2021 (9) TMI 482 - AAR - GST

Classification of supply - supply of goods or supply of services - composite services or not - principal supply - supply of services of coaching to students which also includes along with coaching supply of goods/printed material/test papers uniform bags and other goods to students - coaching service under a business model through Network Partners as per sample agreement attached containing obligations of Applicant and Network partners - supplier of service and recipient of service? - valuation of service provided by Applicant to students and by network partner to Applicant. Supply of goods or services - services of coaching to students which also includes along with coaching supply of goods/printed material/test papers uniform bags and other goods to students - HELD THAT - Since the applicant supplied the goods i.e. printed material text paper uniform bags to the students etc. and as well as supply of services i.e. coaching/Training to the student. As such supplies are not charged separately but a consolidated amount is charged by the applicant - In the instant case the applicant is providing coaching service to its enrolled students for as consideration which will be a lump sum amount for both goods and services. Therefore transaction of supply of coaching service for a consideration falls under the ambit of Supply of service . Whether such supply shall be considered as composite supply? - If yes what shall be the principal supply? - HELD THAT - From the definition of principal supply it is clear that in the present case there is a principal supply of goods or services which constitutes the predominant element of a composite supply. The predominant element of the composite supply is to be determined on the basis of facts and circumstances of the present case - In the instant case the applicant along with coaching services provides goods in the form of uniforms bags study material etc. Supply of goods is a part of supply of service shall qualify as composite supply . The principal supply being the supply of coaching service to the students tax on such supply shall be levied accordingly. Coaching service under a business model through Network Partners as per sample agreement attached containing obligations of Applicant and Network partners - who shall be considered as supplier of service and recipient of service under the agreement? - HELD THAT - Where services are provided by the applicant to the students. students shall be regarded as recipient as consideration is payable for the supply of goods or services or both by the students to the applicant. Similarly. Network partner will be regarded as provider of service to the applicant. What shall be the value of service provided by Applicant to students and by network partner to Applicant? - HELD THAT - The applicant has been incurring the cost of goods supply to the students i.e. Begs study material etc.). therefore in light of the provisions of Sections 15(2) (b of the Act the values of goods are part of the value of services provided by the applicant and charged a consolidate amount to the students. Therefore the consolidated value for which tax invoice is issued shall be the taxable value. Whether both Applicant and network partner can avail eligible ITC for their respective supplies? - HELD THAT - As per Section 16(1) of the CGST Act Every registered person shall subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49 be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person - in this case the applicant is a registered person and can avail eligible ITC as per provisions of GST Act 2017.

Summary

Issues Involved:
1. Classification of supply (goods or services)
2. Determination of composite supply and principal supply
3. Identification of supplier and recipient of service
4. Valuation of services provided
5. Eligibility for Input Tax Credit (ITC)

Detailed Analysis:

1. Classification of Supply (Goods or Services):
The applicant supplies coaching services to students, which include printed material, test papers, uniforms, bags, and other goods. These supplies are not charged separately but as a consolidated amount, with the major component being coaching. The ruling determined that such supply should be considered a "Supply of Service" as per Section 7(1) of the CGST Act, 2017, since the transaction is primarily for coaching services with ancillary goods provided.

2. Determination of Composite Supply and Principal Supply:
The ruling examined whether the supply is a Composite Supply or a Mixed Supply. As per Section 2(30) of the GST Act, 2017, a composite supply involves two or more taxable supplies naturally bundled and supplied in conjunction with each other in the ordinary course of business, with one being the principal supply. The principal supply is defined under Section 2(90) of the CGST/SGST Act, 2017. In this case, the predominant element is the coaching service, making the entire supply a composite supply with coaching as the principal supply. The tax liability on such composite supply is determined as per Section 8 of the CGST/SGST Act, 2017, where the tax rate applicable to the principal supply (coaching service) will be applied to the entire composite supply.

3. Identification of Supplier and Recipient of Service:
Under the business model, the applicant provides coaching services through Network Partners. The network partner provides services to students on behalf of the applicant. The ruling clarified that:
- The applicant is the service provider to the students.
- The network partner is the service provider to the applicant.

4. Valuation of Services Provided:
The value of the service provided by the applicant to students and by the network partner to the applicant is determined under Section 15 of the CGST Act. The value of taxable supply includes the transaction value, which is the price actually paid or payable for the supply. Since the applicant incurs the cost of goods supplied to students (e.g., bags, study material), the consolidated amount charged to students, for which a tax invoice is issued, shall be the taxable value.

5. Eligibility for Input Tax Credit (ITC):
As per Section 16(1) of the CGST Act, every registered person is entitled to take credit of input tax charged on any supply of goods or services used in the course or furtherance of business. The ruling confirmed that both the applicant and the network partner can avail eligible ITC for their respective supplies as per the provisions of the GST Act, 2017.

Ruling Summary:
1. The supply by the applicant will be considered a "Supply of Service."
2. The supply shall be considered a Composite Supply, with coaching service as the principal supply.
3. The applicant will be the service provider to the students, and the network partner will be the service provider to the applicant.
4. The total consolidated amount charged, for which the applicant generates a tax invoice, will be the value of the service supply by the applicant.
5. The applicant can avail eligible ITC as per the provisions of the GST Act, 2017.