In Re: M/s. Sandvik Asia Pvt. Ltd.
GST
2018 (11) TMI 1348 – AUTHORITY FOR ADVANCE RULING, RAJASTHAN – 2018 (19) G. S. T. L. 683 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, RAJASTHAN – AAR
Dated:- 12-10-2018
AAR No. RAJ/AAR/2018-19/21
GST
NITIN WAPA AND HEMANT JAIN, MEMBER
Present for the applicant: Shri Nitin Vijayvargiya, (Authorised representative)
Note: Under Section 100 of the CGST/RGST Act 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of CGST/RGST Act 2017, within a period of 30 days from the date of service of this order.
The Issue raised by M/s. Sandvik Asia Pvt. Ltd. {hereinafter the applicant} is fit to pronounce advance ruling as it falls under ambit of the Section 97(2) (a)(e) and it is given as under:
a. Classification of any goods or services or both;
e. Determination of the liability to pay tax on any goods or services
Further, the applicant being a registered person,
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y its overseas group entities which are imported by the customers into India.
1.2. With respect to after sales support, the Applicant provides maintenance services for the imported equipment which includes repair and replacement of parts and tools. The maintenance services are provided for the equipment post issuance of commissioning certificate. The maintenance services are rendered on the equipment for a specific period as agreed with the customer from the commencement of mining operations depending upon the number of hours the equipment are operational or the quantum of output ton produced by the equipment during the equipment life cycle.
1.3. In respect of the supply of part under the proposed agreements, the Applicant would supply parts falling under multiple GST rates such as 12%, 18%, 28%, etc.
1.4. The Applicant intends to execute an agreement for providing maintenance services to prospective customers for equipment located at various sites in the state of Rajasthan.
2. QUE
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shall be the relevant place of supply and type of tax which needs to be discharged? (i.e. CGST & SGST or IGST).
3. THE APPLICANT's INTREPRETATION:-
a. As per Section 2 (30) of GST Act, “composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.
b. As per Section 2 (74) of GST Act, “mixed supply” means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply.
c. As per Section 2 (90) of GST Act, “principal supply” means the supply of goods or services winch constitutes the predominant element of a composite supply and to which any other supply forming part of that composite
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t the maintenance services are required to be performeg, accordingly, depending on the requirements for performing the services, the Applicant would be supplying goods or services which could vary on each equipment.
g. Thus, it is clear that the main activity performed by the Applicant would be in respect of providing maintenance services ensuring uninterrupted operation of equipment irrespective of the quantum of goods required for the said purpose.
h. Therefore, it could be said that the supply of spares or other goods for providing maintenance services would be incidental or ancillary to the repair or maintenance services to be provided under the agreement.
i. In order to classify any activity as a composite supply, it could be said that the following conditions are required to be fulfilled referring the definition under Section 2(30) of GST Act:
a) There should be two or more taxable supplies of goods or services or both;
b) The taxable supplies should be naturally bundled i
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ble supplies should be naturally bundled in the ordinary course of business.
In order to understand whether any service is naturally bundled or not, it is important to refer to the Education Guide issued by the Central Board of Excise and Customs (CBEC”) now renamed as Central Board of Indirect Tax and Customs ('CBIC'). Para 9.2.4 of the Education Guide mentioned the following:
“Whether services are bundled in the ordinary course of business would depend upon the normal or frequent practices followed in the area of business to which services relate.”
The nature of the various services in a bundle of services will also help in determining whether the services are naturally bundled in the ordinary course of business. If the nature of services is such that one of the services is the main service and the other services combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main service. Referring to the scope of work to be
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in the agreement. Hence the quantum of goods used is not possible since it varies every time depending on the requirement of the equipment to ensure its guaranteed availability. Therefore the Applicant offers the maintenance services as a whole to its clients charging therein a fixed amount, on the basis of the time the equipment has been in operation or the output the equipment has produced.
iii. Single Price: As mentioned above, the Applicant provides these maintenance services as a single package which includes supply of goods and services. The pricing of these services is also fixed on the basis of the time the equipment is in operation or the quantum of output produced by the equipment. Hence, the quantum of goods consumed in providing these services would be irrelevant in respect of the price to be charged to the customers by the Applicant. Further, as discussed earlier, the Applicant may not be able to predict the type of goods that may be required for the maintenance of the eq
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Oxford dictionary has been “Conjunction: The action or an instance of two or more events or things occurring at the same point in time or space”
In the instant case, the supply of goods or services or both shall be occurring together or at the same point of time as the sole intention of the agreements is to ensure that the equipment is operating without any interruptions. Hence, it could be said that the supply of goods or services would be done by the Applicant in conjunction with each other.
d) One taxable supply should be a principal supply
The definition of principal supply states that the supply which constitutes the predominant element of a composite supply and to which the other supply is ancillary shall be the principal supply.
As the provision of maintenance services under the said agreements is with the objective to ensure smooth and uninterrupted operation of the equipment. Thus, the activity of providing maintenance and repair service would constitute the predominant e
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g in case of M/S GE Diesel Locomotive Private Limited vide order dated 16.05.2018 held that comprehensive maintenance services in relation to railway locomotives are a composite supply of maintenance services.
4. PERSONAL HEARING (PH)
4.1 In the matter personal hearing was given to the applicant on 08/ 10/2018 wherein Sh. Nitin Vijayvargiya, Authorised representative (AR) appeared on behalf of the Applicant. During the PH the AR reiterated the submissions already made in the application for advance ruling and requested that the case may be decided at the earliest.
4.2 The jurisdictional officer in his comments has submitted that “the said supply is a mixed supply. As per Section 2 (74) of GST Act, “mixed supply” means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. Under Section 2 (74) of GST Act, the applicable GST fo
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y them. The machinery supplied in 2017 also requires maintenance and further supply of its parts by the applicant. We also find that the applicant also makes an integrated contract for the operation and maintenance service and they are not in a position to ascertain which parts are to be supplied in the course of its operation and maintenance. In these two situations the question raised by the applicant is that Whether on facts and circumstances of the case, the maintenance services rendered on customers' equipment under the two agreements i.e. comprehensive maintenance services agreement and supply of parts and services agreement which also includes supply and replacement of spare parts should be classified as 'composite supply' under Section 2(30) of Central Goods and Service tax Act, 2017 (CGST Act) and Rajasthan State Goods and Service Tax Act, 2017 (RJ SGST Act) [collectively referred to as the 'GST Act'] or as mixed supply under Section 2(74) of GSTAct?
5.2 We find that Integrat
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, also shows that in their daily/ monthly logsheet the applicant has to mention the parts being replaced by them. It is evident that the applicant can supply these parts individually and along with the package of the services. Supply of parts and services are known and can be supplied individually to the customers, hence, these supplies fall under the services specified under Section 2(74) of the CGST/RGST Act, 2017 and they are chargeable to GST at applicable rates such as 12%, 18%, 28%, etc. whichever is higher.
5.4 As per Section 2 (74) of GST Act, “mixed supply” means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply.
5.5 In the present case the applicant can supply the parts or services individually or any combination thereof on a single price which is appropriately covered under mixed supply.
5.6 However, the conten
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operation and maintenance services. In the present case, main issue is to ensure the uninterrupted operation of the equipment through supply of maintenance services. For the provision of such services, the Applicant has to supply certain goods such as spare parts and consumables, and would also supply maintenance services through skilled engineers, labourers etc.
5.9 The consumption of goods vary substantially depending on the wear and tear of the equipment, however the consumption of services which would be critical may not vary substantially as these engineers would be stationed at the mine site and accordingly perform maintenance activities on the equipment at regular intervals. Therefore, the predominant element in the composite supply would be provision of maintenance services and the supply of goods would be ancillary to such services.
5.10 Accordingly, the supply of maintenance services should be considered as the principal supply and the supply of other goods or services shal
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ather production, machinery for paper and paperboard production, weapons and weapons systems, agricultural, forestry and garden tractors and lawnmowers, other general-purpose machinery and special- purpose machinery.
This service code does not include:
* maintenance and repair services of domestic boilers and bunters, cf 995463 and
* elevators, goods lifts, escalators and moving pavements, cf 998718
5.12 Thus, the service code for Maintenance and repair services of commercial and industrial machinery is 9987171 and the prescribed rate of GST is (CGST @ 9% of the taxable value, SGST @ 9% of the taxable value) or IGST @ 18% of the taxable value.
5.13 For the supply of mixed services, the applicant is liable to pay the highest rate of tax as per Section 8(b) of the CGST Act, 2017. Section8(b) of the CGST act is as below:
“a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.”
Question 4
5.13
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7 and determination of place of supply has not been specified under Section 97 (2). In view of above we are not giving any finding in respect of place of supply. Hence the query raised by the applicant is accordingly disposed off.
6. In view of the above stated facts we pronounce the ruling as under:-
RULING
1. The activities performed under the 'Comprehensive Maintenance Contract' are to be treated as a composite supply of services and the activities performed under 'Equipment Parts Supply and Services Agreement' are to be treated as Mixed Supply.
2. In respect of the activities performed under 'Comprehensive Maintenance Contract', the supply of Operation & Maintenance services is the principal supply and the supply of other services are ancillary to such principal supply.
3. The service code for Maintenance and repair services of commercial and industrial machinery is 9987171 and the prescribed rate of GST is 18% (CGST @ 9% of the taxable value, SGST @ 9% of the taxable value) o
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