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TMI Blog2018 (10) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... condition that customer shall procure agreed quantity of products as per the scheduled time limit. The customer is also responsible for the Cost of any repairs required in connection with any damage caused to the instrument due to negligence or misuse. The agreement between the parties, established that the supply of two components are indispensable for the fulfillment of contract and getting required output - the supply of two components based on the strength of agreement qualifies the concept of combination or two or more naturally bundled' supply and becomes composite supply. The supply of instrument and the products to a hospital/ laboratory is for monetary consideration. Being a composite supply, it is the discretion of the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use without any consideration, against an agreement containing minimum purchase obligation of products like reagents, calibrators, disposals etc for a specific period constitute composite supply. The principal supply is the transfer of right to use of any goods for any purpose and is liable to GST under Sl No. 17 (iii) - Heading 9973 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017. - AAR No. KER/15/2018 - - - Dated:- 26-9-2018 - SHRI. B.G. KRISHNAN AND SHRI. B.S. THYAGARAJABABU MEMBER Authorized Representative: Adv. Darshan Boram, The applicant has adopted the business model of placing their own medical instruments at the premises of hospitals or laboratories and supplied the pharmaceutical products, reagents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e products are supplied against tax invoice. If the hospital fails to purchase specified minimum quantity of the products such as reagents, calibrators, disposals etc, the applicant is entitled to recover the same from the hospital, equal to the volume of deficit purchase. As the applicant has faced certain difficulties while transporting the instrument against delivery challan, this clarification was sought for. The issue is examined in detail. The applicant is providing two components to the respective hospitals or laboratories. One is the medical instrument and the other one is the products like reagents, calibrators, disposals etc to be used in that machine. The terms and conditions of the agreement reveal that it is an indivisible c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement is the supply receipt exigible to tax. This being a composite supply applicable tax rate is @ 18% GST. But the applicant established a business model, in such a way to split the supply by independent transactions. One transaction is the supply and installation of instrument owned by the applicant, at the premises of the customer on free of cost, till the tenure of contract. The 2nd transaction is supply of per-defined minimum quantity of consumables like reagents, calibrators, disposals etc on the pre- fixed prices. The applicant has designed such a modus operandi with the ultimate objective to avoid payment of tax at higher rate, which is applicable for composite supply. colourable business model of free supply of instrument acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs the characteristics of combination of goods or utilities to provide a specified service. In order to obtain the required service of diagnosis, the hospital / labs require two unique components such as instrument and the products like reagents. calibrators, disposals etc. By the combination of these two components, the desired output is generated and hence these two components are inter-dependent and not separable. As both these components are naturally bundled, the impugned supply of instrument and reagents based on an agreement constitute composite supply. In this composite supply the principal supply is the instrument. Hence the entire receipts covered under this agreement attract the tax rate of principal supply ie, the instrument. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Consumable is not procured by the recipient hospital. In such scenario there is clear provision in the agreement to the effect that, if the customer fails to meet its exclusive purchase obligation or its minimum purchase obligation, the applicant shall have the right to recover the deficit amount from the customer. From this, it is clear that the price realized from the Customer includes subsumed rent of the equipment also. That is why if required quantity of consumable is not used, the customer hospital has the liability to pay the deficit amount. In the light of the discussion above, we come to the conclusion that the essential nature of the transaction, as evidenced by the agreement, is the right to use the machine / instrument an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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