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TMI Blog2025 (2) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the Advance Ruling No. GUJ/GAAR/R/2022/52 dated 30.12.2022. 3. Briefly, the facts are enumerated below for ease of reference: * the appellant is a manufacturer & supplier of stationery items; * the applicant supplies the goods in a combination with other products viz [a] DOMS A1 pencil. This consist of 10 pencil along with a sharpener & eraser. [b] DOMS Smart Kit. This is a gift pack which consists of a colouring book, two pack of pencils, one pack of colour pencil, one pack of oil pastels, one pack of plastic crayons, one pack of wax crayons, one eraser, one scale and one sharpener. [c] DOMS my first pencil kit. It consists of a pencil, eraser, scale and a sharpener. * That consequent to the 47th meeting of the GST Council, vide notification No. 6/2022-CT (R), GST rate was increased on pencil sharpener, Scales & mathematical instruments sets from 12% to 18%; * the applicant feels that he satisfies the four conditions to term the aforesaid supply as 'composite supply'. 4. In view of the foregoing facts, the appellant had sought Advance Ruling on the following questions, viz: (i) Whether the supply of pencils sharpener along with pencils being principa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at in case of sale of 'composite goods consisting of different materials/components and goods put up in sets for retail sale, Rule 3(b) of GIR is to be applied; * explanatory notes define the term 'goods put up in sets for retail sale'; * further for determination of the goods which provides essential characteristic, reference can be made to the explanatory notes issued by WCO; * that since all the conditions as specified in explanatory notes for the term 'goods put up in sets for retail sale' is satisfied & since pencil provides the essential characteristic, the HSN code to be used for DOMS A1 pencil should be the one applicable; * GST Council in its 47th meeting recommended change in GST rate vide notification No. 6/2022-CT (R) wherein the GST rate was increased on pencil sharpener & Scales & mathematical instruments sets from 12% to 18%. * the appellant relies on the ruling passed under US Customs Law on classification of stationery set consisting of two regular pencils; * that supply of pencils with sharpener and eraser is a composite supply & meets all the conditions; * that major manufacturers are following this trade practice since decades; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sharpener [along with kit] having nominal value, will have an impact on rate of tax. 11. On going through the grounds & prayer of the appellant, it is forthcoming that the appellant is aggrieved only in respect of their product 'DOMS A1 pencil', which consists of 10 pcs of pencil, one eraser and one sharpener. We therefore, limit our ruling to the said product only. 12. The averment raised by the appellant is that for determination of the goods which provides essential characteristic, reference can be made to the explanatory notes issued by WCO; that as pencil provides the essential characteristic, the HSN code to be used for DOMS A1 pencil should be the one applicable; that supply of pencils with sharpener and eraser is a composite supply & meets all the conditions. 13. This averment stands answered by the GAAR in para 19. We find that the GAAR has examined it by testing it with the four conditions which need to be satisfied for a supply to fall within the ambit of 'composite supply'. GAAR has held that supply of 10 pencils, one eraser and one sharpener in a single box, named DOMS A1, is not 'naturally bundled', that they are not made in conjunction w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as a package. * The different elements are not available separately. * The different elements are integral to one overall supply if one or more is removed, the nature of the supply would be affected * No straight jacket 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. 14. As is evident, though issued in respect of services, the analogy of the word naturally bundled can be adopted even in respect of goods. The supply in present case, is not naturally bundled as many of the indicators as mentioned supra are not satisfied. Further, nothing is produced to substantiate the fact that pencil provides the essential characteristic, as far as supply of product DOMS A1, is concerned. GAAR has further examined whether the product DOMS A1, meets the condition to fall under the ambit of mixed supply. Consequently, vide the ruling it was held that the product meets with the conditions of mixed supply and that the applicant is required to use the HSN code of the product which attracts the highest rate of tax among a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply 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; Illustration.- Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply; (74) "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. Illustration. A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately; Section 8. Tax liability on composite and mixed supplies.- The tax liability on a composite or a mixed supply shall be de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance is not legally tenable. [b] Rulings in the case of Baroda Medicare P Ltd 2021 (55) GSTL 495 (AAR-GST-Guj). Sameera Trading Company 2019 (31) GSTL 375 (AAR-GST-Guj) South Indian Federation of Fishermen Societies 2021 (52) GSTL 466 (AAR-GST-Ker), Jainish Anantkumar Patel 2022 (59) GSTL 111 (AAR-GST-Guj) and HP India Sales P Ltd. 2019 (29) GSTL 756 (AAR-GST). We have gone through the facts of the aforementioned rulings. The services/goods involved, not being similar, the reliance on the same is not legally tenable. 19. We have in the earlier paragraphs stated that we concur with the findings and the ruling of the GAAR vide the impugned ruling. However, with the change in the rate, we wish to answer the questions posed for advance ruling as under taking into consideration the change in the rate of GST: Question 1: Whether the supply of pencils sharpener along with pencils being principal supply will be considered as the composite supply or mixed supply? Ruling: The supply of pencils sharpener along with pencils under product DOMS A1 is covered under the category of 'mixed supply'. Question 2: What will be the HSN code to be used by us in the above case. Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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