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2018 (10) TMI 257 - AAR - GSTClassification of Supply - composite or mixed supply? - supply of comprehensive annual maintenance service - principal supply - place of provision of service - service recipient - taxability. Whether supply of comprehensive annual maintenance service which may also involve incidental supply of spare parts/ goods should be classified as a composite supply or mixed supply? In case the said contract is considered as composite supply, what is the principal supply between goods or services? In case goods are considered as principal supply, how the taxability should be determined considering: i. The contract would entail supply of various goods falling under different tax brackets; ii. These goods would be supplied on a need basis as and when required at different point(s) of time and iii. There is no fixed value ascribed for goods in the contract considering these goods would be supplied depending upon condition of the locomotive at the time of maintenance. In case services are considered as principal supply, what tax rate should be applicable? In case of the said contract, what is the relevant place of supply and type of tax which needs to be discharged (i.e. CGST & SGST or IGST)? Held that:- The said contract merits to be considered to be a composite supply of service and principal supply is service inasmuch as the supply of goods is merely incidental to the maintenance contract in the given facts and circumstances - In terms of Section 8 of the CGST Act, 2017 / SGST Act, 2017, it has been clarified that a composite supply comprising two or more supplies, one of which is a principal supply would be treated as supply of such principal supply. The essential conditions for a supply to qualify as composite supply can be highlighted as: a. Two or more taxable supplies of goods or services or both; b. The taxable supplies should be naturally bundled; c. The taxable supplies should be supplied in conjunction with each other; and d. One taxable supply should be a principal supply - In such case, the supply which is the principal supply is treated as the main supply and the entire transaction should be eligible to GST as per the principal supply. Where the service provider and service recipient of a service are located in India, the provisions of Section 12 of the of IGST Act, 2017 determine the place of supply of services. Sub-section (10) of Sec. 12 ibid enjoins that place of supply if service on-board a train shall be the first scheduled points of departure of the convenience. If the location of the supplier and place of are not in the same State or Union territory, it shall be treated as inter-State supply of Services and IGST shall be levied, otherwise CGST & SGST shall be levied - If the supply of services is not made on-board a train, the location of a registered service recipient shall be the place of supply of service as per Section 12(2) ibid. Ruling:- Since the supply of maintenance service is for a one and fixed price with or without supply of spare parts/goods and supply of service and goods is made in conjunction with each other in the ordinary course as per maintenance contracts, this maintenance service to the extent of presence of all the necessary ingredients cited in the legal provisions quoted supra, is naturally bundled with the incidental supply of goods., it is case of composite supply of service. The said contract merits to be considered to be a composite supply of service, and principal supply is service inasmuch as the supply of goods is merely incidental to the maintenance contract in the given facts and circumstances. The supply is considered to be supply of services. The Service Code for the maintenance and repair service of transport machinery and equipment is 998714 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. Where the service provider and service recipient of a service are located in India, the provisions of Section 12 of the IGST Act, 2017 determine the place of supply of services - The place of supply of services on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, shall be the location of the first scheduled point of departure of that conveyance for the journey.
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