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Composite Supply Section 8(a) - GST Ready Reckoner - GSTExtract Composite Supply General Introduction The taxable event under GST is supply of goods or services or both. GST will be payable on every supply of goods or services or both unless otherwise exempted. The rates at which GST is payable for individual goods or services or both is also separately -notified. Classification of supply (whether as goods or services, the category of goods and services) is essential to charge applicable rate of GST on the particular supply. The application of rates will pose no problem if the supply is of individual goods or services which is clearly identifiable and the goods or services are subject to a particular rate of tax. But not all supplies will be such simple and clearly identifiable supplies. Some of the supplies will be a combination of goods or combination of services or combination of goods and services both. Each individual component in a given supply may attract different rate of tax. The rate of tax to be levied on such supplies may pose a problem in respect of classification of such supplies. It is for this reason, that the GST Law identifies composite supplies or mixed supplies and provides certainty in respect of tax treatment under GST for such supplies. Composite Supply under GST As per definition as stated in Section 2(30) 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 . A works contracts and restaurant services are classic examples of composite supplies, however the GST Act identifies both as supply of services and chargeable to specific rate of tax mentioned against such services. (Works contract and restaurant) In respect of composite supplies (other than the two categories mentioned above), the need to determine the supply as a composite one, will arise, so as to determine the appropriate classification. It will be necessary to determine as to whether a particular supply is naturally bundled in the ordinary course of business and what constitutes principal supply in such composite supplies. Whether only two taxable supplies can be composite supplies, or even a taxable supply and an exempt supply can be considered a composite supply? In the case of IN RE: M/S. COLUMBIA ASIA HOSPITALS PRIVATE LIMITED [ 2018 (12) TMI 474 - AUTHORITY FOR ADVANCE RULINGS, KARNATAKA ], it was held that the supply of goods and services supplied by the applicant company in conjunction with the healthcare services fall under the definition of composite supply as the services of supply of food and medicines to the patients are as advised by the doctor or nutritionists. However, supplies of medicines or food and drinks to persons other than patients, like attendants of the patients and when supplied to the patients not as advised by the doctor or nutritionists, then such supplies would not form part of the composite supplies and would attract applicable tax. The applicant can claim credit of input tax paid on inward supplies, but the credit of input tax claimed which is attributable to such supplies of healthcare services needs to be reversed. Determination of tax liability of Composite Supply As Per section 8(a) , The tax liability on a composite or a mixed supply shall be determined in the following manner, namely: - a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply. Further following composite supplies shall be treated as a supply of services, Mentioned in the schedule II ,namely:- (a) works contract and (b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration. Some Important Clarification 1. where the sale of cinema ticket and supply of food and beverages are clubbed together, and such bundled supply satisfies the test of composite supply, the entire supply will attract GST at the rate applicable to service of exhibition of cinema, the principal supply. [ Circular No. 201/13/2023-GST Dated 01.08.2023 ] 2. As per Circular No. 32/06/2018-GST Dated 12th February 2018 (3) Food supplied to the in-patients as advised by the doctor/nutritionists is a part of composite supply of healthcare and not separately taxable. Other supplies of food by a hospital to patients (not admitted) or their attendants or visitors are taxable. Time of supply in case of Composite supply If the composite supply involves supply of services as principal supply, such composite supply would qualify as supply of services and accordingly the provisions relating to time of supply of services would be applicable. Alternatively, if composite supply involves supply of goods as principal supply, such composite supply would qualify as supply of goods and accordingly, the provisions relating to time of supply of goods would be applicable. Some clarifications on composite or mixed supply given by CBIC Clarification on taxability of printing contracts The printing industry in India in particular faces a dilemma in determining whether the nature of supply provided is that of goods or services and whether in case certain contracts involve both supply of goods and services, whether the same would constitute a supply of goods or services or if it would be a composite supply and in case it is, then what would constitute the principal supply . It is to be noted that in case of composite supplies, taxability is determined by the principal supply. To address concerns of the printing industry, CBIC has come out with Circular no.11/11/2017-GST Dated 20.10.2017 , where in it is clarified as under. Where Content and physical input (material) provided by recipient In the case of printing of books, pamphlets, brochures, annual reports, and the like, where only content is supplied by the publisher or the person who owns the usage rights to the intangible inputs while the physical inputs including paper used for printing belong to the printer , supply of printing [of the content supplied by the recipient of supply] is the principal supply and therefore such supplies would constitute supply of service falling under heading 9989 of the scheme of classification of services. Where only content are provided by recipient In case of supply of printed envelopes, letter cards, printed boxes, tissues, napkins, wall paper etc. falling under Chapter 48 or 49, printed with design, logo etc. supplied by the recipient of goods but made using physical inputs including paper belonging to the printer , predominant supply is that of goods and the supply of printing of the content [supplied by the recipient of supply] is ancillary to the principal supply of goods and therefore such supplies would constitute supply of goods falling under respective headings of Chapter 48 or 49 of the Customs Tariff. Retreading of tyres is supply of services but supply of retreaded tyre is goods, is composite supply and pre dominant element is process of retreading which is services. Rubber used for retreading is an ancillary supply. [ Circular No. 34 / 8 / 2018 -GST dated 01-March 2018 ] Bus body building classification of this composite supply, as goods or service would depend on which supply is the principal supply which may be determined on the basis of facts and circumstances of each case. [ Circular No. 34 / 8 / 2018 -GST dated 01-March 2018 ] Supply, erection and assembly of air conditioning plant is composite supply not a work contract and principal supply is supply of goods. Supply and installation of pumps or fire control or radar systems at ship is composite supply. Servicing of vehicles and cars which covers both goods and services. The taxability of supply would have to be determined on a case to case basis looking at the facts and circumstances of each case. case law refer following [ Circular No. 47/21/2018-GST Dated 08 th June 2018 ] M/S. SOUTH INDIAN FEDERATION OF FISHERMEN SOCIETIES [ 2022 (61) G.S.T.L. 205 (A.A.R. - GST - T.N.)] AMC of machines , it is cover both supply of goods services, the predominant intention is provide maintenance services. it is considered composite supply of services where the principal supply is services and the supply of goods is incidental to such supply of services. Supply of sale of space in print media along with designing , selling of space in print media, is a principal supply, it is a composite supply. Supply of Grated supari, lime and tobacco in single pack , it is a composite supply of goods, wherein chewing tabacco is the principal supply. [ M/S. JAINISH ANANTKUMAR PATEL, 2021 (1) TMI 493 - AAR, GUJARAT ]
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