2020 (4) TMI 868 - AAR - GST

Classification of supply - Composite Supply or independent of supply of power packs - supply of powerpacks, freight and insurance service and commissioning/ installation services - freight and insurance service and commissioning / Installation - HELD THAT - The supply of installation and commissioning service would be and independent service and is not a part of the composite supply. The rate of tax applicable to the installation and commissioning service needs to be applied for such supply of service. The applicant has to transport the goods and deliver the power packs to the recipient and the amount charged to do this is a part of the value of the goods supplied. Hence the freight and insurance charges are part of the value of supply of power packs, since the supply contract is a contract for supply of power packs and the value of the contract is the sum total of the value of the power pack plus all charges charged to the recipient for anything done till the goods are delivered to the recipient - Even if these supplies, i.e. supply of power pack and supply of freight and insurance are distinct supplies, the same would be covered under the definition of composite supply as per section 2(30) of the CGST Act, 2017, as the same are naturally bundled and supplied in conjunction with each other in the ordinary course of business - The principal supply in the case is the supply of power packs. Thus, the supply of power packs and the supply of freight and insurance services involved in such power packs shall be treated as the supply of power packs and the applicable tax related to such power packs and the time of supply would apply to the entire transaction as it applies to the supply of power packs .

Issues Involved:
1. Whether the supply of power packs, freight and insurance service, and commissioning/installation services constitutes a "Composite Supply" under the CGST Act, 2017.
2. The classification and tax treatment of freight and insurance services.
3. The classification and tax treatment of installation and commissioning services.

Issue-wise Detailed Analysis:

1. Composite Supply Determination:
The applicant sought an advance ruling on whether the supply of power packs, freight and insurance services, and commissioning/installation services should be treated as a "Composite Supply" as defined in Section 2(30) of the CGST Act, 2017. The applicant argued that since the value for the 'supply of goods' and 'supply of services' are separately provided in the Purchase Orders and not naturally bundled, they should not be treated as a 'Composite Supply.' The applicant emphasized that the installation and commissioning services are performed months after the supply of power packs and can be independently availed by the recipient from other service providers.

2. Freight and Insurance Services:
The applicant contended that freight and insurance services are naturally bundled with the supply of power packs and should be treated as part of the "Composite Supply." The Authority examined the Purchase Order terms, which specified that the delivery mode is by road on a freight pre-paid door-delivery basis and that insurance charges are extra. Section 15(2) of the CGST Act, 2017, was referenced, which includes incidental expenses in the value of supply. The Authority concluded that freight and insurance charges are part of the value of the power packs supply, as they are necessary for delivering the goods to the recipient. Even if considered distinct supplies, they would still fall under "Composite Supply" as per Section 2(30) of the CGST Act, 2017, with the principal supply being the power packs.

3. Installation and Commissioning Services:
The applicant argued that installation and commissioning services are not naturally bundled with the supply of power packs and should be treated as independent services. The Authority agreed, noting that the recipient can choose to avail these services from other providers. Therefore, installation and commissioning services are not part of the composite supply and should be treated as independent services. The applicable tax rate for these services was not addressed as it was not part of the ruling request.

Ruling:
1. The supply of power packs and the freight and insurance charges form part of the value of the supply of power packs.
2. The supply of commissioning/installation services supplied by the applicant is independent of the supply of power packs.

The Authority's findings emphasized that the supply of power packs, along with freight and insurance services, constitutes a "Composite Supply" with the power packs as the principal supply. Installation and commissioning services, however, are independent and not part of the composite supply.

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