2023 (12) TMI 287 - AAAR - GST

Classification of supply - composite supply or mixed supply? - supply of services of coaching to students which also includes supply of goods/printed material/test papers, uniform, bags and other goods to students against a lump-sum amount - HELD THAT - The student kit is integral to one overall supply i.e. supply of coaching services in the instant case. If one or more is removed, the supply would be affected as removal of the student kit would affect the studies of the students (no printed material or study material or exam papers or course planner and only coaching would definitely affect the studies of the students) and furthermore the nature of the ancillary services/goods in this package is facilitative to the students as well - the amount of the printed material, uniform and bags form a small proportion of the total value of the supply as part of the package. Moreover, when the appellant is not separately selling their bags, uniforms and printed material, it is not difficult to infer that their students enjoy these goods only as a part of composite services of educational/coaching services. No student would choose only the student kit and not the coaching. Here the AAR judgement fails prima facie, because the students cannot opt for only coaching service without receiving the student kit. The students will only pay for principal supply and anyways are going to receive the student kit. The student kit is part of the package of the coaching services and is not sold separately by the appellant or even by their network/channel partner. It is therefore to be treated as composite supply. The supply of coaching service by the appellant along with supply of goods/printed material/test papers, uniform, bags and other goods to their students is composite supply and their principal supply is coaching services.

Summary

Issues Involved:
1. Classification of supply as either "mixed supply" or "composite supply".
2. Eligibility of Input Tax Credit (ITC) for the supplies.
3. Determination of the supplier and recipient of coaching services.
4. Value of services provided by the appellant and the channel/network partner.

Summary:

1. Classification of Supply:
The appellant, M/s Resonance Edventures Limited, provides coaching services along with goods such as printed materials, uniforms, and bags. The Authority for Advance Ruling (AAR), Rajasthan, initially classified this as a "mixed supply" under Section 2(74) of the CGST Act, 2017, attracting the highest rate of tax at 18%. However, the appellant argued that the supply should be considered a "composite supply" under Section 2(30) of the CGST Act, 2017, with coaching services as the principal supply. The Appellate Authority noted that the appellant's services and goods are naturally bundled and integral to the coaching services, thus qualifying as a "composite supply". The ruling of the AAR was modified to classify the supply as a "composite supply" with coaching services as the principal supply.

2. Eligibility of Input Tax Credit (ITC):
The AAR confirmed that the appellant is eligible to avail Input Tax Credit (ITC) as per Section 16 of the CGST Act, 2017, for the GST paid on goods or services used in the course or furtherance of business, subject to the conditions prescribed under Section 17 of the CGST Act, 2017.

3. Determination of Supplier and Recipient:
The AAR ruled that the appellant (REL) is the supplier of mixed supply to the students, and the network partner is the supplier of service to the appellant. The place of supply for both cases would be determined as per the relevant sections of the IGST Act, 2017.

4. Value of Services:
The total consolidated amount charged by the appellant to the students, for which a tax invoice is issued, shall be the value of the mixed supply. The network partner will issue invoices to the appellant for the coaching services provided.

Conclusion:
The Appellate Authority concluded that the supply of coaching services along with goods by the appellant is a "composite supply" with coaching services as the principal supply, modifying the initial ruling by the AAR. The appellant is eligible for ITC, and the value of services will be based on the total consolidated amount charged to students.