Tax invoice to be issued in accordance with Section 31 of the CGST Act, 2017, in case of ‘composite supply' where principal supply is supply of goods. 

Facts of the case:

• The applicant, M/s Surya Roshni LED Lighting Project Limited is engaged in the business of executing Greenfield street lighting projects.
• The Government of Odisha, through the Housing and Urban Development Department, the Urban Infrastructure Development Fund, and the Directorate of Municipal Administration has decided to develop an energy-efficient street lighting system covering new and upcoming road stretches in Greenfield areas across 21 Urban Local Bodies (ULBs), including in the cities of Balasore, Bhadrak, Jajpur, Baripada on a Public-Private Partnership basis.
• The Applicant is entitled to receive a consideration, in the form of Capital Subsidy, being 90% of the total capital expenditure incurred by the Applicant in supplying, installing and commissioning of the equipment. The balance 10% of the total capital expenditure along-with O&M fees is receivable as ‘Annuity fees’, and is recovered by the Applicant by raising quarterly invoices on the ULBs. After the Greenfield Public Street Lighting System has been commissioned, the Applicant is required to undertake the Operation and Maintenance of the system till the end of the term of the Agreement.

Issue:

• Whether Capital Subsidy (90 percent of Project Capital Expenditure) received by the Applicant as per SIOM Agreement and Escrow Agreement from Odisha Government/ULBs for the Green Field Public Street Lighting System in the State of Odisha is not liable to GST and if liable to GST, then at what rate of GST.
• What is the GST rate for the balance 10% of the Project Capital Expenditure and O&M Fees received as Annuity Fee over the period of 7 years by the Applicant as per SIOM Agreement considering the Sl. No. 3(vi) of the notification No. 11/2017 Central Tax (Rate), dated June 28, 2017 as amended by Notification No. 31/2017 Central Tax (Rate), dated October 13, 2017 and corresponding notifications of Odisha State Tax Rate as amended. 
• What shall be the time for raising GST Invoices for Capital Subsidy and Annuity Fee (consisting of 10% of Project Capital Expenditure and O&M Fee) payable in 7 years.

Ruling of AAR: The Authority of Advance Rulings, Orissa ruled that Capital Subsidy (90 percent of Project Capital Expenditure) received by the Applicant is liable to GST. The GST will have to be paid on the goods at the appropriate rate after classification under the appropriate
heading.

The AAR further ruled that the supply being undertaken or proposed to be undertaken by the applicant would qualify to be a supply of ‘composite supply’ in terms of the definition under Section 2(119) of the Central Goods and Services Tax Act, 2017, where the principal supply is the supply of goods and is not the supply of service’. Therefore, the question of the applicability of the concessional rate of tax in terms of Notification No. 11/2017- Central Tax (Rate), dated June 28, 2017, and as amended does not arise. The GST will have to be paid on the goods
at the appropriate rate after classification under the appropriate heading.

Further, since in the present case there is a ‘composite supply' where the predominant supply/principal supply is ‘supply of goods', AAR is of the opinion that the applicant should raise invoice as per the provisions of Section 31 of the CGST Act, 2017. 

To read the complete judgment 2021 Taxo.online 1427