AAR rules on taxability of consideration towards inland / local transportation and ancillary services like in-transit insurance, loading / unloading and delivery of goods supplied under separate contract, charged under freight bill to contractee; Notes that applicant seeks to undertake supply of tower packages to Power Grid Corporation of India under two separate sets of contracts – first contract includes ex-works supply of all equipment and materials such as transmission line towers, spares and accessories thereof, whereas second contract involves supply of allied services like erection of towers, testing and commissioning, including transportation, in-transit insurance etc.; Observes that although goods to be supplied involve movement and / or installation at site, the first contract does not include provision and cost of such transportation and delivery, in other words, the first contract has “no leg” unless supported by second contract.
Further, the two contracts are linked by a cross fall breach clause and therefore, notwithstanding the break-up of contract price, they must be construed as a single source responsibility contract, observes AAR while stating that composite nature is clear from the clause that defines satisfactory performance of first contract (supply of goods) as the time when goods so supplied are installed and finally commissioned in terms of second contract.
Accordingly, holds that price components of both contracts including that for transportation, in-transit insurance etc. should be clubbed together to arrive at value of composite supply of works contract, as defined u/s 2(119) of CGST Act, and taxed at 18% in terms of Sl. No. 3(ii) of Notification No. 11/2017-Central Tax (Rate) : West Bengal AAR