2021 (12) TMI 37 - AAR - GST

Classification of services - rate of GST - composite supply or not - manufacturers of electronics equipments for locomotives and coaches for Indian Railways and Metro Railways - naturally bundled supply of services or not - HELD THAT - As seen from the definition a composite supply is essentially a naturally bundled supply where two or more different supplies invariably exist along with each other. As against this a mixed supply is a bundled supply is not a bundled supply where the goods / services though supplied together are distinct and separately identifiable. However a supply can be a mixed supply only if it is a single price. The Hon ble High Court of Kerala in the case of ABBOTT HEALTHCARE PRIVATE LIMITED VERSUS THE COMMISSIONER OF STATE TAX KERALA, THE COMMISSIONER, CGST, KERALA, UNION OF INDIA, STATE OF KERALA, THE KERALA AUTHORITY FOR ADVANCE RULING, THE KERALA APPELLATE AUTHORITY FOR ADVANCE RULING 2020 (1) TMI 338 - KERALA HIGH COURT held that a composite supply must take into account supplies as affected at a given point in time on as is where is basis. The supply made by the applicant against the letter of acceptance (LOA) of the South Central Railway is a composite supply and the rate of tax applicable is the rate at which the principal supply has to be taxed i.e., Electrical signalling equipment with HSN code 8530 - This commodity was made taxable at the rate of 9% under CGST SGST respectively vide Notification No. 41/2017 dated 14.11.2017. Therefore the supply of Train Collision Avoidance System (TCAS) is taxable at the rate of 9% under CGST SGST respectively.

Summary

Issues:
1. Classification of HSN/SAC
2. Applicability of GST rate

Classification of HSN/SAC:
The applicant, a manufacturer of electronics equipment for railways, sought clarification on whether their supplies for a specific purchase order constitute a composite supply and the applicable tax rate. The contract with South Central Railway involved design, supply, installation, testing, and commissioning of Train Collision Avoidance System (TCAS) equipment. The applicant inquired whether the scope of work falls under the composite supply of works contract service as defined under Section 2(119) of the CGST Act, with a query on the applicable tax rate of 12%.

Applicability of GST rate:
The Authority analyzed the contract terms, the LOA issued by South Central Railway, and a handbook on TCAS published by the Ministry of Railways, which detailed the system's composition and working. The system was found to be a naturally bundled supply of various goods working together for railway safety through signaling. The supply was deemed a composite supply as per Section 2(30) of the CGST Act, where goods or services are naturally bundled and supplied together in the ordinary course of business. The rate of tax applicable was determined based on the principal supply, which was identified as electrical signaling equipment with HSN code '8530'. This commodity was taxed at 9% under CGST and SGST, as per Notification No. 41/2017. Therefore, the supply of TCAS equipment was held taxable at 9% under both CGST and SGST.

In conclusion, the Authority issued an Advance Ruling clarifying that the HSN classification for the TCAS equipment was '8530' and the applicable GST rate was 9% for both CGST and SGST.