Jaipur Metro Rail Corpn. Ltd., In re

SUBSCRIBE FOR FULL CONTENT


The Tax Publishers 2024 TaxPub(GST) 856 (AAR-Raj) IN THE AUTHORITY FOR ADVANCE RULING, RAJASTHAN MAHIPAL SINGH & MAHESH KUMAR GOWLA, MEMBER Jaipur Metro Rail Corpn. Ltd., In re RAJ/AAR/2023-24/19 29 February, 2024 Applicant by: L.D. Sharma, CA, Shri Vijay Mukherjee (Finance Consultant, JMRC) and Shri K.K. Sharma (G.M. Finance), (all are Authorized Representatives of the applicant) ORDER Note 1: Under section 100 of the CGST/RGST Act, 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of CGST/RGST Act, 2017, within a period of 30 days from the date of service of this order. Note 2: At the outset, we would like to make it clear that the provisions of both the CGST Act and the RGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the RGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act/RGST Act would be mentioned as being under the "GST Act" A. Submission of the Applicant (in brief):- M/s. Jaipur Metro Rail Corporation Ltd. ("JMRC" in short) awarded the contract to M/S. Continental Engineering Corp ("CEC" in short) for the Designing and Construction of Tunnel between Chand Pole and Badi Chaupar and reversal line by Shield TBM, Underground Metro Stations at Choti Chaupar & Badi Chaupar by Cut & Cover Method on East-West Corridor at Jaipur Metro (Phase 1B) at Jaipur, Rajasthan on 5th Oct. 2013. In this agreement the amount quoted was lump sum including all taxes except VAT, the then tax instead of GST, because the VAT was exempt for the JMRC Project vide Notification issued on 6-10-2010 by Rajasthan Government. The Contractor was supposed to pay all taxes, duties and fees required to be paid by him under the prevailing statutes contract and the contract price was not to be adjusted for any of these costs except as stated in sub-clause 13.7 (Adjustment for change in Law) of General Condition Clause (GCC) of agreement. Under pre-GST regime, "Works Contract" has been defined in section 65B of the Finance Act, 1994 as a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any movable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property. Hence, the contract between the employer and the contractor above was covered under the ambit of "Works Contract". Though, "Services by way of construction, erection, commissioning, or installation of original works pertaining to an airport, port or railways, including monorail or metro" was notified to be exempt from the payment to Service Tax vide Notification No. 25/2012-ST dated 20-6-2012. It is pertinent to notice that these services will not include a service used for providing such service. Notification No. 25/2012-ST was substituted by the Notification 09/2016-ST which excluded the monorail and metro from the ambit of the exemption. But there was an exception for the services by way of construction, erection, commissioning or installation of original works pertaining to monorail or metro, where contracts were entered before 1-3-2016, on which appropriate stamp duty, was paid, shall remain exempt. CBEC Circular No. 138/7/2011-ST dated 6-5-2011 opined that every service has to be classified and taxed in terms of its specific description and not in terms of a more general description. Clarification was further sought as to the taxability of works contract service (WCS) provided by subcontractors for dams, tunnels, etc. which was exempted and for which the contract was awarded to the main contractor. The CBEC clarified that: "in case the services provided by the sub-contractors to the main contractor are independently classifiable under WCS, then they too will get the benefit of exemption so long as they are in relation to the infrastructure Projects mentioned above. Thus, it may happen that the main infrastructure projects of execution of works contract in respect of roads, airports, railways, transport terminals, bridges tunnel and dams, is sub-divided into several sub-projects and each such sub-project is assigned by the main contractor to the various sub-contractors. In such cases, if the sub-contractors are providing works contract service to the main contractor for completion of the main contract, then service tax is obviously not leviable on the works contract service provided by such sub-contractor." Hence, the above clarifications issued by the CBEC make it clear that there are two categories of sub-contractors for works contract services: SUBSCRIBE FOR FULL CONTENT

The Tax Publishers 2024 TaxPub(GST) 856 (AAR-Raj)

IN THE AUTHORITY FOR ADVANCE RULING, RAJASTHAN

MAHIPAL SINGH & MAHESH KUMAR GOWLA, MEMBER

Jaipur Metro Rail Corpn. Ltd., In re

RAJ/AAR/2023-24/19

29 February, 2024

Applicant by: L.D. Sharma, CA, Shri Vijay Mukherjee (Finance Consultant, JMRC) and Shri K.K. Sharma (G.M. Finance), (all are Authorized Representatives of the applicant)

ORDER

Note 1: Under section 100 of the CGST/RGST Act, 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of CGST/RGST Act, 2017, within a period of 30 days from the date of service of this order.

Note 2: At the outset, we would like to make it clear that the provisions of both the CGST Act and the RGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the RGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act/RGST Act would be mentioned as being under the "GST Act"

A. Submission of the Applicant (in brief):-

M/s. Jaipur Metro Rail Corporation Ltd. ("JMRC" in short) awarded the contract to M/S. Continental Engineering Corp ("CEC" in short) for the Designing and Construction of Tunnel between Chand Pole and Badi Chaupar and reversal line by Shield TBM, Underground Metro Stations at Choti Chaupar & Badi Chaupar by Cut & Cover Method on East-West Corridor at Jaipur Metro (Phase 1B) at Jaipur, Rajasthan on 5th Oct. 2013.

In this agreement the amount quoted was lump sum including all taxes except VAT, the then tax instead of GST, because the VAT was exempt for the JMRC Project vide Notification issued on 6-10-2010 by Rajasthan Government. The Contractor was supposed to pay all taxes, duties and fees required to be paid by him under the prevailing statutes contract and the contract price was not to be adjusted for any of these costs except as stated in sub-clause 13.7 (Adjustment for change in Law) of General Condition Clause (GCC) of agreement.

Under pre-GST regime, "Works Contract" has been defined in section 65B of the Finance Act, 1994 as a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any movable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property. Hence, the contract between the employer and the contractor above was covered under the ambit of "Works Contract".

Though, "Services by way of construction, erection, commissioning, or installation of original works pertaining to an airport, port or railways, including monorail or metro" was notified to be exempt from the payment to Service Tax vide Notification No. 25/2012-ST dated 20-6-2012. It is pertinent to notice that these services will not include a service used for providing such service. Notification No. 25/2012-ST was substituted by the Notification 09/2016-ST which excluded the monorail and metro from the ambit of the exemption. But there was an exception for the services by way of construction, erection, commissioning or installation of original works pertaining to monorail or metro, where contracts were entered before 1-3-2016, on which appropriate stamp duty, was paid, shall remain exempt. CBEC Circular No. 138/7/2011-ST dated 6-5-2011 opined that every service has to be classified and taxed in terms of its specific description and not in terms of a more general description. Clarification was further sought as to the taxability of works contract service (WCS) provided by subcontractors for dams, tunnels, etc. which was exempted and for which the contract was awarded to the main contractor. The CBEC clarified that: "in case the services provided by the sub-contractors to the main contractor are independently classifiable under WCS, then they too will get the benefit of exemption so long as they are in relation to the infrastructure Projects mentioned above. Thus, it may happen that the main infrastructure projects of execution of works contract in respect of roads, airports, railways, transport terminals, bridges tunnel and dams, is sub-divided into several sub-projects and each such sub-project is assigned by the main contractor to the various sub-contractors. In such cases, if the sub-contractors are providing works contract service to the main contractor for completion of the main contract, then service tax is obviously not leviable on the works contract service provided by such sub-contractor." Hence, the above clarifications issued by the CBEC make it clear that there are two categories of sub-contractors for works contract services: