2019 (8) TMI 1562 - Commissioner - GST

Composite supply of services or not - coaching services - Evasion of GST - Suppression of taxable outward services supply related turnover - invocation of Section 74 read with Rule 142(1) of CGST/APGST Act Rules, 2017. Whether the point of the objection of the appellant that their supply of coaching services shall not be termed as composite supply, is based on any logical basis and legitimate provision or not? - HELD THAT - 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 tax net only post inspection after which he has been issued with suo motu registration. The appellant ought to have registered himself at least after crossing threshold limit, but failed to do so, which supports the AO s finding that the appellant has been wilfully attempted for tax evasion - The core fundamental friction between the appellant Department revolves around treating 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 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 appellant through his explanations. 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? - HELD THAT - The AO has recorded certain specific remarks, which on a fundamental reading are found to be logical and legitimate. The AO has asserted that; (a) The appellant must have been a registered taxable person, (b) he must be in possession of tax invoice, and (c) such dealer ought to have filed all GST returns. However, in the present case, none of the above criteria satisfied, hence ITC shall not be eligible to the appellant. The AO s declaration in this regard found to be based on valid provisions of the GST Act. The assessment levy of tax by the audit officer are confirmed - Appeal dismissed.

Summary

Issues Involved:
1. Denial of ?20 lakhs threshold limit for GST applicability.
2. Denial of Input Tax Credit (ITC) on renting of immovable property.
3. Classification of services as composite supply.
4. Exemption of accommodation charges under renting of residential dwelling for use as residence.

Detailed Analysis:

1. Denial of ?20 Lakhs Threshold Limit:
The appellant argued that GST liability should be computed only after excluding the threshold turnover of ?20 lakhs as per Section 22 of the APGST Act, 2017. The adjudicating authority, however, confirmed the demand on the gross amount received without excluding the threshold turnover.

Analysis:
The appellate authority upheld the adjudicating officer's decision, stating that the appellant failed to register after crossing the threshold limit, thus making them liable to pay tax from the start of their business. The appellant did not provide details on how and when the ?20 lakhs turnover was achieved, leading to the conclusion that the threshold limit exemption did not apply.

2. Denial of Input Tax Credit (ITC):
The appellant claimed entitlement to ITC for GST paid on renting of immovable property used for furtherance of their business. They argued that they met the conditions for ITC eligibility, including possession of tax invoices and payment of GST to the supplier.

Analysis:
The appellate authority agreed with the adjudicating officer's decision to deny ITC, citing that the appellant was not a registered taxable person during the relevant period and had not filed the necessary GST returns. The conditions for ITC eligibility were not satisfied, making the appellant ineligible for ITC.

3. Classification of Services as Composite Supply:
The appellant contended that their services of coaching, accommodation, and mess charges were independent and not naturally bundled, thus should not be treated as composite supply. They argued that students could choose services separately and were billed accordingly.

Analysis:
The appellate authority upheld the adjudicating officer's classification of the services as composite supply. The authority cited Section 8 and Section 2(30) of the CGST/APGST Act, 2017, and guidelines from CBEC flyers, concluding that the services were naturally bundled in the ordinary course of business. The principal supply was identified as commercial coaching, making the entire bundle taxable at the rate applicable to the principal supply.

4. Exemption of Accommodation Charges:
The appellant argued that accommodation charges should be exempt under Sl. No. 12 of the GO No. 588, dated 12-12-2017, as they were for residential purposes.

Analysis:
The appellate authority dismissed this argument, stating that since the services were classified as composite supply, the entire bundle, including accommodation charges, was taxable. The authority found no merit in treating accommodation charges separately for exemption purposes.

Conclusion:
The appellate authority confirmed the adjudicating officer's assessment and levy of tax, dismissing the appeal. The appellant's contentions regarding the threshold limit exemption, ITC eligibility, and classification of services were found to be without merit. The services provided by the appellant were correctly classified as composite supply, making the entire bundle taxable at the rate applicable to the principal supply, which is commercial coaching.