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2019 (3) TMI 1075 - AAAR - GSTClassification of supply - services provided by the Appellant under the ICT project - artificially-bundled and composite supply - existence of principal supply or not - training provided is predominant supply or not - non-fulfilment of pre-requisites of Entry No. 72 of the notification No. 12/2017- CT (Rate) - Held that - It is seen from the documents produced by the appellant that the National Policy of ICT school was framed in the year 2012 and the aim of the policy is to transform all government and government aided schools into smart schools where each school would have a computer lab and students are provided with computer training. For the effective implementation of the project, the policy allows the State or Union Territory Governments to take on private partners and implement the ICT project by adopting the BOOT- Build, own, operate and transfer model. The project also has to be implemented based on the guidelines issued by the Central Government. The contention of the appellant in the present appeal is that it is a composite supply as the supply of computer hardware and training are supplied in conjunction and it is naturally bundled - As per Section 2(30) a supply will be a composite supply only when it is naturally bundled - We understand that what the AAR wanted to say that the supply is a composite supply of two items but is not naturally bundled. However, we do not agree with the AAR on this aspect. The Education Guide, at para 9.2.4, clarifies that whether services are naturally bundled in the ordinary course of business would depend upon the normal or frequent practices followed in the field of business to which services relate - the Government of India in its nationwide policy called the National Policy on Education, 1986, stressed the need to employ information technology to improve the quality of education. This was the old policy which included schemes like computer literacy and studies in school and educational technology. Subsequently, the HRD Ministry revised its old policy and a new nationwide ICT scheme (Information and Communication Technology in School) was introduced to replace the earlier scheme. Thereafter, in the year 2012, the Department of School Education and Literacy framed guidelines under the National Policy on ICT in school. Thus, it is a Central Government driven project and the training along with supply of computers is an inherent part of the project and the project is imagined as such. Therefore, a major pre-requisite for a supply to be a composite supply - that the said bundle should be naturally bundled is satisfied here. The supply of computers along with training is itself envisaged and conceived as such by the Ministry of Human Resources Development and therefore by its very nature, the supply can be said to be naturally bundled. Thus, the training provided by the appellant is advanced training or training aided by technology which helps in easy delivery of the contents to the student through visual mediums. The project is nothing but a training project aided by technology. Merely because hardware and software is provided by the appellant, it does not mean that the training to be done is not a principal supply. The supplies of goods and services by the appellant to the Director of Education (S HS) qualifies for exemption in term of Entry No 72 of Notification No 12/2017 -C.T (Rate).
Issues Involved:
1. Applicability of Entry No. 72 of Notification No. 12/2017-CT (Rate) to the services provided by the Appellant under the ICT project. 2. Determination of whether the supplies made by the Appellant constitute a composite supply or a mixed supply. 3. Identification of the principal supply in the composite supply, if applicable. 4. Fulfillment of conditions stipulated in Entry No. 72 of Notification No. 12/2017-CT (Rate). Detailed Analysis: 1. Applicability of Entry No. 72 of Notification No. 12/2017-CT (Rate): The Appellant argued that the activities undertaken under the ICT project fall within the scope of Entry No. 72 of Notification No. 12/2017-CT (Rate) as the services are provided under a training program to the Government of Maharashtra, with the entire expenditure borne by the Central and State Governments. The Appellant contended that the services provided, including computer training, should be exempt from GST as per the said notification. 2. Determination of Composite Supply vs. Mixed Supply: The AAR ruled that the supplies made by the Appellant are artificially bundled, composite supplies of goods and services, and not naturally bundled. The Appellant contended that the supplies are naturally bundled composite supplies, with the principal supply being computer training services. The Appellate Authority agreed with the Appellant, stating that the supply involves both goods and training services and fulfills the requirements of Section 2(30) of the CGST Act for composite supply. 3. Identification of Principal Supply: The Appellant argued that the principal supply is computer training services, supported by the fact that the aim of the agreement is to improve the quality of education in schools, and the infrastructure and equipment provided are ancillary to this aim. The Appellate Authority concurred, noting that the primary objective of the ICT project is to promote computer literacy and that the provision of hardware and software is incidental to the main service of computer training. 4. Fulfillment of Conditions in Entry No. 72 of Notification No. 12/2017-CT (Rate): The Appellate Authority examined the conditions for exemption under Entry No. 72, which requires that the services be provided under a training program to the Central or State Government and that the entire expenditure is borne by the government. The Authority found that these conditions were met as the services were provided to the Government of Maharashtra, and the expenditure was jointly borne by the Central and State Governments. Conclusion: The Appellate Authority modified the ruling of the Advance Ruling Authority and held that the supplies of goods and services by the Appellant to the Director of Education (S&HS) qualify for exemption under Entry No. 72 of Notification No. 12/2017-CT (Rate). The Authority determined that the supplies constitute a naturally bundled composite supply with computer training services as the principal supply, thereby fulfilling the conditions for exemption from GST.
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