Does installation service where usage of a chemical is essential, qualify as composite supply?

Last updated: 23 April 2021

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Quick Summary

This advance ruling addresses whether an installation service, where the use of a chemical is essential, qualifies as a composite supply under GST. The applicant, a trading entity dealing in port infrastructure products, sought clarity on the classification and applicable tax rates for their goods under the new GST regime, especially given past disputes regarding VAT classifications.

Court :
Gujrat AAR

Brief :
The applicant M/s. Trellborg Marine Systems pvt.ltd., 1702-1709, 17thfloor, B-Block, West Gate, YMCA club, S.G.Highway, Ahmedabad-380015 is engaged in the business of trading of products like fixtures, buoys, bollards,frontal frames and fascia pads which are made mainly from iron and steel,barring fascia pads which are made from plastics and these products are primarily used at port/jetty as support infrastructure.

Citation :
ADVANCE RULING NO. GUJ/GAAR/R/14/2021

ADVANCE RULING NO. GUJ/GAAR/R/14/2021
(IN APPLICATION NO. Advance Ruling/SGST&CGST/2020/AR/44)
Date: 27.01.2021

B R I E F FA C T S

The applicant M/s. Trellborg Marine Systems pvt.ltd., 1702-1709, 17thfloor, B-Block, West Gate, YMCA club, S.G.Highway, Ahmedabad-380015 is engaged in the business of trading of products like fixtures, buoys, bollards,frontal frames and fascia pads which are made mainly from iron and steel,barring fascia pads which are made from plastics and these products are primarily used at port/jetty as support infrastructure.

2. The applicant has submitted that under the erstwhile Indirect taxregime, the applicant was subjected to the levy of Value Added Tax and Central Sales Tax (hereunder referred to as ‘VAT’ and ‘CST’ respectively); that theapplicant, being a trading entity, was not required to be registered under theCentral Excise legislation; that since, the classification under Gujarat VAT isnot derived by any Harmonized System of Nomenclature (‘HSN’) except for specific/few goods, classification adopted by Applicant was a subject matter ofdispute between VAT authorities and the Applicant; that under theclassification mechanism provided under Gujarat VAT legislation, there were two predominant rates of VAT in force viz. 5% (4% + 1% additional tax) and 15% (12.5% + 2.5% additional tax) and for the former category, goods were specifically enlisted whereas the latter tax rate applied as a residual tax rate onall other goods; that in the erstwhile regime, the applicant had classified each product under its specific category provided under 5% tax rates but this classification was disputed by the VAT Department, without providingsufficient grounds for substantiation; that subsequent to the change in the Indirect tax legislation and considering the way in which the manner forclassifying goods and services has undergone a change, they seek tounderstand the correct classification of their products under the GST regime.The applicant has stated that in view of this, they wish to have clarity onclassification of certain products dealt in by the Applicant and based on the above facts, they have raised the following questions seeking Advance Ruling on the same:

Question-1(Part-A) –What would be the classification of the following products under GST and applicable tax rate thereon in accordance with Notification No.01/2017 dated June 28, 2017 (as amended).

To know more in details find the attachment file

FAQ :

The ruling clarifies whether an installation service that requires the essential use of a chemical is considered a composite supply under the Goods and Services Tax (GST) regime.

The applicant is M/s. Trellborg Marine Systems Pvt. Ltd., a company involved in trading port infrastructure products like fixtures, buoys, and bollards.

Previously, under the Value Added Tax (VAT) and Central Sales Tax (CST) regime, the applicant was subject to VAT and CST levies but not Central Excise, as they were primarily a trading entity.

The applicant faced disputes with the VAT authorities regarding the classification of their products, as the Gujarat VAT legislation had specific rates for certain goods and a residual rate for others, leading to disagreements on how their products should be categorised.

The applicant is seeking an Advance Ruling to gain clarity on the correct classification of their products and the applicable tax rates under the current GST regime, given the changes in indirect tax legislation and classification methods.