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TMI Blog2019 (9) TMI 1483X X X X Extracts X X X X X X X X Extracts X X X X ..... epend on which supply is the principal supply which is to be determined on the basis of facts and circumstances of the present case - From the above 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. It is clear that the bus body builder is doing fabrication of body on chassis provided by the principal (the applicant is principal in this case; type 1), this amounts to job work, the supply would merit classification as service, and 18% GST as applicable will be charged accordingly - the applicant has a complete bus ready to supply to the customer. The supply of chassis mounted with bus body to the customer, shall be treated as a supply of bus; classifiable under chapter heading 8702; taxable at the rate 28%. The Applicant will enter into a contract with its customer for the sale of chassis. Pursuant to which, request is received from the customer for fabrication of the bus body on the chassis purchased by him. In this reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., 39 KM Stone, N.H.-8, Narsinghpur Village, Gurgaon, Haryana is registered under the GST laws vide registration no. 06AAACS1430P1ZD; and engaged in the business of trading of buses and chassis of bus. Additionally, in certain cases, also engaged in provision of services in respect of fabrication/mounting of bus body on chassis to its customer, wherein such services of fabrication/ mounting are being outsourced to a bus bodybuilder. In respect of the same, the applicant enters into a separate arrangement with body builder for mounting of bus body on chassis provided by the Applicant. 1.2 The Applicant has provided below a description of the transactions/ arrangements entered or proposed to be entered by the Applicant with its customer: 1.3 Type 1:- Contract for sale of chassis mounted with bus body Applicant enters into an arrangement with a chassis manufacturer for purchasing chassis for bus. Subsequently, the Applicant enters into an independent contract/arrangement with a bus body builder for mounting the bus body on the chassis. In this regard, the Applicant sends the chassis to the body builder under the cover of a challan. Once the body building act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of activity of mounting/fabricating of bus body on the chassis. In respect of the above, the Applicant will further enter into an arrangement with body builder for mounting the bus body (as per customer specifications). For executing supplies as per the above arrangement, the Applicant will supply the chassis to the customer under the Bill to Ship to arrangement, wherein the invoice for such chassis will be raised on the customer and the chassis will be shipped to body builder for mounting the bus body on the chassis. Once the body building activity gets completed, the built up bus i.e. chassis mounted with the bus body will be removed by the bus body builder and sent to the customer directly. For carrying out such activity of mounting the bus body on the chassis, the body builder will recover service charges from the Applicant. Subsequently, the Applicant will raise another invoice on the customer for recovering its charges in respect the activity of mounting/fabricating of bus body on the chassis. In respect of the above transaction, separate consideration will be charged by the Applicant from the customer in respect of the supply of chassis and provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of activity of mounting/fabricating of bus body on the chassis wherein the said activity of mounting/fabricating is outsourced by the Applicant to the body builder. 2.3 Whether the recovery of the bus body building charges incurred by the Applicant on behalf of customer in capacity of an agent, should be covered in the ambit of Schedule I of Central Goods and Services Tax Act, 2017 (CGST Act, 2017) and leviable to GST. If the answer to the said question is in adverse, whether the recovery of the bus body building charges incurred by the Applicant on behalf of the customer in capacity of an agent, will be leviable at the rate of 18% as supply of services. 3. Discussion and findings:- 3.1 Now, before the above questions are to be decided in the instant case, it is pertinent to know whether the activity of the bus body builder, in which fabrication/mounting of bus body on the chassis supplied by the applicant amounts to supply of goods or supply of services. In this regard, CBIC vide Circular No. 34/8/2018-GST, dated 1-3-2018, has clarified the matter. The relevant portion of the circular is as under: S.N. Issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply is to be determined on the basis of facts and circumstances of the present case. 3.5 Now, classification of this composite supply, as goods or service would depend on which supply is the principal supply which is also to be determined on the basis of facts and circumstances of the present case. 3.6 Further, the tax liability on composite supply has been determined under Section 8 of the CGST/SGST Act, 2017, as under : The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:- (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and (b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax. It means, in the present case, there is composite supply of goods and services. One of which is a principal supply. And the tax liability of such principal supply will be the tax liability of the composite supply. 3.7 Now, it is pertinent to identify the principal supply and tax liability thereon for all the three types of description of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the bus body builder is doing fabrication of body on chassis provided by the principal (the applicant is principal in this case; type 1), this amounts to job work and as mentioned at Para 12.2 (b) 12.3 above the supply would merit classification as service, and 18% GST as applicable will be charged accordingly. Now, the applicant has a complete bus ready to supply to the customer. The supply of chassis mounted with bus body to the customer, shall be treated as a supply of bus; classifiable under chapter heading 8702; taxable at the rate 28%. 3.10 Now, discuss type 2; in which a separate contract for sale of chassis and provision of services in respect of activity of mounting/fabricating of bus body on the chassis is done. 3.11 In this situation, the Applicant will enter into a contract with its customer for the sale of chassis. Pursuant to which, request is received from the customer for fabrication of the bus body on the chassis purchased by him. In this regard, a subsequent contract will be entered between the Applicant and the customer for the provision of services in respect of activity of mounting/fabricating of bus body on the chassis. In respect of the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue which is being charged by the bus body builder from the applicant or the customers. 3.16 Thus it emerges that the applicant whether a dealer or an agent is providing only chassis. All inputs/materials required for fabrication of bus body, has to be used by the bus body builder from its own account. Under such situation it is the bus-body which is being fabricated and also being mounted on the chassis provided by the applicant. Therefore, it is not merely job-work. Rather it is supply of bus body and the activity of fitting/fabrication/mounting of bus body on chassis is an ancillary activity to the principal activity of supply of bus-body. Hence, in terms of the clarification issued by the CBIC vide Circular No. 34/8/2018-GST, dated 1-3-2018; the impugned activity is a composite supply, with principal supply being supply of bus-body. 3.17 From the contents of the Tax Invoice No. 10461/1920 dated 20.05.2019 issued by the bus body builder i.e. M/s. Audi Automobiles, Pithampur, District-Dhar (M.P.) to the applicant as supplied by the applicant, it is observed that the description of supplies made/work done, is as under: Bus body building on your chassis with materi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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