9911796707
TMI Blog2025 (4) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... per entry No. 233 of schedule-II of CGST Act, 2017; * the applicant intends to insert a 'Scraping Tool' in the said pack of oil pastels & has re-labelled it as 'Apsara Oil Pastels with free scraping tool'; * the scraping tool is a small tailor-made product of plastic (3 x 3 cms.) and comes in fancy shapes like Duck or Bird; that it can be used to scratch the surface coloured with the oil pastels to create and enrich designs, drawings, and patterns in the coloured areas by removing layers of oil pastels from a drawing and reveal a different colour or layer underneath; that the picture of the scraping tool is as under: * that the scrapping tool is independently classified under 3926 9080 and taxed at 18% as per entry 111 of schedule-III of CGST Act, 2017. 4. The applicant is further of the view that though the supply of oil pastels includes the scraping tool, there is no supply of scraping tool since they are making only one supply i.e. supply of oil pastels which is classifiable under 9609 9030 & is leviable to GST @ 12% under entry 233 of schedule-II of CGST Act, 2017, owing to the following: * that no consideration is charged for scraping tool, as it is given free of cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduct, ie oil pastels. The scraping tool compliments the use of oil pastels by enhancing the beauty and aesthetics of the drawing and sketches coloured by using the oil pastels. Other than being used along with the oil pastels, the scraping tool does not have any utility by itself. 6. In view of the aforementioned facts, the applicant has asked following question in their application for advance ruling viz i. Whether inclusion of a free 'Scraping Tool' in the pack of Apsara Oil Pastels amounts to independent 'supply' of the scrapping tool under Section 7 of the CGST Act, 2017?; ii. What will be the classification and rate of tax on supply of the 'Apsara Oil Pastels with Free Scraping Tool' under the provisions of the CGST Act, 2017 and the GGST Act, 2017? 7. Personal hearing was granted on 03.01.2025 wherein Shri Parind Mehta, CA along with Shri Sanjay Gupta, CFO appeared on behalf of the applicant and reiterated the facts as stated in the application. During the course of the personal hearing, the applicant submitted a brief write-up, seeking correction/ up-dation in respect of paragraph C.5 of the original application viz: Particulars Oil Pastels Scrapping Tool Nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eproduce the relevant provisions for ease of reference: * Section 2. Definitions (30) "composite supply" means a supply 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; Illustration.- Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply; (74) "mixed supply" means 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. Illustration.- A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately; (9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g tool in the kit containing 'Apsara oil pastels with free scraping tool'; [b] that there is a supply of scraping tool involved in the sale of 'Apsara oil pastels with free scraping tool'; [c] that the aforementioned sale of entire kit is for a consideration, which is an undisputed fact; [d] singling out an element in a kit to hold that there is supply of all the elements in the kit except scraping tool on the ground that no consideration was charged, is not a rational argument which is even otherwise not supported by section 7, ibid. In view of the foregoing, we hold that there is a supply of scrapping tool which is very much a part and parcel of the kit containing 'Apsara oil pastels with free scraping tool'. To substantiate our finding, we would like to rely on the below mentioned circular viz; Circular No. 92/11/2019-GST dated 7.3.2019 [relevant extracts] Subject: Clarification on various doubts related to treatment of sales promotion schemes under GST - Reg. Various representations have been received seeking clarification on issues raised with respect to tax treatment of sales promotion schemes under GST. To ensure uniformity in the implementation of the law acro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /materials & marketing item used by the appellant in promoting their brand and marketing their products can be considered as 'inputs' as defined u/s 2 (59) of the CGST Act, 2017 & GST paid on the same can be availed as ITC in terms of section 16 of the CGST Act, 2017 or not?" [b] M/s. Surfa Coats (I) P Ltd. "Whether the applicant is eligible to claim the GST ITC on the items purchased for furtherance of business? Hence, the reliance sought to be placed on the above rulings is not tenable. 15. The second averment of the applicant is that even if it is held that there is a supply of the 'scrapping tool', it would still be considered as 'composite supply' as all the conditions for the supply to qualify as composite supply is met. The applicant has stated that they qualify all the condition to be considered as a "composite supply". 16. We find that for a supply to considered as a composite supply, the following conditions must be satisfied: * There must be two or more taxable supplies of goods or services or any combination thereof; * Such supplies of goods or services must be naturally bundled; * Such supplies of goods or services are made in conjunction with each other i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aundering of 3-4 items of clothing free of cost per day. Such service is an ancillary service to the provision of hotel accommodation and the resultant package would be treated as services naturally bundled in the ordinary course of business. * Other illustrative indicators, not determinative but indicative of bundling of services in ordinary course of business are - * There is a single price or the customer pays the same amount, no matter how much of the package they actually receive or use. * The elements are normally advertised as a package. * The different elements are not available separately. * The different elements are integral to one overall supply - if one or more is removed, the nature of the supply would be affected. No straight jacket formula can be laid down to determine whether a service is naturally bundled in the ordinary course of business. Each case has to be individually examined in the backdrop of several factors some of which are outlined above. The applicant, we find, has not been in a position to convince us that large number of customers of such goods reasonably expect this to be provided as a package. Further the averment that majority of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posite supply. As is already mentioned the applicant supplies two products in a single pack/box for a single price. Further as already discussed supra such supply does not constitute composite supply. Therefore, we hold that applicant's product is covered under the category of 'mixed supply' as defined under section 2 (74) of CGST Act, 2017. 24. Now, tax liability in respect of a supply falling under the ambit of mixed supply is governed by section 8 (b) of CGST Act, 2017, which is already reproduced supra. 25. The above provision specifies that the tax liability of a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the higher rate of tax in the mixed supply. We therefore, hold that the product Apsara Oil Pastels with free scraping tool is classifiable under HSN 3926 and would attract GST @ 18% in terms of entry no 111 of schedule-III. 26. In the light of the foregoing, we rule as under: RULING (i) Inclusion of a free 'Scraping Tool' in the pack of Apsara Oil Pastels amounts to independent 'supply' of the scrapping tool under Section 7 of the CGST Act, 2017. (ii) 'Apsara Oil Pastels with free Scraping Tool' is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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