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TMI Blog2019 (3) TMI 1075X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal is that it is a composite supply as the supply of computer hardware and training are supplied in conjunction and it is naturally bundled - As per Section 2(30) a supply will be a composite supply only when it is naturally bundled - We understand that what the AAR wanted to say that the supply is a composite supply of two items but is not naturally bundled. However, we do not agree with the AAR on this aspect. The Education Guide, at para 9.2.4, clarifies that whether services are naturally bundled in the ordinary course of business would depend upon the normal or frequent practices followed in the field of business to which services relate - the Government of India in its nationwide policy called the National Policy on Education, 1986, stressed the need to employ information technology to improve the quality of education. This was the old policy which included schemes like computer literacy and studies in school and educational technology. Subsequently, the HRD Ministry revised its old policy and a new nationwide ICT scheme (Information and Communication Technology in School) was introduced to replace the earlier scheme. Thereafter, in the year 2012, the Department of Sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies Act, 1956. The Appellant having GSTIN 27AABC12106H1ZO is registered in Mumbai, Maharashtra and falls within the jurisdiction of Mumbai Nodal Division-5, Maharashtra. The Appellant is the social infrastructure arm of IL FS group and is engaged in the key areas of education, skill development, healthcare and cluster development for long term and sustainable impact. B. Inter alia, the Appellant is working with various State or Union Territory Governments to promote computer training among the students and teachers of the government and government aided higher secondary schools under the Information and Communication Technology ( ICT ) @ School Project (hereinafter referred to as ICT Project ), C. Information and Computer Technology ( ICT ) is universally acknowledged as an important tool for improving the quality of education. Realizing the importance of ICT and the vital role that it plays in educational sector, the Government of India framed nationwide policy viz. National Policy on Education, 1986 (as modified in 1992) (hereinafter referred to as the old policy), which stressed the need to employ information technology to improve the quality of education. Also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scheme in an effective manner. Thus, primary responsibility of implementing ICT Projects is on the State or Union Territory Governments. H. However, while framing the policy, standards, norms, etc. for implementation of ICT Projects, the State or Union Territory Governments would be guided by the national level policy framed by the Ministry of Human Resource and Development, Government of India. This is to ensure uniform and high standards, optimum utilization and cost-effective implementation of ICT Projects. Thus, the State and Union Territory Governments have to implement ICT Projects in accordance with the guidelines issued by the Central Government in this regard. I. As the State or Union Territory Government is required to implement ICT Projects in accordance with the guidelines issued by the Central Government, almost all states have been following the PPP model by sourcing out the ICT Project work to the private parties under the BOOT model (as suggested by the Central Government). J. Thus, as a matter of fact, throughout the nation, the States are adopting the BOOT model to implement ICT Project in schools. In fact, the Appellant is also implementing suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable ICT infrastructure (i.e. the ICT lab so created by the Appellant) for imparting computer training to the students in accordance with the curriculum developed in this regard by the Director, Pune, as per Annexure-Ill to the agreement. Q. Annually, the appointed teacher shall also impart necessary training to at least 5 school teachers including the headmaster/ headmistress of the school in computer aided learning and computer education with the usage of available ICT infrastructure. Further, the appellant shall impart technical training to the subject teachers for a period of ten days per year for normal operation, installing and use of textbook based educational software, computer education software, additional educational software, school management software, common software applications. R. Moreover, it is also the responsibility of the Appellant to maintain and upkeep the ICT labs in proper working conditions for the entire contract period at its own cost. For this, the Appellant would have to provide requisite manpower to carry out the necessary repairs as and when required within the time limit prescribed in the agreement. Besides this, the Appellant would a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther. GROUNDS OF APPEAL 1. For quick reference, Entry No. 72 of the Notification No. 12/2017- C.T. (Rate) is reproduced herein below: Sl.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent) Condition (1) (2) (3) (4) (5) 72 Heading 9992 Services provided to the Central Government, State Government, Union territory administration under any training programme for which total expenditure is borne by the Central Government, State Government, Union territory administration. Nil Nil 2. The corresponding exemption is provided under Entry No. 72 of Notification No. 12/2017 dated 29.06.2017 issued under Maharashtra Goods and Services Tax Act, 2017. 3. On perusal of the above extracted entry, it is clear that NIL rate under the said entry would be leviable to: a. all the education services (falling under Heading 9992); b. provided under any trai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply; ii. Mixed Supply - Section 2(74) of the CGST Act defines mixed supply to mean two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. 8. The concept of composite supply under GST has been explained by the Department in its e-flier on the topic of Composite Supply and Mixed Supply 1 to be identical to the concept of naturally bundled services prevailing in the existing service tax regime. As also referred in the flier, the said concept has been explained in the Education Guide issued by CBEC for the levy of service tax (hereinafter referred to as Education Guide ). The concept of bundled services that were naturally bundled in the ordinary course of business under Service tax law is now known as composite supply under GS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant humbly submits that for the reasons stated in the following paragraphs, supplies made by it under the ICT project are in fact naturally bundled, composite supplies, with services of computer training being principal supply. 14. The phrase naturally bundled in the ordinary course of business is not defined in the CGST Act. The Education Guide, at para 9.2.4, clarifies that whether services are naturally bundled in the ordinary course of business would depend upon the normal or frequent practices followed in the field of business to which services relate. Such normal and frequent practices adopted in a business can be ascertained from several indicators, a few of which are listed below - a) The perception of the consumer or the service receiver. If large number of service receivers of such bundle of services reasonably expect such services to be provided as a package then such a package could be treated as naturally bundled in the ordinary course of business. b) Majority of service providers in a particular area of business provide similar bundle of services. For example, bundle of catering on board and transport by air is a bundle offered by a majority of air ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aragraph 29); iv. the essential features of the transaction must be ascertained in order to determine whether the taxable person is to supply the consumer, being a typical consumer, with several distinct principal services or with a single service (paragraph 29); v. there is a single supply where one or more elements are to be regarded as constituting the principal services and one or more elements are to be regarded by way of contrast as anciliary services which share the tax treatment of the principal service (paragraph 30); vi. a service must be regarded as ancillary to a principal service if it does not constitute for customers an aim in itself, but a means of better enjoying the principal service supplied (paragraph 30); vii. the fact that a single price is charged may be indicative of a single service, but is not decisive (paragraph 31); 17. The Appellant submits that it fulfills all the criteria enlisted in the education guide and the Card Protection Case: a) It has been explained in the facts of the case that the national level policy framed by the Central Government for implementation of the ICT Projects provides that the State Government(s) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Case, the fact that a single price is charged is not decisive. Merely because separate prices for different goods and services is provided, it does not necessarily imply that a supply is not naturally bundled. A single consideration seems appropriate where same price is paid regardless of whether optional extras are taken unpaid. However, in all other cases, the question whether single or separate charges are made for different elements has been regarded as irrelevant. 20. Therefore, it is submitted that the fact, that the agreement has given bifurcation of cost element towards the goods portion and service portion, shall not be any basis to consider the training programme as not naturally bundled. 21. Therefore, in view of the industry practice and the expectation of state governments as recipient of supply, the understanding of the Appellant is, that all the activities performed by the private parties including the Appellant under the BOOT model are naturally bundled. 22. Further, Ld. AAR at para 3 of page 11 of the impugned ruling has held that computer training service is not pre-dominant / principal supply and the contracted supply has many distinct supply compone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucture in such schools, as required, which will be used by the Appellant for the first five years and thereafter by the respective schools. 28. It is pertinent to note that the infrastructure built by the Appellant is used by the teachers appointed by the Appellant to provide computer training to the students as well as to teachers of the government and government aided schools. 29. The Appellant humbly submits that the entire infrastructure is being developed for the purpose of imparting computer training which is the ultimate aim for the concerned schools and also for the Maharashtra Government and thus, supply of computer training services to the state of Maharashtra is the principal supply. 30. The above argument that the entire infrastructure is developed to provide computer training is also supported by the policies framed by the Central as well as the State Government in this regard. 31. The vision and mission statement in the new policy provides that the scheme has been introduced in schools with an aim to promote computer literacy and technologically-aided education among the students as well as teachers. 32. Reference is also made to the tender document iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. d. It takes a considerable time for the computer learning processes to stabilize and the BOOT model leverages the expertise of IT vendors for the time period enough for smooth transition. 37. Thus, for the above referred merits of the BOOT Model, the Government has encouraged the State Governments to opt it for implementing ICT Projects. 38. It is to be noted that prior to introduction of the new policy, the Government of India had amended its old policy in 2011 by issuing revised guidelines of ICT in Schools (hereinafter referred to as revised guidelines). Under its revised guidelines also, the Government has stressed upon the fact that the Outright Purchase Basis or Direct Procurement of Hardware by the State Governments would be the last resort. Moreover, the State Government(s) opting to implement the ICT Project under the Outright purchase method would be required to give a detailed justification as to why BOOT model is not opted. 39. It has been experienced in the past that the Outright Purchase of Assets helped in creation of assets or infrastructure, but in absence of the qualified teachers or trainers, such infrastructure was never utilized for impa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as teachers. 43. Para 6.1 of the agreement provides that the Appellant is required to provide computer education services, and at para 6.2 it is mentioned that the equipment is provided for computer education . Further, para 5 of the agreement provides the scheme of implementation of the agreement and the activities to be undertaken on part of the Appellant. It starts with the phrase for conducting the education delivery services , which clearly indicates that the main aim is to deliver education services for which various goods have to be supplied and a computer lab to be created. Also, para 8 of the agreement provides that the Appellant is required to provide one faculty member for each school to provide computer education. 44. Para 7.2 of the agreement provides that the Appellant shall receive performance based payment which shall be 20% of the entire consideration. A schedule of payment is provided at para 7 of the agreement according to which the Appellant would get paid in terms of percentage of students who pass the computer subject. If 70% or more students pass the computer subject, only then will the Appellant get 100% payment, and as the percentage of stu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party. 49. Reliance in this regard is placed on the decision of CMS (l) operations and Maintenance Co. Pvt. Ltd. vs. CCE, Pondicherry reported at 2007 (7) STR 369 (Tri.-Chennai) = 2007 (5) TMI 74 - CESTAT, CHENNAI , wherein, the Hon ble Customs, Excise Service Tax Appellate Tribunal held that the maintenance or repair services undertaken by CMS cannot be taxed under Management, Maintenance or Repair service inasmuch as the same are undertaken in respect of the self-owned goods and would amount to self-service. This view of the Tribunal was upheld by the Hon ble Supreme Court in CCE, Pondicherry vs. CMS (l) operations and Maintenance Co. Pvt. Ltd reported at 2017 (4) GSTL J75 (SC) = 2017 (11) TMI 442 - SUPREME COURT . 50. Thus, in view of the above discussion it is clear that the entire infrastructure is owned by the Appellant and the repair and maintenance activities undertaken by the Appellant are in regard to the self-owned equipment. Therefore, there is no suppiy of maintenance or operation services by the Appellant. 51. In fact, the repair and maintenance of the equipment and infrastructure is performed by the Appellant so that it may continue to provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dictionary Training: practical education in any profession, art, or handicraft; (v) Oxford Dictionary of English, third edition Training means the action of teaching a person or animal a particular skill or type of behaviour 57. On a careful perusal of the above referred dictionary meanings, it is evident that in common parlance, training is generally used to refer to practical instruction or learning process. It also means practical guidance given for developing skills or the action of teaching or giving instruction in a particular subject to enhance skills. 58. It is to be noted that under the erstwhile service tax regime, services in the nature of commercial training and coaching provided by commercial training and coaching institutes were taxable and the term commercial training and coaching was also defined under the Finance Act (both under the positive and negative regime). Further, the courts had, at various occasions, interpreted the term training used therein. 59. In this regard, reference is made to the decision of Hon ble Customs, Excise Service Tax Appellate Tribunal (Larger Bench) in the case of Great Lake Institute of Management Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Lake Institute of Management Ltd. (supra), the Hon ble Tribunal also observed that Parliament has not restricted the scope of training or coaching as is defined, by super adding any conditions such as in terms of pedagogic methodology, course or training content, syllabus, duration, periodicity, tenure/duration or like conditions. 63. Similarly, Entry No. 72 of Notification No. 12/2017-C.T. (Rate), also provides that the benefit of NIL rate would be available to all services under a training programme. Notably, the term training used therein, is neither defined nor qualified by adding any conditions viz. content, syllabus, periodicity, etc. Thus, once it is established that the services are in the nature of imparting skills or knowledge, the same would amount to training services for the purpose of Entry No. 72 of Notification No. 12/2017-C.T. (Rate). 64. It is already discussed in detail that the Appellant is engaged in providing computer related skills to the students as well as to the teachers. Thus, it is abundantly clear that the services provided by the Appellant viz. computer related training to the students as well as teachers under ICT Project would squarely fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ist in the said notification has been held to be untenable and illegal in plethora of cases. 71. In case of Commissioner of Central Excise, Surat-l vs. Favourite Industries reported at 2012 (278) ELT 145 (S.C.) = 2012 (4) TMI 65 - SUPREME COURT OF INDIA , it was held by the Hon ble Supreme Court that exemption notification has to be interpreted strictly and there should be no addition and subtraction to the language of the notification. 72. It is a settled legal position that non-existing conditions cannot be added in notifications to deny exemption. Larger Bench of the Hon ble Supreme Court in the case of Sri Sathya Sai Institute of Higher Medical Sciences vs. Union of India reported at 2003 (158) E.L.T. 675 (S.C.) = 2003 (9) TMI 94 - SUPREME COURT OF INDIA , has held that no courts can impose additional conditions which are not provided for in the exemption notification. It was observed specifically that grant of an exemption is the prerogative of the legislature and hence it is for the legislature to impose appropriate conditions for availing the benefit of an exemption notification and not other authorities. 73. Reliance is also placed on Kohinoor Reclamat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmits that supply under the ICT Project involves supply of goods as well as supply of services, and whilst supply of services is the principal supply, supply of goods is merely an ancillary supply. As submitted above, in case of composite supply, ancillary supply takes the color of principal supply and the tax treatment of principal supply is applied to ancillary supply. It is to be noted that if at all, Schedule II(1)(c) relates only to the ancillary supply in this case and thus cannot decide the nature / tax treatment of the entire transaction / composite supply. The Appellant understands that discussion of Schedule II(1)(c) is not relevant here. Thus, in the present case, the entire supply (composite supply) is to be treated as the principal supply which is computer training services under the agreement. b. Also, Schedule Il(l)(c) requires payment of full consideration for title in goods to transfer at a future date. In the present case, the agreement stipulates payment of Re. 1/- which cannot be considered as full consideration. For this reason also, Schedule II(1)(c) does not find application in the present case. 78. It is humbly submitted that the decision in the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in agreement with the Appellant and has given no adverse finding in this regard. PERSONAL HEARING 88. A personal hearing in the matter was conducted on 16.01.2019, where Shri Kalpesh Shah, appearing on behalf of the Appellant, reiterated their written submissions made before the Appellate Authority at the time of the appeal and Shri Ramesh shendge, Dy. Commissioner argued in the capacity of the Jurisdictional Officer as the respondent in the case. DISCUSSION AND FINDINGS 89. We have perused the records of the file and have gone through the facts of the case and the oral and written submissions made by the appellant as well as the department s representative. We have also gone through the Advance Ruling Order passed by the AAR. 90. The appellant is a social infrastructure arm of IL FS Group and is engaged in key areas of educational skill development, health care and cluster development for a long term. The appellant is also working with various State and Union Territory Governments to promote computer training amongst the students and teachers of the Government and Government aided higher secondary schools under the Information and Communication Technolog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... site supply of goods i.e. hardware and networking equipment, printer, scanner, computer equipment and also imparting training on the use of such equipment. It is a composite supply of goods and services not naturally but artificially bundled having distinctly separate components with distinct value attributable to each of its components. The supply is composite supply of goods and services having distinctly separate components like procurement of hardware and maintenance of the same for 5 years, supply of man power and training to the teachers. The contract is also for the supply of hardware and software along with the site preparation i.e. official flouring, furniture and fixtures, electrical equipment etc. The other part is a small component of the above. Regarding the contention of the appellant that there is no consideration for the transfer of the goods in question, it was concluded by the AAR that as per the part 10 of schedule-Il of the SGST Act, any transfer of goods under an agreement which stipulates that property shall passed in future date is also a supply of goods. The AAR however, agrees with the contention of the appellant that the services are su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es deployment and maintenance of school management software to admit the administrative aspects of a school. Clause 2.3 of the project proposal deals with the training and it incorporates training to at least 5 teachers per school for a period of 10 days for normal operation, installing and use of the text book software, computer education software etc. The teachers manual is made available to all trainee teachers. It also includes provisions of one full time instructor at each school. It is also the responsibility of the appellant to maintain the ICT Lab in proper working condition for the entire contract department at its own cost. The appellant is also required to appoint a help desk which will serve as a single point of contract for all ICT related instances and service requests. As per the payment terms laid down in 7.1 of the agreement, 30% payment will be made on satisfactory commissioning and installation of hardware and delivery and installation of education related software at each school within 120 days from the date of agreement. 5% will be made every semester and the balance 20% payment will be made based on the performance of student in the annual exam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice receivers of such bundle of services reasonably expect such services to be provided as a package then such a package could be treated as naturally bundled in the ordinary course of business. b. Majority of service providers in a particular area of business provide similar bundle of services. For example, bundle of catering on board and transport by air is a bundle offered by a majority of airlines. c. The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business. If the nature of services is such that one of the services is the main service and the other services combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main service. d. Other illustrative indicators, not determinative but indicative of bundling of services in ordinary course of business are - (i) There is a single price or the customer pays the same amount, no matter how much of the package they actually receive or use. (ii) The elements are normally advertised as a package. (iii) The different elements are not available separa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to States/UTs to establish computer labs on sustainable basis*.(*emphasis added) The scheme has essentially four components:- The first one is the partnership with State Government and Union Territories Administrations for providing computer aided education to Secondary and Higher Secondary Government and Government aided schools. The second is the establishment of smart schools, which shall be technology demonstrators. The third component is teacher related interventions, such as provision for engagement of an exclusive teacher, capacity enhancement of all teachers in ICT and a scheme for national ICT award as a means of motivation. Fourth one relates to the development of an e-content, mainly through Central Institute of Education Technologies (CIET), six State Institutes of Education Technologies (SIETs) and 5 Regional Institutes of Education (RIEs), as also through outsourcing. Thus, what can be seen from the above is that it is a Central Government driven project and the training along with supply of computers is an inherent part of the project and the project is imagined as such. Therefore, a major pre-requisite for a supply to be a composi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... training, has been outsourced. However, our research suggests that vendors are finding it challenging to impart an ICT based education in the schools. (Oct, 2010) ODISHA The ICT@school scheme of E-Vidyalaya programme has been started under Odisha Madhyamik Sikshya Mission (OMSM) and aims to reach 4,000 government schools in the first phase and an additional 2,000 government schools in the second phase. An amount of around ₹ 746 crore has been demarcated for the project. Special training will also be imparted to teachers to help them in using new facilities to their full extent.(Aug, 2014) 104. It is seen by us that the present agreement under consideration is also one such ICT project. The contract is for implementation of computer education program and the preamble also states that BOOT Model is envisaged under ICT school scheme under public-private partnership. Thus, the agreement is in consonance with the national guidelines on computer aided education. It satisfies the criteria of composite supply in the sense that it is an established scheme or a method of training done as per national policy and having government mandate behind it. The ICT scheme is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company is described as follows:- ILFS Education and Technology Services Ltd. aspire for quality in education along with Profound Societal Impact. As catalysts, we facilitate education to transform and create a sustainable impact. Education is a passion for us and not just a business. We improve the quality, reach and delivery of education to the masses using pedagogy and technology. Our partnership with the Government, Educational Institutions and International Agencies ensures maximum reach and hence impact. 109. The above motto shows that company is in the field of education and its expertise lies in combining education with technology, However, this will not imply that providing technology is the aim of the company - it only makes the imparting of education easier. It is imparting education with transformative solutions. The solutions provided by them in educational institutions involve the supply of technology along with education. 110. We have also gone through the Agreement of the appellant with the Director of Education. Clause 4.0 of the agreement shows that the contract is for provision for computer education including equipment for the same . Clause 4.1 r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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