Gujarat GST AAR: Tax Applicable on High Seas Sale Goods Used in EPC Projects Despite IGST Payment

The Gujarat Authority for Advance Ruling (AAR) ruling said that imported goods sold under a High Seas Sale ( HSS ) agreement and later used in a project initiated through an Engineering, Procurement, and Construction (EPC) contract will draw Goods and Services Tax ( GST ), even if Integrated Goods and Services Tax ( IGST ) was already paid at the time of import of the goods.

The Indian Oil Corporation Limited ( IOCL ) had invited bids for execution of the EPC Package ( EPCC-09 ) for the Catalytic De-Waxing Unit at their Gujarat Refinery with the successful bidder contractually liable to execute the work on a lump sum turnkey basis single point responsibility.

The petitioner Thyssenkrupp Industrial Solutions (India) Pvt. Ltd., (Thyssenkrupp) on the successful bid, was given an EPC contract by Indian Oil Corporation Limited ( IOCL ) for the execution of a Catalytic De-waxing Unit at IOCL’s Gujarat Refinery.

As contractual duties stipulated by the Thyssenkrupp imported certain equipment and supplied it to IOCL under an HSS agreement, a transaction where ownership of the goods is transferred to the buyer while still in transit before entering Indian customs territory.

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The existing application for Advance Ruling has been asked via Thyssenkrupp to discover whether the imported goods already within IGST can be levied to tax again when utilized in an EPC works contract and whether the value of the same imported goods will be excluded from the taxable value of EPC contract.

CA S.L. Kapadia along with Rajesh and Lalitha Vishwanath appearing for Thyssenkrupp furnishes their submissions that IOCL being the importer had paid IGST during customs clearance and therefore the same goods shall not be taxed again under GST when incorporated into the EPC contract.

The two-member Bench of the Gujarat Authority for Advance Ruling formed by SGST Member Kamal Shukla and CGST Member P.B. Meena rejected the petitioners’ submissions ruling that the EPC contract is an indivisible works contract, which is imposed to tax as a composite supply of services under GST law.

Subsequently, the Bench mentioned that even if the imported goods were initially sold under HSS and levied to tax separately at customs, they proceed to become part of the overall EPC contract once imported into the project. Hence the works contract will comprise the whole value of the project along with that of the imported goods for the objective of GST computing.