2019 (10) TMI 1013 - AAR - GST

Rate of GST - HSN Code - e-campus solutions supplied by the applicant - HELD THAT - The transaction of the applicant is verified and found that the applicant has entered into contract with various organisations, especially with schools for the supply of e-campus solutions which involves various e-learning facilities. The contract also involves the annual maintenance of the entire product. The contract is for multiple years and the consideration for the contract is to be received in two instalments in each year. The sample contract is examined and found that the transfer of title in goods is happening only at the end of the contract period in all cases, except planetarium where no transfer of property in goods is happening and it is a clear case of lease (hence a service). Even where the contract is terminated within the contract period, a lump-sum amount is charged as severance amount which is related to the cost of infrastructure installed and the transfer of property happens at that time. Hence in all cases, the actual contract is for the lease of infrastructure in the project and usage and hence is a service - What is leased in this case is not individual goods but all the goods involved in the set-up of an e-classroom. The moment the e-classroom comes into existence,- the individual goods lose their existence and only additional users can be attached for additional amounts. Thus, the lease of the project is covered under item (iii) of entry 17 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 and is liable to tax at 9% CGST as the project is taxable at 9% CGST.

Summary

Issues involved:
1. Determination of HSN Code and tax rate for e-campus solutions supplied by the applicant under the GST Act.

Analysis:
The applicant, a Private Limited Company registered under the Goods and Services Act, sought an advance ruling on the HSN Code and tax rate for e-campus solutions provided by them. The applicant supplies e-campus solutions to organizations, including schools, encompassing e-learning facilities, annual maintenance, software updates, training, and staff for teaching. The contract involves the delivery of various materials like interactive whiteboards, projectors, CPUs, digital content, and maintenance services for multiple years. The contract also includes clauses for new infrastructure delivery and support from the contractee for civil work. The project value is charged per student basis, and the contract involves both one-time hardware investment and periodic service investments. The applicant bills schools based on the number of students, calculating instalment amounts for each academic year and charges GST at 18%.

The Authority considered the submissions by the applicant and their representative during the personal hearing. It was noted that the contract involves the lease of infrastructure for e-classrooms, language labs, and other solutions for a period of five years, with the transfer of title happening only at the end of the contract. The contract is deemed as a service due to the lease nature of the agreement. The lease of infrastructure for e-classrooms falls under SAC 997329, and the tax rate applicable is 9% CGST under entry 17(iii) of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017. The ruling stated that the supplies made by the applicant are taxable at 9% CGST under both the Central and Karnataka Goods and Services Tax Acts.

In conclusion, the Authority ruled that the e-campus solutions provided by the applicant are classified under SAC 997329 and are subject to a tax rate of 9% CGST under the relevant notifications.