Works Contract Service of laying pipelines in Bangladesh is not Export and 18% GST applicable: AAR [Read Order]

The West Bengal Authority of Advance Ruling (AAR) ruled that the works contract service undertaken by the applicant of laying pipelines in Bangladesh is not export and 18% tax applicable.

The Government of India and The Government of Bangladesh have signed a Memorandum of Understanding for construction of an oil pipeline from Siliguri in India to the depot of the Bangladesh Petroleum Corporation (BPC) at Parbatipur in Bangladesh.

The work will be monitored by the Ministry of External Affairs (MEA), Government of India, which has engaged M/s Numaligarh Refinery Ltd (NRL) as the implementation agency.

The NRL has awarded the applicant, M/s Maninder Singh the contract for the installation of the pipeline by HDD method.

The applicant has sought advance ruling on various issues.

Firstly, whether the work of  laying pipelines in Bangladesh is supply works contract service.

Secondly, whether the supply of service to NRL for the above construction in Bangladesh is an export and exempt under the GST Act.

Thirdly, whether the applicant is entitled to input tax credit on its inward supplies for the service rendered in the construction of Bangladesh portion of the pipeline on behalf of NRL.

Fourthly, whether the applicant is liable to pay tax on goods or services procured locally within Bangladesh for the purpose of construction of Bangladesh portion of the pipeline on behalf of NRL

Fifthly, whether the applicant is entitled to input tax credit on procurement of such goods or services in Bangladesh used in the construction of Bangladesh portion of the pipeline on behalf of NRL.

Lastly, if all the queries come out with responses that lead the applicant taxable, then what will be the proper method of valuation of tax.

The two-member bench consisting of Susmita Dey and Parthasarthi Dey ruled that the applicant’s supply is contract service, which is not an export of service.

“The applicant’s service is taxable at the rate of 18% in terms of Entry No. 3(iii)(c) of Notification No. 11/2017 – CT (Rate) dated 28/06/2017, as amended from time to time,” the AAR said.

The AAR further ruled that the applicant is entitled to input tax credit on the GST paid on procurement.

The Authority observed that as the applicant has not paid GST on purchasing goods or services in Bangladesh used in the construction of the pipeline, the question of the input tax credit does not arise.

“GST shall be payable on the consideration receivable for the applicant’s service,” the AAR said.