Digital Cinema Equipment Leasing Is Mixed Supply Taxable at Highest GST Rate: Telangana AAR

In re UFO Moviez India Limited (GST AAR Telangana)

Summary: The Telangana Authority for Advance Ruling considered the GST rate applicable to leasing of Digital Cinema Equipment (“DCE”) by UFO Moviez India Limited. The DCE consisted of four different equipments—Projector, Server, UPS and VSAT—having different HSN classifications, while lease rental for the entire set was charged through a single invoice. The applicant treated the arrangement under section 8 of the CGST/SGST Act. The Authority examined whether the bundle constituted a composite supply or mixed supply.

Referring to the definitions of composite supply under Section 2(30), principal supply under Section 2(90) and mixed supply under Section 2(74), it observed that composite supply requires the constituent supplies to be naturally bundled and supplied together in the ordinary course of business. The Authority also considered the indicators stated in CBIC Flyer No. 4 dated 05.08.2019 for determining whether services are naturally bundled, including consumer perception, normal industry practice, whether the elements are advertised as a package, whether they are separately available and whether they are integral to one overall supply. It found that none of those indicators applied to the applicant’s proposed supply and that similar businesses did not provide such bundling as a matter of course. Consequently, the DCE bundle was held not to constitute a composite supply.