18% GST Payable On Supply Of Functional Cattle Feed Plant, Inclusive Of Erection, Installation, Commissioning: AAR

[29 March 2022] The Gujarat Authority of Advance Ruling (AAR) has ruled that the 18% GST is applicable on supply of a functional Cattle Feed Plant, inclusive of its Erection, Installation and Commissioning and related works.
The two-member bench observed that the Cattle Feed Plant once installed and commissioned in the premises is transferred to the customer, it involves transfer of property. The Plant installation comprises cabling and fastening to earth/ foundation and all the equipment/parts are interlinked to constitute a functioning Plant that it cannot be moved as such without dismantling. Supply of a functional Cattle Feed Plant, inclusive of its Erection, Installation and Commissioning and related works is covered under work contract services.
The AAR noted that the issue hinges on the ‘test of permanency’ to determine the nature of subject supply of an installed, functional and operational plant. In simple and precise words, the ‘test of permanency’ has been enunciated by the Supreme Court in the case of Municipal Corporation of Greater Bombay & ors. v. Indian Oil Corporation Ltd., wherein one of the questions considered was whether a petrol tank, resting on earth on its own weight without being fixed with nuts and bolts, had been erected permanently without being shifted from place to place. It was pointed out that the test was one of permanency; if the chattel was movable to another place of use in the same position or liable to be dismantled and re-erected at the later place, if the answer to the former is in the positive it must be a movable property but if the answer to the later part is in the positive then it would be treated as permanently attached to the earth.
The AAR observed that, “it is fact on record that an erected Cattle Feed Plant as such cannot be shifted from one place to another, i.e., to say that all the different equipment, machines parts and accessories, electrical systems are required to be dismantled and then only the equipment can be shifted,” the AAR ruled.