Works Contract in different State – Separate GST registration not Compulsory

SUMMARY OF AN ADVANCE RULING BY – AUTHORITY FOR ADVANCE RULING, KARNATAKA – IN CASE OF M/S. T AND D ELECTRICALS

Explanatory Video –

Summary –

1. Applicant’s statement of relevant facts:
   • M/s. T & D Electricals – The Applicant are registered in Jaipur, Rajasthan. They have been awarded a contract by M/s. Shree Cement Ltd., Rajasthan for works contract at township, in the state of Karnataka.
   • The scope of work of the contract include complete electrical & instrumentation jobs; installation, testing and commissioning at township. The job involves supply of material and installation, testing and commissioning of the same. The basic value of the contract is ₹ 297.85 lacs.
   • The contractor i.e. applicant herein have to arrange all required tools and tackles with manpower/electrician/technician with required material as per Annexure A of the contract.
   • The invoices have to be addressed to Karnataka Cement Project (a unit of Shree Cement Ltd.,), Karnataka, PIN-585222 and the GSTIN of Karnataka is required to be mentioned in the invoices.
   • The contractor i.e. applicant herein does not have any premises in Karnataka as M/s. Shree Cement Ltd., will only provide temporary small space for office & store in their premises without any written documents.
2. Seeking advance ruling in respect of the following questions:
   • Whether separate registration is required in Karnataka state? If yes, whether agreement would suffice as address proof since nothing else is with the assesse and service recipient will not provide any other proof?
   • If registration is not required in Karnataka state and if we purchase goods from dealer of Rajasthan and want to ship goods directly from the premises of dealer of Rajasthan to township at Karnataka then whether CGST & SGST would be charged from us or IGST by the dealer of Rajasthan ?
     If registration is not required in Karnataka state and if we purchase goods from dealer of Karnataka to use the goods at township at Karnataka then whether IGST would be charged from us or CGST & SGST by the dealer of Karnataka?
   • What documents would be required with transporter to transit/ ship material at Karnataka site from asdasddealer/ supplier of Rajasthan and in case of dealer/ supplier is of Karnataka. Advance ruling may kindly be issued in case of registration is required or not required in both the situation?

DISCUSSION & FINDINGS:

• Section 22 of the CGST Act 2017 is relevant to registration and stipulates that every supplier shall be liable to be registered in the state from where the said supplier makes the taxable supply of goods or services or both, subject to the threshold limit of the aggregate turnover in a financial year.
  • In the instant case, the applicant intends to supply goods or services or both from their principle place of business, which is located in Rajasthan. The applicant has only one principle place of business, for which registration has been obtained and does not have any other fixed establishment other than the principle place of business, as admitted by the applicant. Therefore the location of the supplier is nothing but the principle place of business which is in Rajasthan. Thus there is no requirement for a separate registration in Karnataka for execution of the contract referred supra.
  • The second question The first part of the said question (part a) is related to the situation where the goods are purchased by the applicant from the dealer of Rajasthan and shipped directly to the township (location of the project) in Karnataka, if separate registration is not required in Karnataka.
  • In this situation the supplier i.e. dealer in Rajasthan and the recipient of goods i.e. the applicant, both are situated in the same state of Rajasthan and hence the impugned supply becomes intra-state supply, in terms of Section 8 of the IGST Act 2017 and the said supply gets covered under Bill to – Ship to transaction, in terms of Section 10(1)(b) of IGST Act 2017. Thus CGST & SGST has to be charged by the dealer in the relevant invoice.
  • The second portion (part b) of the said question is related to the situation where the goods are purchased by the applicant from the dealer of Karnataka and shipped directly to the township (location of the project) in Karnataka, if separate registration is not required in Karnataka.
  • In this situation the supplier i.e. dealer is situated in Karnataka & the recipient of goods i.e. the applicant, is situated in the state of Rajasthan and hence the impugned supply becomes inter-state supply, in terms of Section 7(1) of the IGST Act 2017. Further the said supply gets covered under Bill to – Ship to transaction, in terms of Section 10(1)(b) of the IGST Act 2017. Thus IGST has to be charged by the dealer in the relevant invoice.
    The third question is related to the documents required to be carried by the transporter of goods, when purchased from (a) the dealer in Rajasthan and (b) the dealer in Karnataka and shipped to Karnataka Cement Project (a unit of Shree Cement Ltd.,) in Karnataka.
  • The impugned question does not gets covered under the issue/s on which the advance ruling can be sought under CGST Act 2017, in terms of Section 97 (2) of the said Act. Therefore no ruling is given to this question.

RULING

1. The applicant need not obtain a separate registration in Karnataka, to execute the project in Karnataka. However, they are at liberty to obtain the said registration, if they are able & intend to have a fixed establishment at the project site in Karnataka.
2. (a) The dealer in Rajasthan has to charge CGST & SGST when the goods, purchased by the applicant, are shipped to project site in Karnataka, under bill to ship to transaction in terms of Section of the IGST Act 2017.
   (b) The dealer in Karnataka has to charge IGST when the goods, purchased by the applicant, are shipped to project site in Karnataka, under bill to ship to transaction in terms of Section 10(1)(b) of the IGST Act 2017.
3. No ruling is given on this question as it does not cover under Section 97(2) of the CGST Act 2017.