In re San Engineering & Locomotive Company Ltd. (GST AAR Karnataka)
Whether the supply of powerpacks, freight and insurance service and commissioning/ installation services as per the Purchase Order 08/16/2730/1838/f dated 05.11.2016 has to be treated as “Composite Supply” as defined in section 2(30) of CGST Act, 2017 read with section 8(a) of CGST Act, 2017 or freight and insurance service and commissioning / Installation can be treated independent of supply of power packs given that installation and commissioning takes place after 4-5 months of supply of power packs.
Section 15(2) of the CGST Act, 2017 states that the value of supply shall include incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services. Hence the applicant has to transport the goods and deliver the power packs to the recipient and the amount charged to do this is a part of the value of the goods supplied. Hence the freight and insurance charges are part of the value of supply of power packs, since the supply contract is a contract for supply of power packs and the value of the contract is the sum total of the value of the power pack plus all charges charged to the recipient for anything done till the goods are delivered to the recipient.
Even if these supplies, i.e. supply of power pack and supply of freight and insurance are distinct supplies, the same would be covered under the definition of “composite supply” as per section 2(30) of the CGST Act, 2017, as the same are naturally bundled and supplied in conjunction with each other in the ordinary course of business. The principal supply in the case is the supply of power packs. Further section 8 of the CGST Act, 2017 clearly states that the tax liability on a composite supply shall be determined by treating them as a supply of such principal supply. Hence going by this also, the composite supply of power pack and the supply of freight and insurance would be treated as “supply of power packs” only as per section 8 of the CGST Act, 2017.
In view of both the above paras, the supply of power packs and the supply of freight and insurance services involved in such power packs shall be treated as the “supply of power packs” and the applicable tax related to such
FULL TEXT OF ORDER OF BEFORE THE AUTHORITY OF ADVANCE RULING, KARNATAKA
ORDER UNDER SUB-SECTION (4) OF SECTION 98 OF CENTRAL GOODS AND SERVICES TAX ACT. 2017 AND UNDER SUB-SECTION (4) OF SECTION 98 OF KARNATAKA GOODS AND SERVICES TAX ACT. 2017
1. M/s SAN Engineering & Locomotive Company Limited, Whitefield Road, Bengaluru 560048, (hereinafter referred to “the applicant”) and having a GSTIN 29AAECS5331H1ZA, has filed an application for Advance Ruling under Section 97 of the CGST Act, 2017 read with Rule 104 of CGST Rules, 2017 and Section 97 of the KGST Act, 2017 read with Rule 104 of KGST Rules 2017, in FORM GST ARA-01 discharging the fee of Rs.5,000/- each under the CGST Act and the KGST Act.
2. The applicant is a company registered under the provisions of the Goods and Services Act, 2017. The applicant states that he is engaged in the business of manufacturing power packs and supplying installation and commissioning service.
3. The applicant has sought advance ruling in respect of the following questions:
1. Whether the supply of powerpacks, freight and insurance service and commissioning/ installation services as per the Purchase Order 08/16/2730/1838/f dated 05.11.2016 has to be treated as “Composite Supply” as defined in section 2(30) of CGST Act, 2017 read with section 8(a) of CGST Act, 2017 or freight and insurance service and commissioning/Installation can be treated independent of supply of power packs given that installation and commissioning takes place after 4-5 months of supply of power packs.
Installation and commissioning invoice can be only raised after obtaining confirmation from the customer that the Installation and Commissioning has been completed and a Completion Certificate to that effect has been issued.
4. The applicant furnishes some facts relevant to the stated activity.-
a. The applicant states that he is engaged in manufacture of power packs classifiable under HSN Code Chapter 86 and also in activity of installation and commissioning of the same.
b. The applicant has been issued with purchase order bearing no. 08/16/2730/1838/F dated 05.11.2016 by M/s Integral Coach Factory, Chennai to supply “twin power pack with underslung engine and hydraulic transmission and commissioning/installation of the same in High Speed Self Propelled Accident Relief Train (HS SPART)”. As per the said purchase order, the applicant was required to supply 18 numbers of Power Pack to M/s Integral Coach Factory, Chennai and also to install / commission the same in HS SPART. The applicant states that he has supplied and installed some of the Power Packs in HS SPART during the excise / service tax regime and remaining units of Power Packs during GST regime.
c. The applicant states that as per Part-I of the said Purchase Order, the breakup of the price of each Power Pack, packing charges, freight charges, installation/ commission charges and duties/ taxes is as follows:
