In re H.P. Sales India Pvt. Ltd. (GST AAAR Maharashtra)
The supplies of the Appellant have been held to be a continuous supply by the Advance ruling authority and while deciding whether the supply is composite or not have done so keeping in mind the continuous nature of the supply. They have stated that each of the supplies has its own pattern and each of the supplies can be supplied separately as they are not dependent on each other. We agree with the same. It is seen that under the clauses of the agreement, the Imaging products are supplied based on the usage cycle of the Reseller. It may be, that for the first time, the products may be supplied together but it may not happen that the products are supplied together every time. While Ink may be supplied after a 1000 clicks, the others like the plate may be replaced after 2000 clicks.
As per the GST Fliers issued by CBIC, the following tests are laid down to ascertain whether a supply of goods or services is a composite supply or not.
- The perception of the consumer or the service perceiver
- Majority of service providers in a particular business provide similar bundle of services
- The nature of the various services in a bundle of services
- 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 each other and if one or more is removed, the nature of supply would be affected.
In a composite supply, the two or more taxable supplies have to be naturally bundled and one of the indicators of a ‘naturally bundled’ supply is that it should be an industry practice. The appellant has given no evidence that the program given is an industry practice. The fact that the appellant offers his customers the option of a tier programme does not make the same an industry practice. Also, what is more important is that the products are to be used on a HP printing machine and therefore for the best printing, the HP products only have to be used. The fact that this is so does not at all make it a composite supply as it has an element of compulsion in it whereas there is no place for compulsion in a composite supply.
The Appellate Authority for Advance Ruling upheld the ruling given by the Advance Ruling Authority and held that The supply of Electro Ink supplied along with consumable is a mixed supply as defined u/s section 2 (74) of the GST Act and is also a continuous supply of goods as defined u/s 2 (32) of the GST Act.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
(under Section 101 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the MGST Act.
The present appeal has been filed under Section 100 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by HP India Sales Private Limited(herein after referred to as the “Appellant”) against the Advance Ruling No. GST-ARA-38/2017-18/B-45 dated 08.06.2018.
BRIEF FACTS OF THE CASE
A. HP India Sales Private Limited (hereinafter referred to as “the Appellant”), being taxable person registered under Section 22 of the Maharashtra State Goods and Services Tax Act, 2017 (referred as “MSGST Act”) read with Rule 24 of the Maharashtra Goods and Services tax Rules, 2017 (referred as “MSGST Rules”), having GSTIN 27AAACC9862F1ZI,are engaged inter alia in providing printing supplies to be used in HP’s Indigo press machines supplied to customers.
B. The HP Indigo digital printing press (hereinafter referred to as “HP Indigo”) is a printing press specifically designed for ensuring best quality prints in the industry along with wide colour gamut, substrate versatility, speed, productivity and with the ability to vary every printed copy.
C. The HP Indigo machine is based on a unique digital offset colour technology specially designed to cater to the printing requirements of large scale print service providers. The HP Indigo printers are significantly different from other office and industrial use printers due to the specialized liquid ink (hereinafter referred as Electrolnk) being used in its print process.
D. Additionally, ancillaries comprising oil, binary ink developer, bib, blanket, print imaging plate and other machine products (hereinafter collectively referred as “consumables”) are also consumed in the Indigo press machines in the course of effecting prints.
E. In this regard, the Electrolnk along with the consumables are directly imported by the Appellantfrom its overseas suppliers at the customs port situated in Mumbai wherefrom the said goods are cleared on payment of applicable customs duties including IGST. The goods are stored at the Appellant’s warehouse in Maharashtra.
F. Further, the Appellant has contracted with a taxable person registered under GST to be its authorized reseller and distributor of such goods to various customers across India.
G. The terms of contract between the Appellant and the authorized reseller stipulates the conditions, prices, discount, mode of receiving orders, billing and payment terms in relation to supply of Electrolnk with consumables. Importantly, the contract stipulates that the supplies shall be the property of the Appellant till such time the supplies are utilized in the presses by the customer for effecting prints.
H. Further, the Electrolnk along with the consumables are moved by the Appellant to the authorised reseller locations in the States of Tamil Nadu, Gujarat and Punjab under a delivery challan along with the necessary road permit, where applicable.
I. Pursuant to the same, such goods are transported by the authorised reseller to the respective customer locations as segregated geographically across India.
J. The arrangement is diagrammatically explained below:
