Whether work constitutes composite contract or is it separate contract for each work undertaken? What will be the effective rate of tax in the given facts?

PJ/Case Law/2020-2021/3566

M/s Kalyan Toll Infrastructure Ltd- AAR Madhya Pradesh Order Number 16/2019 dated 25.09.2019
Brief Facts: - The Assesses has taken work under e-tender process by MP Power Generating Company Pvt Ltd for General Civil, Electrical and Mechanical Works Package of Shri Singaji Thermal Power Project. The tender though a consolidated work order, has categorical mentions of individual work to be carried out by the applicant with specific remuneration of each such work. Assesses has considered that the contact is a composite contract and chargeable at a concessional rate of GST in terms of notification no. 11/2017-CT (R).
Issue: - Whether work constitutes composite contract or is it separate contract for each work undertaken? What will be the effective rate of tax in the given facts?
Appellant’s Contention: -Appellant contended that the tender is issued by the government entity. It has been a composite supply which is being supplied to a government entity and accordingly the same would be entitlement of concessional rate of GST in terms of Sr. No. 3 (vi) of Notification no. 11/2017-CT(R) as amended vide notification no. 24/2017-CT(R) & 31/2017-CT(R) .

Respondent Contention and reasoning of Advance Ruling: -In the instant case, the applicant have been awarded a consolidated contract for carrying out different specified works at Shri Singaji Thermal Power Project, which includes erection, commissioning, installation etc. – It is also necessary to place on record that there are certain items mentioned in the subject contract including, but not limited to, ‘Fitness Centre cum Gym’, which definitely do not find place in the ambit of essential work entrusted by the State Government to MPPGCL. Needless to mention that such work shall not qualify for exemption as envisaged under Sr.No.3(vi) to the Notification no. 11/2017-CT(Rate), in as much as it does not fall within the scope of work entrusted by Government of Madhya Pradesh to MPPGCL.

The work entrusted vide subject tender document/contract awarded to the Applicant by MPPGCL cannot be termed as composite supply and thus entire work under the said contract shall not be entitled to concessional rate in terms of Notification No.11/2017-CT(R) dtd.28.06.2017 – Also, the supply of goods and/or services which squarely fall within the ambit of scope of work entrusted to MPPGCL by the Government of Madhya Pradesh shall be entitled for concessional rate under Sr.No.3(vi) to Notification No.11/2017-CT(R). Accordingly, each and every supply under the subject contract shall be treated separately for determining the rate of tax under the CGST Act 2017 read with the provisions of GST Tariff and respective exemption notifications.

Thus, the tender document in question is a not consolidated contract and each supply under the said contract shall be chargeable to tax individually, depending upon the individual classification of such supplies and rate of tax applicable at the time of supply.

Authority claimed that issue of MPPGCL being a Government entity has been dealt with at length in the Order passed by this authority in the matter of M/s.Shreeji Infrastructure India P.Ltd. and therefore, they are of the view that MPPGCL has been established by the Madhya Pradesh government and 100% shareholding and control is being carried out by the MP State Government. Further, this company has been exclusively formed to carry out the work of power generation. Work involved in the contract is work as per object of MPPGCL and/or incidental to it.

Ruling:-The tender document in question is a not consolidated contract and each supply under the said contract shall be chargeable to tax individually, depending upon the individual classification of such supplies and rate of tax applicable at the time of supply.
Conclusion: - Mere fact that a number of tasks have been entrusted to the applicant through a single document would not make it entitled to be categorised as 'composite supply' particularly in terms of Section 2(30) of the CGST Act 2017. The above activities performed by the person is nota composite supply as per section 2(30) of CGST Act, 2017 in terms of notification no. 11/2017-CT(R).The relied on the advance ruling M/s. Shreeji Infrastructures P. Ltd.vide order dtd.18.10.2018 where under the issue of construction of residential quarters has been held to be out of purview of exemption under notification no. 11/2017-CT(R).

Prepared by CA Mahesh Parmar

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PJ/Case Law/2020-2021/3566

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