QUESTION

1. M/s. D ltd has got Site office in Gujarat and Plant at Tamilnadu. M/s. D Ltd is giving Purchase order for Suppy, Installation and commissioning of Plant to be installed at Tamilnadu to M/s. A Pvt ltd of Gujarat. The amount payable as 25% Advance balance in 4 monthly instalments after commissioning the plant. The Cost of entire supply, Installation and commissioning of Plant and training of staff is Rs. 100.00 Lacs.
M/s. A Pvt Ltd. is subsidiary company of M/s. A Inc (USA company) who is dealing in such kind of Plants. M/s.A Ltd (Indian Company) in turn Places Two orders to M/s. A Inc (USA company) as follow.
§ Order for supply of Material for Plant, And other order for
§ Order for Supply of Services for commissioning and installation at client’s site (Tamilnadu)
Now what are the precautions to be taken for OUTPUT tax liability and availability of INPUT tax Credit.
As per my understanding it should be as follow.
• How to discharge OUTPUT liability.
1. M/s. A Pvt Ltd has to obtain GST registration in Tamilnadu to avail ITC for all purchase and services availed at site.
2. M/s. A Pvt ltd if they are getting Purchase Order from M/s. D Ltd (Gujarat Office) has to charge and pay IGST at the time of receipt of advance or at the time of issue of invoices whichever is earlier as the said contract is works contract and considered as service. (GST is applicable on Advance Receipt in case of Supply of Service)
3. M/s. A Pvt ltd are getting Purchase Order from M/s. D Ltd (Tamilnadu Office) has to charge and pay CGST and SGST at the time of receipt of advance or at the time of issue of invoices whichever is earlier as the said contract is works contract and considered as service. (GST is applicable on Advance Receipt in case of Supply of Service)
How to discharge RCM INPUT liability and ITC availability
1.M/s. A Pvt Ltd (India) is importing Material from M/s. A Inc (USA Company) and paying IGST at the time of Import and claiming ITC for the same.
Further as per the second contract M/s. A ltd is paying for Technical consultancy to M/s. A Inc (USA Company) on which IGST is to be paid under RCM as the services are utilised in INDIA and can claim ITC for the same.
Further M/s. A Pvt Ltd can claim ITC of whatever Inputs of Material and services utilised from local market at plant site in Tamilnadu. (Like Consumables, Hotel accommodation etc) (Provided M/s. A Ltd is obtaining GST registration at plant site)
Now my questions are as follow.
Q-1 Whether above mentioned interpretation is having any issues left to be addressed?
Q-2 Is it desirable/advisable to get PO from M/s. D Ltd from Tamilnadu instead of Gujarat office?
Q-3 Whether split of order in Material and Services given to M/s. A Inc (USA company) can attract any issue under GST?
Q-4 what is the best way to execute this transaction in your opinion.

ANSWER

All the points are well covered in your planning. It can further be improved with the following :

Please note A Ltd is to be registered in Tamilnadu to take credit of CGST and SGST.and it will charge CGST and SGST on number of supplies made to D Ltd.Even there can be some direct sourcing of material and services by the D Ltd in Tamilnadu by debiting it to A ltd.orotherwise.It happens some time that some key material are to be procured by the company(D Ltd) because of tender prices or licensing restriction etc.

Therefore D Ltd should take registration in Tamilnadu (it seems already registered in Tamilnadu) so that the ITC of any Invoice(intra state supply) of CGST and SGST is not lapsed.

All the billing should be to the D Ltd Tamilnadu.

The D Ltd should give separate PO for material and service to A Ltd in order :
(1) To avoid any dispute of the rate of tax for the items attracting a higher rate of 28%
and
(2) To postpone the tax liability on advance amount given for goods .which is included in 25% of contract amount. (Reply dt. 08/07/2021)