Activity of designing and development of tools as per specification indicated by recipient of supply and getting same manufactured from third parties for eventual supply to overseas customers amounts to supply of goods and not composite supply

Rajeev Jain

Designing and developing tools for overseas clients is a supply of goods, not a composite supply. The Appellate Authority for Advance Rulings in Maharashtra determined that the activity of designing and developing tools as per the specifications of an overseas customer, and getting them manufactured by third parties, constitutes a supply of goods rather than a composite supply. The appellant, who undertook the design and development in-house and outsourced manufacturing, raised invoices for the tools supplied to the overseas client. Despite the tools being retained for manufacturing camshafts, ownership was transferred to the customer, confirming the transaction as a supply of goods. The advance ruling was subsequently modified. (AI Summary)

Whether activity of design and development of patterns/tools used for manufacturing camshaft for overseas customer amounts to composite supply

APPELLATE AUTHORITY FOR ADVANCE RULINGS, MAHARASHTRA held in the case of IN RE: M/S. PRECISION CAMSHAFTS LIMITED - 2023 (1) TMI 1093 - APPELLATE AUTHORITY FOR ADVANCE RULING, MAHARASHTRA that:

As per purchase order, overseas customer intended to receive manufactured pattern/tools as per their specification from appellant
Appellant undertook in-house drawing, design, modelling, simulation and documentation for manufacture of tools and had hired third party for manufacturing said tools
Third party had delivered tools and had raised invoice on applicant for such manufacturing
Appellant had raised another invoice on overseas client indicating description of goods (tools) with quantity and rate
Tools supplied to such customers are supplied on own account
Appellant had not facilitated supply between overseas customer and third party vendor in order to treat transactions as intermediary
Although tools were not exported to customers and have been retained by appellant for manufacturing camshaft, ownership over such tools was transferred to customers
Such transaction amounts to supply of goods and not composite supply
Advance ruling is modified.

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Activity of designing and development of tools as per specification indicated by recipient of supply and getting same manufactured from third parties for eventual supply to overseas customers amounts to supply of goods and not composite supply

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Activity of designing and development of tools as per specification indicated by recipient of supply and getting same manufactured from third parties for eventual supply to overseas customers amounts to supply of goods and not composite supply