Page 105 - GSTL_23rd April 2020_Vol 35_Part 4

2020 ] IN RE : KARNATAKA STATE ELECTRONICS DEVELOPMENT CORPORATION LTD. 431
(e) Even if the transaction amounts to composite supply, it would not
be works contract and the principal supply would be energy per-
formance service.
(f) Consideration/remuneration is computed purely on the basis of en-
ergy savings and performance, on monthly basis.
(g) The applicant is liable for penalty in case lights are not functioning,
LUX level is not maintained, minimum guaranteed savings not met.
(h) The activity of street lighting is a function of municipali-
ty/corporation, but is outsourced to the applicant, which falls under
Article 243W of the Constitution of India.
(i) The goods (LED lights, etc.,) are not considered as saleable invento-
ry in the books of account of the applicant, but are capitalised as
fixed assets.
6.2 The applicant, with regard to rate of GST applicable, contends that
their activity, being a pure service other than works contract, squarely gets cov-
ered under Entry No. 3 of Notification 12/2017-Central Tax (Rate), dated 28-6-
2017, as amended and hence is entitled to the benefit of exemption. The applicant
further contends that they fulfil all the required conditions to claim the benefit of
exemption that -
(i) they provide service to the local authority i.e. TMC;
(ii) The service being provided by them squarely falls under the func-
tions entrusted to the panchayat under Article 243W of the Consti-
tution of India;
(iii) The activity is a pure service other than works contract or composite
supply involving supply of goods.
6.3 The applicant further contends that if the benefit of Entry 3 of the
notification supra is not applicable to them or if their supply is considered as a
composite supply, then also they would be entitled to the benefit of Entry 3A, for
the following reasons.
(i) The value of supply of goods, if at all, is less than 25% of the value
of the composite supply.
(ii) The goods would vest with the TMC, only at the end of the contract
i.e. after 7 years & at that time the value of the goods become zero,
due to depreciation.
(iii) Rule 43 of CGST Rules, 2017 prescribes the life of all capital goods
as five years whereas the impugned contract is for 7 years and
hence the value of the supply of goods at the end of the tenure is
practically zero.
6.4 The applicant with regard to time of supply, in case their activity is
treated as supply of service, contends that their contract is in the nature of ‘con-
tinuous supply of service’ in terms of Section 2(33) of CGST Act, 2017, as the said
service is being provided for a period exceeding 3 months continuously. Further
in terms of Section 31(5) of the CGST Act, 2017, invoice for such contracts are re-
quired to be issued in the following sequential manner :
 Due date of payment as per contract, where due date is ascertaina-
ble.
 Actual receipt of payment where due date is not ascertainable.
GST LAW TIMES  23rd April 2020  225