2018 (11) TMI 1348 – AUTHORITY FOR ADVANCE RULING, RAJASTHAN – 2018 (19) G. S. T. L. 683 (A. A. R. – GST) – Classification of supply – composite supply or mixed supply – 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 – principal supply between goods and services – rate of GST – relevant place of supply – type of tax which needs to be discharged.
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Held that:- The Applicant is a multiproduct, multi-division entity, engaged in manufacturing, distribution and sales agency activities of various industrial products which include metal cutting tools, mining/construction equipment, spares for mining equipment, seamless stainless steel tubes and pipes and wires and heating systems. Further, the Applicant is also engaged in the business of after sales support services for the mining equipment manufactured by i
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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 – the supply of maintenance services should be considered as the principal supply and the supply of other goods or services shall be ancillary to such principal supply.
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Rate of GST – Held that:- 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.
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Relevant place of supply – type of tax which needs to be discharged – Held that:- The determination of place of supply as requested by the applicant cannot be decided by the authorities for Advance Ruling constituted under Section 96 of SGST Act, 2017. The Authority constituted under the said section can determine or pronounce Advance rulin
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rvices, the applicant is liable to pay the highest rate of tax as per Section 8(b) of the CGST Act, 2017. – AAR No. RAJ/AAR/2018-19/21 Dated:- 12-10-2018 – 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, GSTIN is 08AACCS6638K1ZX, as per the declaration given by him in Form ARA-01, the issue raised by the applicant
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ort, 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. QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT Applicant has sought ruling to be pronounced under section 97 (2) (a) (e)
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CANT 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 supply is ancillary. d. In the present case, the Applicant is entering into agreements with prospective customers with the sole intent
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icant 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 in the ordinary course of business; c) The taxable supplies should be supplied in conjunction with each other in the ordinary course of business;
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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 executed under the above agreement, we have analysed few of the above indicative factors below: i. Perception of the service recipient: The intention of both the
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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 equipment prior to providing maintenance services. Hence, it is not practically possible for the Applicant to separate the goods and services being supplied for ensuri
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ply 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 element of the composite supply whereas supply of other goods or service that may be required to be supplied under the agreements shall be ancillary to the main service. Further,
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pply 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 for the supply will be 28%. Tax in relation to CGST and RGST for Rajasthan will be leviable only when place of supply is Rajasthan . 5. FINDINGS, ANALYSIS & CONCLUSION: 5.1 We have gon
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he 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 Integrated contract made by the applicant is classifiable under Composite supply in terms of Section 2 (30) of GST Act, which means a supply made by a taxable person to a recipient consisting of two
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th 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 contention of the applicant regarding Comprehensive Maintenance Contract , that the services would be classifiable under the Composite Services, we are of the view that Services supplied under the said cont
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e 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 shall be ancillary to such principal supply. Question no.3 5.11 The maintenance services provided in the above agreements should be classified as a composite supply of maintenance services and hence the tax rat
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nery. 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 The applicant has also made a query about the place of supply, whether in the facts and circumstances of the case, what shall be the relevant place of supply and type of tax which needs to be discharged? (i.e. CGST & SGST o
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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) or IGST @ 18% of the taxable value. 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. 4. As the query raised by the applicant does not fall in the cat
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