE OF WORK AUGMENTATION OF FACILITIES & INFRASTRUCTURE UNDER RDG PROJECT
Under the RDG Project, the Appellant are required to undertake various activities as under:
(a) Augmentation of Well Pads and Well Fluid Gathering Pipelines
(b) Augmentation of Existing Gas Processing Terminal capacity with New RDG Gas Processing Terminal
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- Construction of various infrastructure as required in the expansion of the terminal
- Miscellaneous facilities like Living Quaffers and associated Sewage Treatment Plant etc.
(c) Augmentation of product & Effluent Evacuation Facilities / Infrastructure
Para No. 9. The Appellant submitted that they are of the considered view that the subject services are appropriately classifiable under the Heading 9986 [Sr. No. 24(ii)] (viz., “Support services to exploration, mining or drilling of petroleum crude or natural gas or both”) or alternatively under the SAC Heading 9983 [Sr. No. 21 (ia)l (viz., “Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both”) and are liable to attract 12% GST under the CGST Act. By filing the application under Section 97(1) of the RGST Act/ CGST Act before the AAR, Rajasthan, the Appellant had sought to confirm this classification. The AAR, Rajasthan have answered the questions of the Appellant, vide their Ruling dated 13.09.2021 as under:
Question 1 – Whether the services provided by the applicant are classified under Sr. No. 24(ii) (Heading 9986) of the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 (as amended) as ‘Support services to exploration, mining or drilling of petroleum crude or natural gas or both’ and attracts GST @ 12%
Answer: – No
Question 2 – Whether the services provided by them are classified under ‘Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both’ under Sr. No. 21 (ia) (Heading 9983) of the Notification No. 1 1/2017- Central Tax (Rate) dated 28.06.2017 (as amended) and attracts GST @ 12%.
Answer – No
Question 3 – Further, if the subject services are not classified under the aforesaid entry, what would be the appropriate classification for the same and at what rate GST would be imposable.
Answer: – The activities of supply of survey, designing, installation, Commission of project under EPC contract by the Appellant shall attract GST under S.No. 3 (Heading 9954) (ii) of the Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017.
ORDER
In view of the above discussion and findings, we hold that the Ruling dated 13.09.2021 of the AAR for Rajasthan in respect of the Appellant needs no interference up to the extent mentioned in item (i) to (iii) above and the same are hereby modified to the extent mentioned in item (iv) above of Para K of this order. The appeal is disposed of accordingly.
