The Telangana Authority of Advance Ruling (AAR) ruled that 18% GST on Design, supply, installing, testing & commissioning of train collision avoidance system in locomotives.
The applicant, Medha Servo Drives are manufacturers of electronics equipment for locomotives and coaches for Indian Railways and Metro Railways. They have submitted that they have entered into contract with south central railway for design, supply, installing, testing & commissioning of train collision avoidance system in locomotives. That as per the agreement they have to supply multiple items and provide services including annual maintenance services with the service code 9954.
The applicant has sought the advance ruling on the issue whether their supplies made for the above purchase order amounts to composite supply and the rate of tax on the same. Hence this application.
The letter of acceptance (LOA) issued by south central railway the contract is for design, supply, installation, testing and commissioning of onboard TCAS equipment in locomotives and track side. The LOA also contains a schedule of quantities mentioning various items to be utilized quantity and value wise in it. There is also a payment schedule for the contract. There is a specific clause 6 regarding GST which mentions that the contractee i.e., south central railway shall reimburse the GST if a higher rate is determined even after completion of the contract.
The Ministry of Railways, Government of India have published a handbook on Train Collision Avoidance System (TCAS) in April 2021 wherein the composition and working of the TCAS system has been given in detail. It is expressively stated that this system has been designed and implemented to prevent ‘Signal Passing at Danger (SPAD) cases, unsafe situations arising due to over speed and train collisions in station as well as block sections’. It is mentioned in the introduction to overview that this includes automatic break application and display of information like speed, location, distance to signal ahead, signal aspects etc., in the loco pilots cabin and generation of auto & manual SOS messages from LOCO in case of emergency situation.
The coram of Raghu Kiran and S.V. Kasi Visweswara Rao held that the applicant against the letter of acceptance(LOA) of the South Central Railway is a composite supply and the rate of tax applicable is the rate at which the principal supply has to be taxed i.e. Electrical signalling equipment with HSN code ‘8530’. This commodity was made taxable at the rate of 9% under CGST & SGST respectively vide Notification No. 41/2017 dated: 14.11.2017. Therefore the supply of Train Collision Avoidance System (TCAS) is taxable at the rate of 9% under CGST & SGST respectively.
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