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Thursday, 14 March 2019

Installing & Maintaining Surveillance system to be treated as composite supply of works contract under GST

Allied Digital Services Ltd. In re - [2019] 103 taxmann.com 123 (AAR - MAHARASHTRA)

    The dealer has entered into agreement with Government of Maharashtra to set-up comprehensive CCTV based surveillance system on 28.10.2013 for development, implementation and maintenance of the system for the city of Pune and Pimpri-Chinchwad. 

The issues before authority are –whether there is a liability to pay GST on the amount received post- GST for supply of services as per contract executed prior to GST implementation and if the amount is held to be taxable, then at what rate tax should be paid?   

To answer both the questions it is necessary to determine the nature of activity carried out by the applicant. 

The liability of the contractor-applicant does not end with supply of goods but it extends to the successful testing, commissioning and maintenance of the system. 

The set-up of a comprehensive CCTV based city surveillance system for the city does result into installation/commissioning of immovable property wherein transfer of property in goods is involved in the execution of the contract and, thus, the 'Surveillance Project' is a works contract as defined in Sub-Section 119 of Section 2 of the GST Act and the supply of services as per 6(a) of Schedule II of the GST Act and, therefore, the amount received for the supply of services post -GST is taxable under the provisions of GST Act.   

The activity of the applicant is a composite supply of Works Contract, not being original work which is covered under Notification 11/2017 dated 28.06.2017 as amended by Notification No. 1/2018 dated 25.01.2018 and would attract 18% GST (9% each of CGST and MGST)

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