TMI Blog2018 (11) TMI 1348X X X X Extracts X X X X X X X X Extracts X X X X ..... n supply the parts or services individually or any combination thereof on a single price which is appropriately covered under mixed supply - 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 contract are to be treated as composite services and the tax rate applicable on the principle supply would also be applicable on the other services. Principal supply between goods and services - Held that:- 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 - 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 principa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces 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 is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the application is admitted to pronounce advance ruling. 1. SUBMISSION OF THE APPLICANT: The Applicant is a private limited company incorporated under the provisions of Companies Act, 1956 having registered head office located at Pune and holding GST registration Number (GSTIN) 08AACCS6638K1ZX for the State of Maharashtra. 1.1. The Applicant is a multi-product, 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 into the business of after sales support for the mining equipment manufactured by its overseas group entities which are imported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... junction 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 intention to provide maintenance services to a customer. The main object of such maintenance services is to ensure the uninterrupted operation of the equipment, which could be achieved by ensuring the guaranteed availability of the equipment as defined under the agreement. Further, it is important to note that in case such guaranteed availability is not achieved by the Applicant, then the Applicant may be liable to penal consequences. e. In order to achieve t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isfied under the subject agreement. b) Taxable 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 executed under the above agreement, we have analysed few of the above indicative factors below: i. Perception of the service recipient: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided under this agreement is such that the main services could be categorized as the maintenance services provided to the customer and further the supply of goods is incidental to the supply of maintenance services. Therefore, as per above discussion, it is clear that the supply of goods and services executed under the above agreement are naturally bundled in the ordinary course of business. c) Taxable supply should be supplied in conjunction with each other. The term conjunction under 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd RGST for Rajasthan will be leviable only when place of supply is Rajasthan . 5. FINDINGS, ANALYSIS CONCLUSION: 5.1 We have gone through the contents of the application, submissions given by applicant at the time of hearing, comments of the concerned jurisdictional officers and accordingly find 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 its overseas group entities which are imported by the customers into India. Question no. 1 The applicant is mainly providing support services in respect of maintenance of machinery supplied by 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices, 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 contract are to be treated as composite services and the tax rate applicable on the principle supply would also be applicable on the other services. Question no.2 5.7 The Second question arises on the basis of first question. The concept of principle supply is applicable only in supply of composite service. As already discussed, the applicant is supplying both type of services i.e. mixed supply and composite supply. There is no concept of principle supply in mixed supply. 5.8 The concept of principle supply is under Composite supply. On going through the contents of the Integrated Contract, we are of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial- 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 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 or IGST). 5.14 The place of supply can be determined as per Chapter V of IGST Act, 2017. Section 10 of IGST Act relates to place of supp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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