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Nature of activity determines the GST rate, separately identifiable cost center activities cannot be termed as composite supplies


Court :
AAR, Karnataka

Brief :
The AAR, Karnataka in the matter of In Re: M/S. Hyundai Rotem Company [Advance Ruling No.- KAR ADRG 26/2022 dated August 12, 2022] held that the supplies made by all the Cost Centersof Delhi Metro Rail Corporation ("DMRC") are not to be considered as a 'composite supply'.

Citation :
dvance Ruling No.- KAR ADRG 26/2022 dated August 12, 2022

The AAR, Karnataka in the matter of In Re: M/S. Hyundai Rotem Company [Advance Ruling No.- KAR ADRG 26/2022 dated August 12, 2022] held that the supplies made by all the Cost Centersof Delhi Metro Rail Corporation ("DMRC") are not to be considered as a 'composite supply'.

Facts

M/s. Hyundai Rotem Company ("the Applicant") is a foreign company incorporated in South Korea and is engaged in the manufacture, supply, testing, commissioning, and training in respect of rolling stock. The Applicant was a successful bidder to the tender invited by DMRC for design, manufacture, supply, testing, commissioning, and training. The Applicant entered into a contract with DMRC for the execution of the contract awarded. 

The supply by the Applicant to the DMRC is an inter-state supply of the goods and services and is liable for the tax under the Integrated Goods and Services Tax Act 2017 ("the IGST Act"). Supply made by the Applicant under the contract is a 'composite supply' as defined under Section 2(30) of the Central Goods and Services Tax Act, 2017 ("the CGST Act") with the principal supply being the supply of rolling stock. The rate of tax on these supplies is at present levied based on the nature of the respective transaction for which the invoice is issued. The Applicant furnished the present status and treatment of different supplies under the cost centers. The DMRC has disputed the nature of the supply. However, the Applicant has borne the cost of differential Goods and Service Tax ("GST") on its own and paid the said tax to the Government on time. 

Thus, the Applicant has filed an instant advance ruling application. 

Issue

Whether or not the nature of goods or services is considered to be essential criteria to calculate GST?

Held

The AAR, Karnataka in the matter ofIn Re: M/S. Hyundai Rotem Company [Advance Ruling No. - KAR ADRG 26/2022 dated August 12, 2022] held as under:

  • Observed that clear-cut demarcation of activities to each cost center demonstrates the intention of the contracting parties that each cost center is an independent supply center undertaking either the supply of goods or the supply of services and held that the supplies made by all the Cost Centers contract with DMRC are not to be considered as ‘composite supply.
  • Directed that the supplies made by all the Cost Centres of DMRC are not to be considered as 'composite supply', and hence the instant question is redundant.

Relevant Provisions

Section 2(30) of the CGST Act

"Definitions

2.(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."
 

 

Bimal Jain
on 19 September 2022
Published in GST
Views : 133
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