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Supply of UPS systems with installation testing and commissioning would be a composite supply

AAR gave an important ruling dated 4th October,2019 regarding classification of goods and services provided by the applicant in a case of Vertiv Energy [2019] 110 179 (AAR-Maharashtra) which is discussed as below:

Facts of the Case
  • Applicant engaged in the manufacture of various types of UPS systems, which serve as an alternate source of power for a specific period of time in the event of power failure. The applicant also supplies installation commissioning and maintenance and other services to its customers.
  • The applicant entered into a contract with Delhi Metro Railway Corporation (“DMRC”) for Supply, installation, testing, and commissioning of UPS systems
  • The applicant has submitted that the goods are supplied by the applicant from their Maharashtra GST registered premises, the services portion of the contract i.e. erection, installation and commissioning service are rendered by their New Delhi branch which is separately registered under GST law and also the consideration is also separately provided for the supply of goods and services.
Issue Involved
  • Whether the contract entered into with DMRC for supply, erection, installation, commissioning and testing of UPS system qualifies as a supply of works contract or not?
  • As per Section 2(119) of the CGST Act, 2017, unless the context otherwise requires, the term “works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract”.
  • Product provided by the applicant i.e. UPS systems cannot be said to result in the emergence of immovable property as it can be dismantled and moved to different locations without any damage and therefore contract for supply of UPS systems to DMRC does not qualify as a “Work Contract”.
  • It was observed that contract was assigned to Maharashtra office and not to the Delhi GST registration, thereby for taxation purposes, the entire contract is to be treated as a single contract only.
  • The major part of the contract is the supply of goods. i.e. UPS Units, etc. without these goods, the services of installation etc. cannot be performed by the applicant and therefore it was ruled that the said supply is a composite supply.
  • Thereby is this contract with DMRC it would be considered as a  supply of UPS classified under Heading 8504 chargeable to GST @ 18%.
Please click here for Ruling.


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