2018 (10) TMI 1515 - AAR - GST

Classification of goods - Valuation - ElectroInk supplied along with consumables under GST - composite supply/principle supply - naturally bundled supplies - Determination of time and value of supply of ElectroInk with consumables under the indigo press Contract - Continuous supply - POT Rules MSGST Act . Classification of ElectroInk supplied along with consumables under GST - Held that - Under the GST Law the taxable event is supply of goods or services or both. The tax is payable on every supply unless otherwise exempted. The law notifies individual supply of goods and services with applicable rate of tax. Where supply consists individually of goods and services there is no confusion or problem. But with the advent of different models of business certain supplies consist of combination of goods or services or both. It is therefore required to be ascertained to apply the correct rate of tax - there is no doubt to conclude that the impugned transaction consists of two or more taxable supplies of goods and also the goods are supplied in conjunction. Thus the ingredients of the definition of composite supply are satisfied. Whether these supplies are naturally bundled? - Held that - The supply of ElectroInk with consumables by the applicant to the distributor/reseller constitute bundled supply which involves more than two taxable supplies of goods. The dictionary meaning of the word Naturally with reference to supply implies that it should be in the natural manner or is happing or existing as a part of nature and not made or done by the people - In the present case and per the terms of the HP s agreement with reseller / customer which provides that Reseller may elect to purchase Supplies for the different Indigo Press Product Lines under different programs provided that Reseller shall purchase all of the Supplies required by it for each Indigo Press Product Line under the same Supplies purchase program. This clause of the purchase agreement assume significance of the factual background that there exists a notable difference between the conventional offset and HP Indigo Digital offset Printing Technology. The terms of the contract as mentioned above clearly indicate that the recipient of the supply has no option to select individual supply but to accept it as bundled supply. Thus the transaction of supply of ElectroInk with consumables cannot be considered as Naturally bundled Supply but a compulsory supply - the transaction cannot be said to be naturally bundled supply. The applicant has submitted the consumption pattern of Electro ink along with consumables supplied to authorised reseller. From this consumption pattern it is noticed that if the requisite quantity of ink and other consumables are supplied to the printing machine for first time the other consumables are not required to be supplied compulsorily. Assuming that the ink is required to be replaced after thousand clicks the blanket or photo imaging plate is required to be replaced after approximately 3000 and 3300 clicks respectively - the goods are mandatorily supplied in conjunction. Thus the consumption of supplies has its own pattern. Each of such supplies can be supplied separately as they are not dependent on each other and the identification of the principal supply therefore cannot be drawn from and among the supplies which gives one of the essential character of bundle supplies to the suppliers in the present case. The supply of Electro Ink along with consumable cannot be considered as a composite supply as defined under section 2(30) of the GST Act. Mixed Supply or not? - Held that - There is no dispute that applicant s supplies consist of two or more than two supplies. It is also not in dispute that the supplies are made in conjunction with each other and made for a single price - it is noticed that each of the supplies can be supplied separately as they are not dependent on each other and one supply of goods does not occasion the supply of other goods. As the transaction satisfies all the ingredient of mixed supply the transaction would come and fall under mixed supply as defined in clause 74 of section 2 of the GST Act. Determination of Time and Value of supply of ElectroInk with consumables under the Indigo press contract - Held that - The supply of goods in the present case fulfil the basic tenets of continuous supply and therefore the impugned supply is continuous supply of goods as defined in clause 32 of section 2 of the GST Act. The goods are supplied by the applicant on regular or periodic basis where successive statements of account are raised within 15 days from the end of each calendar month with respect to supplies made in the preceding month. Section 31 (4) is the relevant section where provisions are made for issue of invoice in case of continuous supply of goods. Time of supply - Held that - The applicant has to raise invoice on or before 15th day from the end of each calendar month with respect to supplies made in the preceding month. Thus the time of supply in the present case will be the earliest date between the date of invoice or the date of payments with respect to impugned supply as per the provisions of section 12(2) of the GST Act. Vlues of supply of ElectroInk with consumables under the Indigo Press Contract - Held that - The impugned transaction is a mixed supply with nature of supply as continuous supply of goods for single price and therefore the Value of supply of goods as per section 15 of the GST Act shall be the transaction value as reflected in the invoice issue by the applicant. Ruling - The supply of Electro Ink supplied along with consumable is a mixed supply as defined u/s section 2 (74) of the GST Act and is also a continuous supply of goods as defined u/s 2 (32) of the GST Act. The time of supply of Electro Ink supplied along with consumables under the indigo press contract would be the earliest date between the date of invoice or the date of receipt of payment. As regards the value of supply of Electro Ink supplied with consumables under the Indigo Press Contract would be the transactions value as reflected in the invoice issued u/s 31(4) of the GST Act.

Summary

Issues Involved
1. Classification of ElectroInk supplied along with consumables under GST.
2. Determination of time and value of supply of ElectroInk with consumables under the indigo press contract.

Detailed Analysis

Issue 1: Classification of ElectroInk Supplied Along with Consumables Under GST
Arguments by the Applicant:
- The applicant contended that the supply of ElectroInk along with consumables constitutes a "composite supply" under GST, where ElectroInk is the principal supply.
- They argued that the supplies are naturally bundled and supplied in conjunction with each other in the ordinary course of business.
- The applicant cited Section 2(30) of the GST Act, which defines a composite supply as one that is naturally bundled and supplied together, with one principal supply.
- They provided details of the HP Indigo Supplier Reseller Agreement to support their claim that the supplies are naturally bundled and necessary for the operation of the Indigo Press.

Arguments by the Department:
- The department argued that the supplies do not meet the criteria for being naturally bundled.
- They noted that the consumables have different lifespans and are not necessarily supplied together.
- The department emphasized that the supplies can be ordered separately, indicating that they are not naturally bundled.
- They concluded that the supply should not be considered a composite supply and should be taxed according to their separate HSN codes.

Ruling:
- The Authority concluded that the supplies are not naturally bundled as required for a composite supply.
- The different consumables have separate lifespans and can be supplied independently.
- Therefore, the supply of ElectroInk along with consumables is classified as a "mixed supply" under Section 2(74) of the GST Act.

Issue 2: Determination of Time and Value of Supply of ElectroInk with Consumables Under the Indigo Press Contract
Arguments by the Applicant:
- The applicant contended that the supply qualifies as a "continuous supply of goods" under Section 2(32) of the GST Act.
- They argued that the goods are supplied on a recurrent basis, and the invoice is raised periodically based on the number of clicks made by the customer.
- The applicant cited the terms of their contract, which stipulate that the goods remain the property of the applicant until utilized and invoiced.

Arguments by the Department:
- The department acknowledged that the supply is made on a regular basis and involves periodic invoicing.
- They emphasized that the supply should be considered complete when the goods are removed from the applicant's warehouse, regardless of the billing method.

Ruling:
- The Authority agreed that the supply qualifies as a "continuous supply of goods" under Section 2(32) of the GST Act.
- The time of supply is determined by the earliest of the date of invoice or the date of receipt of payment, as per Section 12(2) of the GST Act.
- The value of supply is the transaction value as reflected in the invoice issued under Section 31(4) of the GST Act.

Conclusion
1. Classification: The supply of ElectroInk along with consumables is a mixed supply under Section 2(74) of the GST Act and also a continuous supply of goods under Section 2(32) of the GST Act.
2. Time and Value of Supply: The time of supply is the earliest of the date of invoice or the date of receipt of payment. The value of supply is the transaction value as per the invoice issued under Section 31(4) of the GST Act.