Name of the Party: M/s S P Singla Constructions
Pvt. Ltd.
Name of the Ruling
Authority: Gujarat
Appellate Authority for Advance Ruling (GAAAR), GST
Ruling No.: GUI/GAAAR/APPEAL/2024/07
Date of Ruling: 30.12.2024
Summary of Ruling:
o
The case
pertains to mobilization advance received by M/s S P Singla
Constructions Pvt. Ltd. for an EPC contract awarded by the Ministry
of Road Transport and Highways (MORT&H).
o
The Gujarat
Authority for Advance Ruling (GAAR) ruled that GST is payable at the
time of receipt of the advance.
o
The
appellant challenged the ruling, arguing that GST should be applicable
only when the advance is adjusted against invoices for completed work.
o
The GAAAR
upheld the GAAR ruling, confirming that GST is payable on receipt of
mobilization advance.
Facts of Advance
Ruling:
o
The
appellant undertakes EPC (Engineering, Procurement, and Construction)
contracts for government projects.
o
As per
the contract, MORT&H provides an interest-bearing mobilization advance
equal to 10% of the contract value to assist in resource mobilization.
o
The advance
is secured by a bank guarantee (BG), and repayments are adjusted
proportionally against invoices raised during project execution.
o
The
appellant records the mobilization advance as a liability in its books
and argues that it does not constitute a taxable supply at the time of receipt.
Question Raised:
o
What is
the time of supply for GST purposes on mobilization advance received
for construction services?
Submission Made by
Applicant:
o
The
mobilization advance is not in the nature of a taxable payment at the
time of receipt; it is merely a financial arrangement.
o
GST
should be payable only when the advance is adjusted against invoices for
construction services.
o
The
advance should be treated as a deposit, which is excluded from the
definition of consideration under Section 2(31) of the CGST Act, 2017,
unless applied as payment.
o
The requirement
to furnish a bank guarantee (BG) indicates that the advance is not an
immediate consideration for services.
o
The
appellant cited Notification No. 66/2017-CT dated 15.11.2017, which
exempts GST on advance payments for goods, arguing that a similar
principle should apply to services.
Relevant Sections:
o
Section 2(31) of the CGST Act, 2017: Defines consideration for supply,
excluding deposits unless applied as payment.
o
Section 13(2) of the CGST Act, 2017: Specifies time of supply for services,
which is the earlier of invoice issuance or payment receipt.
o
Section 2(119) of the CGST Act, 2017: Defines works contracts as supply of
services.
o
Schedule II, Sr. No. 6(a) of the CGST Act, 2017: Classifies works contract as
a supply of services.
Discussion and
Findings of Ruling Authority:
o
Mobilization advance qualifies as "consideration" under Section 2(31) of the
CGST Act, 2017 because it is eventually adjusted against invoices
for services.
o
Time of supply is the date of receipt of the advance, as per Section 13(2) of the
CGST Act, 2017.
o
The requirement
of a bank guarantee (BG) does not change the nature of the advance; it
remains a prepayment for services.
o
The provisions
applicable to goods (Notification No. 66/2017-CT) do not extend to
services; hence, no exemption is available.
o
The
appellant's reliance on past service tax rulings was rejected, as GST
law operates differently.
Final Ruling and
Conclusion:
o
GST is payable on receipt of mobilization advance as per Section 13(2) of the
CGST Act, 2017.
o
Mobilization advance cannot be treated as a mere deposit, as it is eventually adjusted
against services.
o
Bank guarantees do not affect the taxability of the advance.
o
The appeal was rejected, and the original GAAR ruling was upheld.
Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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