TMI Blog2019 (8) TMI 1562X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the appellant supplies as composite supply. It is beyond any doubt that the appellant s principal supply among the combined supplies, is nonetheless commercial coaching of NEET education, which is undoubtedly taxable and admitted by the appellant also. The other services of lodging and boarding are only incidental whether chosen by the student or not? That means, though students does not choose auxiliary services but the principal supply must be the criteria while charging the students - No student can choose only lodging or boarding without coaching. Here the appellant contentions fails prima facie, because the narration of the appellant that student can choose any one of the three (3) services is clearly found to be on wrong note. The appellant argument that since some students have opted for only coaching service but not received boarding/lodging as day scholars has no relevance to the present dispute, because such students will only pay for principal supply, resultantly such receipts are to be taxable invariably as applicable to principal supply values only even if treated as composite supply. The present case undoubtedly qualifies to be fallen into category of compo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. 5-12-2018 28-12-2018 Attended on 31-12-2018 3. 3-1-2019 11-2-2019 Not Attended 4. 11-2-2019 28-3-2019 Attended 5. 29-3-2019 30-4-2019 Not Attended 6. 3-6-2019 3-6-2019 Attended 7. 8-7-2019 30-7-2019 Attended 8. 30-7-2019 (final) 19-8-2019 Attended 2. Sri K.V. Subba Rao, Secretary Correspondent and Authorized Representative of the firm (hereinafter referred to as A.R. ) has appeared on earlier occasions and finally on 3-6-2019 for arguing the case. Finally, the appeal was heard by appellate authority. Statement of facts :- 3. The appellant M/s. Doctors Academy of Educational Society, Kanuru is an assessee on the rolls Assistant Commissioner (ST), Patamata Circle, No. II Division, Vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red that 3 (three) services were naturally bundled in the ordinary supply course by the appellant. Thus, the AO has finally levied tax treating as composite of supply for ₹ 18,99,702/- and passed orders under CGST APGST Acts, dated 14-6-2018. 9. Aggrieved by the above orders passed by the audit officer, the appellant has preferred the present appeal and disputed the levy of tax of ₹ 18,67,702/-. Grounds of appeal :- 10. The grounds of appeal filed by appellant in the appeal are extracted hereunder; 1. It is most respectfully submitted that the impugned order passed by the Ld. Adjudicating authority is bad in law, illegal and the same has been passed without proper appreciation of the provisions of the APGST Act, 2017 and various contentions raised by the appellant in reply to the show cause notice and the time of personal hearing. The detailed grounds are as under : 2. Denial of ₹ 20 lakhs Threshold limit: GST is applicable only after crossing ₹ 20,00,000/- turnover. It is humbly submitted that the appellant in reply to the show cause notice as well as during the personal hearing submitted that as per the provisions of sec. 22 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment. The appellant is also in possession of the tax invoices issued by the service provider. The total SGST+CGST available as input credit during the disputed period July, 2017 to February, 2018 is ₹ 2,61,000/- However, the Ld. Deputy Commissioner has disallowance the ITC on the ground that the same would be allowed only if the following conditions are satisfied : The assessee must be registered as a taxable person under GST. He is in possession of tax invoice or any other specified tax paid document. It is mandatory to file all the applicable GST returns. Tax is actually paid by the supplier. 3.3 It is to submit that in the instant case, the following conditions are satisfied : The supplier of the service (Building owner) has paid the GST. The appellant is in possession of tax invoice issued by the service provider. The appellant has received the services and used for outward supplies The appellant has paid the total invoice value including GST to the supplier. As far as the other two conditions of the appellant being registered with the department and filing the applicable GST returns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng (i) Tuition fee (ii) Hostel Accommodation Charges and (iii) Mess charges separately from the students. Appellant submitted that as per Government of India, Ministry of Finance Clarification Vide F. No. 354/17/2018-TRU, dated 12-2-2018, hostel accommodation provided, including by trusts to students with tariff of less than ₹ 1,000/- per day are exempted from GST under Sl. No. 14 of GO No. 588, dated 12-12-2017 issued by the Government of Andhra Pradesh. Further, as per Government of India, Ministry of Finance Clarification Vide F. No. 354/03/2018, dated 8-1-2018, mess charges attract GST rate at 5%. 4.2 However, the Ld. Adjusting authority erroneously applied the provisions of composite supply under sec. 8 of the APGST Act and held that this is a case of bundled service as the services of coaching, accommodation and food in a residential coaching is inseparable. He held that since the dominant nature is determined by the service of commercial coaching, the entire bundle would be treated as educational service and principal supply is providing coaching to the students. 4.3 It is to submit that the above findings of the Ld. Adjusting Authority are totally erroneous. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of the supply would be affected. 4.5 It is to submit that in case of the appellant, none of the above four conditions are satisfied. removal of hostel service does not affect the coaching service and it would continue. Removal of mess service does not affect the coaching service as the students can have their food at any other place. All three services are available separately as the students have the option of going for only coaching and not availing the other facilities. The three services are not advertised as package. The appellant is not charging a single price for all three services assessed and the tax should be computed by applying GST Rate for each service. Accordingly, the Accommodation charges would be totally exempted, and the GST Rate Applicable would be 5% on the Mess Charges Collected. 5. Exemption of Accommodation charges under Renting of Residential travelling for use as residence : It is a fact the service by way of renting of residential dwelling for use as residence is exempted from GST under serial No. 12 of the GO No. 588, dated 12-12-2017. It is submitted that alternatively, even if the Accommodation charges in the case does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is a supply, shall be treated as a supply of such principal supply; and levy collection. The tax liability on a composite supply shall be determined in the following manner. A composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principle supply. Principles supply would mean supply which forms the predominant element of the composite supply and other parts of the supply are only ancillary or supportive to that predominant part. Basic features of a composite supply are as follows : (a) it should be a supply made by a taxable to a recipient (b) such supply should comprise of two or more taxable supplies of goods or services or both or any combination thereof. (c) Such combination of two or more supplies of goods or services should be naturally bundled. (d) Such naturally bundled goods or services should be supplied in continuation with each other in the ordinary course of business (e) One of two naturally bundled supply should be a principle supply. (f) Composite supply shall be treated as the supply of principal supply and the applicable tax rate on the entir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esidential education services rendered by M/s. Doctors Academy is liable to SGST as discussed in supra. Thus the combined reading of all three services clearly revealed that the services rendered by M/s. Doctors Academy is combination of two or more services which are naturally bundled, hence treated it as composite supply. 2. The appellant submits that the findings of the adjudicating authority are factually incorrect and not in appreciation of true facts. The appellant has undertaken coaching for NEET students and collected fees from them under separate heads. (i) Tuition fee (ii) Accommodation charges (iii) Mess charges All the three services are independent and not inter connected. The bills were also issued for each service separately and accounted in books of account accordingly. They are not split at the convenience of the appellant as alleged in the order. Further the service recipients i.e. students have option for choosing the service. They were not charged for all the services if they have taken coaching, as alleged by the authority charges/fees were collected from students only to the service availed by them. There is no composite or bun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Deputy Commissioner (ST) (Int. LTU), No. II Division, Vijayawada has submitted para-wise remarks against the grounds of appeal, and the same are extracted hereunder; I submit herewith the PARAWISE REMARKS with reference to appeal filed by M/s. Doctors Academy, Kanuru, Vijayawada against the orders passed by the Deputy Commissioner (ST), INT., No. 2 Division, Vijayawada, as called for in the reference cited. M/s. Doctors Academy, Kanuru is engaged in providing Commercial coaching to the students for entrance tests like NEET, EAMCET, etc., and have not been registered with the department. On the basis of specific intelligence collected regarding evasion of GST by M/s. Doctor s Academy, the Joint Commissioner (ST), Vijayawada-2 division has given authorization to conduct inspection under Sec. 67(1) to the Deputy Commissioner (ST) vide Ref. No. A11/66/2017, dated 19-2-2018. Accordingly, the Deputy Commissioner (ST), No. 2 Division, Vijayawada has conducted inspection on dated 23-2-2018. During the inspection, it was found that M/s. Doctor s Academy, Kanuru have not been registered with the department and no GST has been paid for the tax period from 07/2017 to 02/2018. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the dealer is not tenable and liable to be dismissed as per Sec. 22 of the GST Act, 2017 which read as under : Every supplier making a taxable supply of goods or services or both in the state shall be liable to be registered under this Act, if his aggregate turnover in a financial year exceeds twenty lakh rupees . It is submitted that as per Section 22 and 15 of GST Act, the GST liability should be computed including the threshold turnover of ₹ 20,00,000/- and no such provision in the Act as contended by the service provider. (2) Denial of Input Tax Credit : The dealer contended that they should be allowed ITC of the GST paid in respect of renting of immovable property as the said service is used for furtherance of business of the appellant in terms of Sec. 16 of the APGST Act, 2017. The contention of the service provider is not correct. They are entitled to get ITC only if they satisfy the below mentioned conditions as per Section 16 of SGST Act, 2017. (1) The assessee must be register as a taxable person under GST. (2) He is in Possession of Tax Invoice or any other Specified tax paid document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies, one of which is a principal supply, shall be treated as a supply of such principal supply; and levy and collection. The tax liability on a composite supply shall be determined in the following manner. 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. Principal supply would mean supply which forms the predominant element of the composite supply and other parts of the supply are only ancillary or supportive to that predominant part. Basic features of a composite supply are as follows : (a) It should be a supply made by a taxable person to a recipient. (b) Such supply should comprise of two or more taxable supplies of goods or services or both or any combination thereof. (c) Such combination of two or more supplies of goods or services should be naturally bundled. (d) Such naturally bundled goods or services should be supplied in continuation with each other in the ordinary course of business. (e) One of two naturally bundled supply should be a principal supply. (f) Composite supply shall be treated as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so accommodation service is exempted under Sl. 12 of the exemption Notification. The contention of the assessee is not correct as the service provider is dividing the charges in their books of accounts only for accounting purpose and convenience. The contention of the service provider that the accommodation charges collected from the students should be excluded from the taxable turnover is not acceptable and tenable and proposed to include all charges received from the students for the tax periods July, 2017 to February, 2018 and treated it as composite supply. Supply can also be composite supply even if separate prices are charged. Thus the combined reading of all three services clearly revealed that the services rendered by M/s. Doctors Academy is a combination of two or more services which are naturally bundled, hence treated it as composite supply. Hence their contention of accommodation charges should be treated as residential service is not correct and tenable. (5) Since, the objections raised by the service provider is found untenable regarding Commercial Educational Services, hence, the appeal is liable to be dismissed. It is submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kage they actually receive or use. (2) The elements are normally advertised as a package. (3) The different elements are integral to one overall supply - if one or more is removed, the nature of the supply would be affected. 20. Citing the above conditions, the appellant professed that none of the above criteria was present in their case. The appellant also put-forth that all 3 services were available separately, and students can choose whatever service they prefer and have option to leave other services. On the basis of above procedure, the appellant advanced that their services and supply turnover are to be assessed at different applicable rates of tax. 21. The appellant also advanced an alternative contention that accommodation charges so charged are on account of student residential facilities and as per Government Instructions vide Sl. No. 12 of G.O. No. 588, dated 12-12-2017, residential dwelling charges are exempted from GST. 22. Arguing against composite supply attribution, the appellant has put-forth that they have collected charges under different heads namely Tuition fee, Accommodation charges, and Mess charges, mentioning distinctively in invoices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any logical basis and legitimate provision or not? (2) Whether the appellant contentions with reference to exemption up to threshold limit and allowing ITC on building rental charges are found to be having any sustainable aspects or not? Analysis : 26. Perused the grounds of appeal along with assessment order passed by the audit officer, and after thorough verification of records, the findings of the appellate authority are stated below; 27. To ascertain any rationality in the contentions of the appellant, the audit officer i.e. Deputy Commissioner (ST) (Int. LTU), No. II Division, Vijayawada, has been asked to submit his Para-wise remarks against the grounds of appellant and the AO has submitted para-wise remarks by duly stressing with force of findings and strongly reiterated the contents as in the assessment order with relevant explanation on each point of observation, which on a plain reading are found to be dependable and sustainable at the outset. 28. The appellant is definitely at fault for not obtaining registration under CGST/APGST Act, 2017, though he was aware of liability of tax on commercial coaching service. The appellant has been brought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service that forms the predominant element of bundled service. In education/coaching areas the predominant service has been recognized as education itself, but not lodging/boarding service. 31. This authority also deeply examined the nature of services offered by the appellant, because each individual case needs to be analyzed in the back drop of multiple factors before determining whether such combination of supplies are naturally bundled together in the ordinary course of business or not?. Further, if providing other supplies are incidental to providing principal supply and such other supplies were provided with a purpose of better facilitation of principal supply, then such combination of service, is to be treated as naturally bundled service and falls into composite supply category. 32. Now coming to the present case, it is beyond any doubt that the appellant s principal supply among the combined supplies, is nonetheless commercial coaching of NEET education, which is undoubtedly taxable and admitted by the appellant also. The other services of lodging and boarding are only incidental whether chosen by the student or not? That means, though students does not choose auxili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... composite supply. 36. The appellant s effort to distinct their supply as other than composite supplies, is not based on any logical/dependable explanations, but seems only put-forth with an intention to minimize the tax liability. 37. The essential ingredients of a composite supply have been indentified as follows; (a) Two or more taxable supplies of goods/services or both. (b) The taxable supplies should be naturally bundled. (c) The taxable supplies should be offered in conjunction with each other. (d) One taxable supply should be a principal supply. 38. If we compare the above characteristics with the present case, it is obvious that present case undoubtedly qualifies to be fallen into category of composite supplies. It is also noteworthy here to comment on the AO s findings, who has discretely observed that the appellant s transactions clearly liable to be treated as composite supply on analyzing the basic records/documents during the course of inspection. The A.O. also opined that the appellant is resorting to separate the receipts in books of accounts to distract the composite nature of receipts, which could not be countered by the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formula can be laid down to determine whether a service is naturally bundled in the ordinary course of business. Each case has to be individually examined in the backdrop of several factors some of which are outlined above. 40. Thus, it is unambiguously established that the combination of supplies of the appellant needs to be termed as composite supply and liable to be taxed at the rate of principal supply i.e. Commercial Coaching. 41. The other contention of the appellant regarding exemption up to threshold limit receipts i.e. 20 lakhs has also been analyzed and it is to be stated that such exemption is available to the Act abiding suppliers, who voluntarily registers themselves after crossing threshold limit. But, in cases like present appellant, tax will be levied on the receipts from the starting of business, since they have failed to get registered themselves on their own after crossing threshold limit, even though the supply is clearly known to be taxable. 42. It is also noteworthy here to observe that the appellant has not submitted the details of initial 20 lakhs turnover, as to how and when they have scored the 20 Lakhs turnover. Since, the appellant s transacti ..... 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