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Madhya Pradesh AAR holds that delayed payment surcharge/ Late payment surcharge/Surcharge on outstanding amount cannot be treated a separate service but is includible in value of initial service i.e. Transmission/ distribution of electricity.

Notes that applicant, engaged in rural electrification work and supply of electricity to commercial and non-commercial consumers, is eligible for exemption from levy of GST under Entry No. 25 of Notification No. 12/2017 – Central Tax (Rate); Remarks that, “component of interest and delayed payment charges are obviously having a direct relation with the value of supply to which such interest/delayed charges relate. These are in fact components of the value of supply and do not have any independent status”; Explains that Delayed payment surcharge is a part of Tariff prescribed by MPERC and Company recovers such charges at rates fixed by Authority, thus “nature of the service is interest/late fee/penalty for delayed in payment of consideration” which falls within scope of Section 15 dealing with ‘Value of Supply”;

Observes further that, in present case, supply is of both exempted (i.e. distribution and transmission, retail supply of electricity) and taxable supply (i.e. other services as per Circular No. 34/8/2018, dated March 1, 2018); Accordingly concludes that “portion of Delayed payment surcharge attributable to exempted supply will be exempted and portion attributable to taxable supply will be taxable at the rate at which the corresponding supply is taxed” 

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 [2018] 100 taxmann.com 300 (Allahabad) GST: Where Authority for Advance Ruling ruled that GST was not applicable on upfront amount for leasing out of plot for 30 years or more allotted to petitioner for purposes of hospital, etc. and Competent Authority issued on petitioner notice for payment of GST, revenue authorities were directed to file counter affidavits.

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Posted by on in Service Tax

Service Tax - Works Contract and Commercial or Industrial Construction service - Includability of value of reinforcement steel and cement received free of cost from client into assessable value – Demand of service tax on supply of ready mix concrete – Levy of penalty 

HELD - the value of the items supplied by the customers to the service provider on FOC basis is not includable in the taxable value of the service - the appellants are justified in not including the cost of reinforcement steel and cement supplied by their clients - the confirmation of duty value of reinforcement steel and cement received free of cost is set aside – Regarding deposit service tax on supply of RMC, the absence of mala fide intention would have been manifest if the appellants discharged the tax liability before the conduct of audit - appellant have not made any case to show the absence of mala fide intention.

The demand of service tax on the items supplied by the customers of the appellants on FOC basis is set aside along with interest and penalty. As regards the issue of inclusion of value of RMC supplied by the customers to the appellants, demand is confirmed and penalty is restricted to 25% - the appeal is partly allowed.

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West Bengal AAR holds that construction of private railway siding for carriage of coal and oil fuel to Raghunathpur Thermal Power Station (RTPS) as per agreement between Applicant and Damodar Valley Corporation (DVC) constitutes a “Composite Supply of Works Contract” taxable @12% under Serial No 3(v)(a) of Notification no 11/2017-CT (Rate); Refers to para 2(zs) of Notification No. 12/2017-CT (Rate) which stipulates that composite supply of works contract defined u/s 2(119) of 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%.

Remarks that, Railways Act, 1989 includes railways under both Government and private administrations whereas the scope of work, as outlined in Applicant’s agreement with DVC, is that of works contract, defined under section 2(119) of GST Act, fit to be called an ‘original work’.

Further holds that construction of private siding pertains to ‘railways’ while explaining that Parliament excludes by law, apart from the tramways, the lines of rails mentioned u/s 2(31)(ii) of the Railways Act, 1989, being rails built solely for the purpose of recreation ; Expounds that, Courts have generally held that phrase ‘public carriage of passengers or goods’ cannot be construed in such a manner so as to exclude from ambit of ‘railways’ the sidings built and owned by organization other than Govt. : West Bengal AAR  

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Revised guidelines relating to works contract under GST wherein procedure for determination of GST inclusive work value for balance work for which the agreement executed on the basis of SoR-2014 has been provided.

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Haryana Value Added Tax Act, 2003 - Whether the Tribunal is justified in upholding the levy of tax on chemicals used as consumables in the process of job work of dyeing of fabric by assuming that property in the goods has passed on to the principals and ignoring the quantity of dyes, which were not transferred to the principals 

HELD - the chemicals used in the job work are taxable, however, the pertinent question to be answered would be as to how much of dyes/colours are taxable which is transferred to the fabric when the whole quantity of consumable is not transferred - while determining the actual loss of chemicals, dyes and colours where the fabric or textile undergoes various processes depends upon factual aspect which can be considered only by the Assessing Officer - what is taxable under the HVAT and CST Acts is the value of the goods which get transferred to the customer in the execution of works contract either as goods or in any other form and not the value of goods used or consumed in the execution of works contract if such user or consumption does not result in transfer of property in those goods in any form to the customer.

The tax on the entire value of chemicals consumed during the process of dyeing and job work are not to be included for the purpose of levy of VAT as substantial portion of the same is not transferred to the principal eventually - the impugned orders passed by the Tribunal in all the three appeals are set aside and the matter is remanded to the Assessing Officer to decide the matter afresh


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CGST : The applicant-company is engaged in the manufacturing, installation and other ancillary services of integrated transmission towers. It has executed a contract with PGCIL for construction and commissioning of Tower Package. It submits that as the contract with PGCIL has been split up into two separate parts one for ex-factory supply of materials and the other for supply of allied services like erection of towers, testing and commissioning of transmission lines etc.

which also includes inland/local transportation, insurance, delivery of materials and storage of them at the contractee PGCIL's site, the execution of the Towers cannot come under "works contract service", since it does not involve the supply of any immovable property and has sought a Ruling on the applicability of Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017

The AAR held that GST being a tax on the supply of both goods and services, it is no longer necessary to segregate the supply of goods in an indivisible composite contract for the purpose of taxation. GST can be levied on the entire value chain, which is the bundled supply of goods and services for execution of an indivisible composite contract for construction, erection, commissioning etc. of an immovable property.

The applicant is executing an indivisible composite contract for construction, erection and commissioning of an immovable property, namely, the Tower Package, execution of which involves bundled supply of both goods and services and it is, therefore, works contract. The contract for the Tower Package being works contract is service in terms of paragraph 6(a) to Schedule II to the GST Act. Activities covered under Schedule II are to be treated as a supply of the nature described under section 7(1)(d) of the GST Act.

Thus, GST is to be paid on the entire value of the works contract, including the supply of materials, transportation, in transit insurance, erection, commissioning etc. The exemption under serial no. 18 of Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017 is, therefore, not applicable in the present context.

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Section 16 of the Central Goods and Services Tax Act, 2017/Section 19, read with section 3, of the Tamil Nadu Value Added Tax Act, 2006 - Input tax credit - Eligibility and conditions for taking credit - Assessment year 2007-08 - Whether section19(11) violates articles 14 and 19(1)(g) of Constitution of India 

Held, no -Whethersection 19(11) is inconsistent to section 3(3) of Tamil Nadu VAT Act - Held, no -Whether time period as provided in section 19(11) is mandatory 

Held, yes -Whether Assessing Authorities could have extended period for claiming input tax
credit beyond period as provided in section 19(11) - Held, no [Paras 37, 42 and 46]
[In favour of revenue] (OR)

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Central Sales Tax Act, 1956 – Works Contract - Whether the supply of the goods from Mumbai to Delhi to execute the works contract constitute inter-state sales - Tribunal view that the goods were appropriated to the contract, which was concluded in Mumbai, upon acceptance of the orders – Revenue view that sale of the right to use the elevators was concluded in Delhi, which was also the place of performance of the contract 

HELD - the appreciation of the law by the Tribunal in this case is sound and unexceptionable. The placement of an order by the agent for procurement of the lifts in this case was merely an offer. It is only upon its acceptance and further steps taken by the supplier that an offer crystallizes into a binding promise or contract. That took place in Mumbai. It is now too far well settled that the incidence of Central Sales Tax or even sale of goods, occurs where the goods are appropriated to the contract.

In this case, the specifications and the invoices issued in pursuance to the contract are sufficient to hold that the goods that moved from outside Delhi for execution of the works contract are inter-state sale and as such cannot be taxed under the Delhi Sales Tax – the Tribunal order is upheld and Revenue appeal is dismissed

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Service Tax – Valuation – meaning of term ‘consideration’ - Whether the value of construction material as provided free by the service recipient to the service provider-appellant, for the purpose of providing services under the category of commercial or industrial construction services is required to be added in the value of the services – benefit of Notifications No.15/2004-ST dated 10.09.2004 

HELD - the valuation of the taxable service is the value received by the service provider as “consideration’ from the service recipient for the service provider whether monetary or otherwise. However, it should have flown from service recipient to service provider in the manner that it should accrue as the benefit of the service provider - the construction material provided by the service recipient to the service provider-appellant for construction of Chimney and chimney elevator package though has to be incorporated into the construction at the time when service provider is providing the construction services to the recipient. But the fact remains is that such material provided by the service recipient is to be used for service recipient only.

Hence no benefit has accrued to the service provider due to the said free construction material. Therefore, the said construction material would not constitute a non-monetary consideration - the gross amount charged shall include the construction material if and only if some value is charged for the same.

Hence, the construction material supplied by the service recipient free of cost, the amount thereof is not the gross amount taxable value as not being charged. However, for the construction material as used by the appellant, is liable to take the benefit of Notification No.15/2004-ST - extended period of limitation couldn’t be invoked against the assessee - the impugned SCN as being barred by time and set aside – assessee appeal stands allowed

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We are Ahmedabad based professional consulting firm. We are providing various services to Construction, Real Estate and Project Companies in various areas like Indirect Taxation – Service Tax & Multi state VAT consultancy, ERP implementation, Site & Management audit, Designing Tender & other related contractual documents etc.