Whether Supply of SCADA System to RVNL is eligible to charge rate 12% under Entry No. 3 (v) (a) of Notification No. 11/2017 — Central Tax (Rate) dated 28/06/2017 or it should be 18%
Applicant Name: ABB lndia Ltd (GST AAR West Bangal)
Facts of the case:
- The Applicant is stated to be engaged in the activity of providing technological and system solutions, including electrification, industrial automation, motion and robotics, data management and production control systems. Rail Vikas Nigam Ltd (hereinafter RVNL) has awarded it the contract for ‘extension of SCADA for Noapara – Dakshineswar Metro Corridor’ (SCADA stands for Supervisory Control and Data Acquisition).
- Applicant describes the SCADA system and states that 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 also Applicant refers to letter no. RVNL/KOL/EL/Metro/07/SCADA/1225 dated 22/08/2019 of RVNL awarding the contract for the supply referred to above and Scope of the supply.
- Applicant also submitted that his supply involves designing, engineering, manufacturing, site installation, cable laying, erection, testing, commissioning etc. The contract, therefore, involves supply of both goods and services. RVNL will release 30% of the payment only after the erection and commissioning are completed. That the contracts for 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.
- The Applicant further submits that erection and commissioning of RTUs at a specified location for a metro project is a work of permanent nature. The cables laid cannot be shifted without causing substantial damage. Such shifting will render such cables incapable of further use. In short, SCADA System installed is intended to be permanently attached to earth and cannot be removed without causing substantial damage to the goods attached to earth. Furthermore, the parts are so interlinked to constitute a functioning SCADA System that none can be moved separately. The composite supply, therefore, amounts to erection and commissioning of an immovable property and classifiable as works contract as defined under section 2(119) of the GST Act.
Findings and observations:
- Authority gone through the rate notification and also analyses the definition of work contracts which is defined in section 2(119) of the GST
- Authority also gone the submission that submits by the applicant . It is a composite supply of goods and services. However, such supply will be called works contract only if it amounts to erection and commissioning of an immovable property.
- Authority check that whether supply falls under the category of immovable property. In the present context, erection and commissioning of SCADA System involves attaching cables and other electrical equipment to the earth with no intention of removing or shifting them in foreseeable future. Moreover, the parts are so interlinked to constitute a functioning SCADA System that none can be moved separately or without causing substantial damage to the goods attached to earth. The Applicant’s supply thus amounts to erection and commissioning of an immovable property involving transfer of property in goods in its execution and, therefore, works contract within the meaning of section 2 (119) of the GST Act.
- Authority also refer the definition of original work contract and found that it supply satisfy this test also. Only one issue is left which is whether supply to RVNL qualifies as a supply pertaining to railways, including monorail and metro?
- SCADA, in the context of the Applicant’s supply to RVNL, is the system that controls and monitors the electrical network of the metro, enabling the operator to issue suitable commands to be followed in the operation of the metro. Using the SCADA interface, the operator sends instructions to the Remote Terminal Unit, which accordingly controls the signals, lights and other electrical equipment of the metro. It is, therefore, a power supply and distribution network installed for the purpose of the operation of the metro. It, therefore, is a supply pertaining to railways, including metro, as defined under section 2 (31) (c) of the Railways Act, 1989
Final Conclusion or 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.
Thus Applicant should charge a rate of 12% and not of 18%