2018 (5) TMI 1701 - AAR - GST

Classification of supply - supply of goods along-with supply of services - Composite Supply u/s 2(30) of the GST Act - GTA Service - naturally bundled services - consideration payable under the Second Contract for inland/local transportation and ancillary services like in-transit insurance - Held that - It is immediately apparent that the First Contract cannot be executed independent of the Second Contract. There cannot be any supply of goods without a place of supply. As the goods to be supplied under the First Contract involve movement and/or installation at the site the place of supply shall be the location of the goods at the time when movement of the goods terminates for delivery to the recipient or moved to the site for assembly or installation. The First Contract is no contract at all unless tied up with the Second Contract. The two promises supply of the goods and their transportation to the Contractee s site are therefore not separately enforceable in the present context. The supplies of goods and services of transportation etc are therefore naturally bundled. Supply of goods packed and transported with insurance is a composite supply and supply of goods is the principal supply. The illustration being part of the Section supplies as that of the applicant s should be construed as specifically mentioned under the GST Act as Composite Supply with supply of goods as the principal supply and services like transportation in-transit insurance etc ancillary or incidental to the principal supply. Ruling - Services of transportation in-transit insurance and loading/unloading being ancillary to the principal supply of goods shall be treated to taxation under Section 8 (a) of the GST Act and the consideration receivable on that account be taxed accordingly.

Summary

Issues:
Taxability of services supplied by the applicant to the Contractee through various service suppliers under two separate contracts - one for supply of materials at ex-factory price and the other for allied services like transportation, insurance, loading/unloading for delivery of materials at the contractee's site.

Analysis:
1. The applicant, a manufacturer of Overhead Power Transmission Line Hardware and Accessories, sought an Advance Ruling on the taxability of services provided to the Contractee under two separate contracts. The Applicant arranged for the supply and delivery of materials through various service suppliers under the Second Contract. The Applicant believed that the services provided were exempt under the GST Act as they were part of a composite supply with road transportation as the principal supply and ancillary services like loading/unloading as incidental to the transportation service.

2. The Exemption Notification exempts services by way of transportation of goods by road except those provided by a Goods Transport Agency (GTA). The Applicant, in written submissions, acknowledged that they were not providing transportation or insurance services but were recipients of such services. Therefore, the Exemption Notification did not apply to the Applicant as they were not the suppliers of transportation services.

3. The two contracts entered into by the Applicant were closely linked, with the First Contract for supply of materials at ex-factory price being dependent on the Second Contract for delivery of goods to the Contractee's site. The contracts were structured in a way that any breach in one contract would be considered a breach of the entire contract, indicating a single source responsibility contract. The supplies of goods and transportation services were deemed inseparable and naturally bundled, forming a composite supply.

4. The ruling concluded that services of transportation, in-transit insurance, and loading/unloading were ancillary to the principal supply of goods and should be taxed accordingly under Section 8(a) of the GST Act. The consideration receivable for these services was deemed taxable. The ruling was subject to the provisions under Section 103 unless declared void under Section 104(1) of the GST Act.