Page 66 - GSTL_20th August 2020_Vol 39_Part 3

280 GST LAW TIMES [ Vol. 39
“(52) “goods” means every kind of movable property other than money
and securities but includes actionable claim, growing crops, grass and
things attached to or forming part of the land which are agreed to be sev-
ered before supply or under a contract of supply”
“(102) “services” means anything other than goods, money and securities
but includes activities relating to the use of money or its conversion by cash
or by any other mode, from one form, currency or denomination, to another
form, currency or denomination for which a separate consideration is
charged”
(emphasis supplied)
6.8 In light of the above background and definitions, it is submitted
that LIH event is entirely contingent and outside the normal stream of supplies
under the Agreement, arising when capital goods in the form of equip-
ment/tools deployed for the drilling services are irretrievably lost. In such a case,
reimbursement towards LIH equipment is paid by ONGC to the Applicant, as
part of a compensatory mechanism. Further, there is no contemplation of trans-
ference of title to the LIH equipment, and in fact, the reimbursement for LIH
equipment is only made after an irretrievable loss of the said goods and conse-
quently, there is no supply of ‘goods’ in relation to the reimbursement received
towards LIH equipment.
6.9 However, as the definition of services is wide enough to cover to
anything other than goods, the reimbursement received towards LIH equipment
would get covered under the broad definition of a supply of ‘services’ under Sec-
tion 7 of the CGST Act.
B. Classification and the rate of GST applicable on supply of goods and
services
6.10 Having stated that the reimbursement received towards LIH
equipment would qualify as supply of service, it is pertinent to determine the
classification of service for discharging GST.
6.11 In this case, it is submitted that there are two possible classifica-
tions viz.
(a) “agreeing to tolerate an Act” as per clause 5(e) of Schedule II of the
CGST Act; or
(b) “composite supply of works contract service” (as a part of main ser-
vice under the Contract)” as per clause 6(a) of Schedule II of the
CGST Act.
6.12 As per clause 5(e) of the Schedule II of the CGST Act, agreeing to
the obligation to refrain from an act, or to tolerate an act or a situation, or to do
an act is considered as supply of service.
The relevant provision in this regard is extracted below :
“5. Supply of services
The following shall be treated as supply of services, namely :-
…
(e) agreeing to the obligation to refrain from an act, or to tolerate an act or
a situation, or to do an act”
6.13 Further, in case of supplies comprising one or more elements, the
taxability thereof is to be determined in terms of the principles governing ‘com-
posite supplies’ and ‘mixed supplies’, the relevant provisions in relation to which
are set out below.
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