In the coal trading industry, various services are availed by coal traders at ports for the procurement and supply of coal. These services include stevedoring, unloading and loading of coal, security, insurance, renting of premises, and more. The question arises whether the supply of coal with cargo handling services is considered a composite supply. This article delves into the concept of composite supply and analyzes its application in the context of coal trading.
1. Supply is defined u/s 7(1) of the CGST Act, 2017 as
a) All forms of supply of goods or services or both, such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.(aa) Activities or transactions by a person (other than an individual) to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration. The explanation clarifies that the person and its members or constituents are considered separate entities and transactions between them are considered supplies.
b) Import of services for a consideration, regardless of whether it is in the course or furtherance of business. c) Activities specified in Schedule I, made or agreed to be made without a consideration.
2. Composite supply is defined u/s 2(30) of the CGST Act, 2017 as:
1. As per Section 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.
2. Principal supply is one which involves supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is auxiliary to and does not constitute, for the recipient an aim in itself, but a means for better enjoyment of the principal supply.
|Goods + Service||Service + Goods||Service + Service|
|1. Predominant Element||Goods||Services||Services|
|2. Example||T.V. & Installation
Car & Warranty
Bike & Insurance
|Printing with Paper
Content with Pen Drive
|Hotel Service with air- port drop facility
Hotel Service with Restaurant
|3. Principal Supply||Supply of Goods||Supply of Services||Supply of Services|
|4. Rate of Tax||Applicable to Goods||Applicable to Service||Applicable to Service|
From the above submission at 1.1, it is clear from the above definition, that trading of coal are treated as supply as well as services also.
1. Tooth brush with Tooth Paste
2. Micro Owen with Pan
3. Crockery Cup with Plate
4. Watch with Cell
5. Laptop bag with Laptop
6. Mobile Accessories with Mobile Phone
From the above examples of composite supply, we are getting common thought process of suppliers & consumer regarding bundling of supplies to augment sales, increase market share, attract customers etc., Which are common practice followed by the same industry players also, then it is treated as naturally bundle supplies, where all suppliers uses the same technique and strategy to get competitive advantage in the market.
1. In the business of the coal, where coal gets imported from outside India needs various support services in the form stevedore expenses, loading & unloading services, warehousing service, security services. Without which imported coal is not cleared for home consumption by port authority of India.
2. As per section 14(1) of the customs act, 1962 “Transaction value’ shall be the value determined for the purpose of levy custom duty, However in simple words, all the expenses incurred to the place of import shall be included in assessable value for example :- loading exp.at place of export, Carriage, Freight & Insurance to the place of importation, which is separate services even though it’s part of assessable value & included in transaction value paid or payable for the purpose of basic custom duty.
3. As per Rule 10 of customs valuation act, 1962. All expenses incurred at the port of importation shall not included in the assessable value, However such services are treated as supply under section 7 of goods and services tax act, 2017. and liable for gst at specified rate prescribed under tariff.
4. Expenses incurred at the port of importation shall not part of assessable value but it should be part of transaction value under section 15 of goods and services tax act, 2017.
5. Basically all the provisions of customs act, 1962 shall be applicable to importer, However, we are in the business of trading coal within India. Hence, the valuation provision of customs act, 1962 shall not applicable. Henceforward, all the provision related to transaction value covered under goods and services tax act, 2017 are applicable.
6. We had made back to back sales contract for supply of coal & all other support services used for making coal available to recipient within India, which includes stevedore expenses, warehousing, security, insurance.
7. We reiterated that support services shall be considered as ancillary service which is part of principal service, provided by us. However, as per above discussion on composite supply, there shall two things which should be considered that’s.
1. Predominant element
2. Naturally bundle
8. As per coal industry point of view, in case of imported coal where supply made from outside India shall requires major ancillary services in the form of goods transportation services, loading & unloading services, clearing agent service, cargo handling service. Without which no importation is possible, henceforward supply of anything from outside India shall requires such services compulsory, which should be treated as naturally bundle.
9. We are trader of coal on back to back basis to recipient within India. So, all the supplies in the form goods & services shall subsequently transfer to the recipient. We reiterated that supply of coal to our recipient is not possible without taking services of stevedore, insurance, security, warehouse rent. So, such support service are ancillary services to the predominant supply i.e supply of coal.
10. From the above discussion and examples, it clears that supply of goods i.e. coal with other services are to be treated as composite supply where supply of coal is principal supply for the purpose of sec 8 of goods & services tax act, 2017 & Rate applicable to coal i.e 5% shall be applicable.
Conclusion: Based on the analysis, it can be concluded that the supply of coal with cargo handling services on a back-to-back basis is considered a composite supply. The supply of coal is the principal supply, while the cargo handling services are ancillary or support services. Understanding the concept of composite supply is crucial for determining the applicable GST rate and complying with relevant tax regulations in the coal trading industry.