12% GST on Composite Supply of Works Contract for Metro & Monorail: AAR

Case Covered:

ABB India Ltd

Read the full text of the case here.

Facts of the case:

ln the context of a metro corridor, SCADA, according to the Applicant, describes a system that controls and monitors the electrical network of the metro system and provides updated data in graphical and other forms of analysis. lt also enables the operator to issue suitable commands to be followed in the operation of the metro (refer to para 14 of Annexure A of the Application). Using the SCADA interface, the operator sends instructions to the Remote Terminal Unit (RTU), which accordingly controls the signals, lights and other electrical equipment of the metro.

The Applicant refers to letter no. RVNL/KOL/EUMeIro/07|SCADN1225 dated 2210812019 of RVNL awarding the contract for the supply referred to above. The scope of the supply is specified therein as below.

1. Supply, erection, and commissioning of RTUs,

2. Supply, laying and connecting of the control cables from RTU to equipment,

3. Supply, erection, and commissioning of UPS and batteries for RTU,

4. Supply and installation of slave clocks and antenna,

5. Modification of software at OCC to accommodate new RTUs and installation of software in RTUs at Baranagar and Dakshineswar,

6. System check, testing, and commissioning of SCADA for full control, protection, telemetering including data logging,

7. Supply and commissioning of the LCD screen with accessories at Remote Control Centre, B. Freight and insurance.

The Applicant submits that it is evident from the Technical Offer (refer to Annexure D to the Application) that the supply involves designing, engineering, manufacturing, site installation, cable laying, erection, testing, commissioning, etc. The contract, therefore, involves the supply of both goods and services. RVNL will release 30% of the payment only after the erection and commissioning are completed. Even the payment for freight and insurance will be made after the erection work is completed. lt is clear, therefore, that the contracts for the supply of goods and that of services are not divisible and the entire contract for the supply of SCADA is a composite supply of goods and services.

Observations and findings:

According to Serial No. 3 (v) (a) of the Rate Notification, the composite supply of works contract, as defined under section 2(119) of the GST Act, supplied by way of construction, erection, commissioning, or installation of original works pertaining to railways, including monorail and metro, is taxable at 12% rate.

Works contract is defined under section 2(119) of the GST Act as a contract for construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract. lt is a composite supply treated as service in terms of para 6 (a) of Schedule ll under section 7 (1A) of the GST Act.

Ruling:

The Applicant is making a composite supply of works contract taxable under Entry No. 3 (v) (a) of Notification No. 11/2017 – Central Tax (Rate) dated 28/06/2017 (State Notification No. 1135-FT dated 28/06/2017), as amended, being erection, commissioning and installation of original work pertaining to railways, including metro.

This Ruling is valid subject to the provisions under Section 103 until and unless declared void under Section 104(1) of the GST Act.

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