Composite supply v/s mixed supply – Interpretation makes it even more complex !

A recent Kerala AAR (ADVANCE RULING No. KER/33/2019 dated 01/03/2019) in case of Kerala Forest Development Corporation Ltd. (hereinafter referred as applicant company) has added fuel to the (already burning) fire pertaining to composite and mixed supplies.

Fact of the case stands as :

Applicant company was providing tour packages to promote eco tourism in the state. Applicant used to charge a combo rate for a package. Now it intended to change the modus operandi by issuing separate invoices for different services instead of giving packages. Hence all services like

– providing accommodation

– serving food and beverages

– providing guide service

– providing trekking accessories

were now intended to be billed and taxed separately. (Contention of the applicant for intending to bill separately for all or some services was on account of option to customers to select any or all services).

Without going to analysis of AAR (which basically ensured correct rate of goods and services to be billed separately – against which we don’t have any issue), it was concluded that in case where a supply involves supply of both goods and services and the value of the same are shown separately, the goods and services would be liable to tax at the rates applicable to such goods and services separately.

Again the issue ends where it all started. If the same logic is to be applied, we can hardly find any supply to be mixed or composite supply as the logic itself suggests that if the supply is shown separately, it can be a regular supply attracting regular rate of duty. Also a contract can always be made in a way to show all services are catered at the option of customer to select any or all of it (for separate charge of GST).

In our example, how can it be presumed that providing guide services or serving foods and beverages or providing trekking accessories per se alone can is a standalone supply? It is a part of an overall tour which is actually the main supply. All other services are ancillary to it. Breaking the type of services in invoices was never the intent of GST law.

God bless GST !