2021 (12) TMI 1416 - AAR - GST

Classification of Oxygen Pipeline Installation Services for Government Hospitals under GST

The Authority for Advance Ruling (AAR) classified the applicant's activity of supplying, installing, testing, and commissioning oxygen pipeline systems in ... Composite supply - principal supply - treatment of a composite supply as a supply of its principal supply - classification under SAC 995464 (installation services of parts and equipment for medical gas systems) - concessional rate under Notification No. 05/2021-Central Tax (Rate) (COVID-19 goods) - Authority for Advance Ruling binding effect on applicant and jurisdictional officerComposite supply - principal supply - treatment of a composite supply as a supply of its principal supply - The activity of supply, installation, testing and commissioning of medical oxygen pipeline systems constitutes a composite supply and must be treated as a supply of the principal supply for tax determination. - HELD THAT: - The Authority applied the definition of composite supply and identified the requisite ingredients: a supply by a taxable person to a recipient consisting of two or more taxable supplies that are naturally bundled and supplied in conjunction with each other, with one being the predominant element. Documents including tender and work orders established that supply and installation of the medical gas pipeline form a combined, naturally bundled supply in the ordinary course of business, with supply and installation of the pipeline being the predominant element. In view of section 8 (as explained), the composite supply is to be treated as a supply of the principal supply for determining tax liability. [Paras 5]Supply, installation, testing and commissioning of the oxygen pipeline system is a composite supply to be treated as a supply of the principal supply.Classification under SAC 995464 (installation services of parts and equipment for medical gas systems) - The applicant's activity is classifiable under SAC 995464 and attracts GST at 18% (9% CGST and 9% SGST). - HELD THAT: - Having held that the activity is a composite supply to be treated as the principal supply, the Authority determined the applicable Service Accounting Code. The services-installation of parts and equipment for the supply or conduct of oxygen and other gases used in hospitals and connection of gas-operated equipment-fall within SAC 995464. Consequently, the applicable rate for such services is 18% (split as 9% CGST and 9% SGST), as concluded by the Authority. [Paras 5]The activity is classifiable under SAC 995464 and is taxable at 18% GST (9% CGST + 9% SGST).Concessional rate under Notification No. 05/2021-Central Tax (Rate) (COVID-19 goods) - Notification No. 05/2021-Central Tax (Rate) dated 14th June 2021 does not apply to the applicant's work-contract/installation services and is not available to exempt or concessional-rate the services in question. - HELD THAT: - The Authority examined the notification relied upon by the applicant and noted that it confers concessional rates or exemptions only on specified goods falling under particular tariff items in the Customs Tariff (first schedule) and remains in force up to 30th September 2021. The notification's scope is limited to the goods expressly listed in its Table (COVID-related items). It does not purport to grant concessional treatment to work contract or installation services such as those rendered by the applicant; therefore the notification does not assist the applicant. [Paras 5]Notification No. 05/2021 does not apply to the applicant's services and cannot be invoked to obtain concessional rate or exemption.Authority for Advance Ruling binding effect on applicant and jurisdictional officer - The advance ruling pronounced is binding only on the applicant and the concerned/jurisdictional officer in respect of the applicant. - HELD THAT: - The Authority recited the statutory position that advance rulings under the Chapter are binding on the applicant who sought the ruling and on the concerned or jurisdictional officer in respect of that applicant. Therefore, the decision rendered applies to the applicant and the relevant tax officers as provided by statute. [Paras 5]The ruling is binding only on the applicant and the concerned/jurisdictional officer.Final Conclusion: The Authority rules that the supply, installation, testing and commissioning of medical oxygen pipeline systems by the applicant is a composite supply to be treated as the principal supply, classifiable under SAC 995464 and liable to GST at 18% (9% CGST + 9% SGST); Notification No. 05/2021-Central Tax (Rate) does not apply to these services. The ruling is binding only on the applicant and the concerned/jurisdictional officer. Issues Involved:1. Classification of services provided by the applicant.2. Applicability of GST rate on the services.3. Availability of GST exemption for the services provided.Issue-wise Detailed Analysis:1. Classification of Services Provided by the Applicant:The applicant, engaged in the supply, installation, testing, and commissioning of oxygen pipeline systems in government hospital Covid Care Wards, sought a ruling on the classification of their services under SAC 995464. The Authority for Advance Ruling (AAR) confirmed that the applicant's activities fall under SAC 995464, which includes installation services of parts and equipment for the supply or conduct of oxygen and other gases used in hospitals, homes, etc., and the connection of other gas-operated equipment.2. Applicability of GST Rate on the Services:The AAR examined the provisions of the CGST Act, 2017, particularly Sections 7(1) and 2(30), to determine the nature of the composite supply. The applicant's services were identified as a composite supply, where the supply and installation of medical gas pipelines are the principal supply. According to Section 8 of the CGST Act, 2017, the tax liability of a composite supply is determined based on the principal supply. Consequently, the AAR concluded that the services provided by the applicant attract an 18% GST rate (9% CGST and 9% SGST).3. Availability of GST Exemption for the Services Provided:The applicant contended that their services should be exempt under Notification No. 05/2021-Central Tax (Rate) dated 14th June 2021, which provides concessional rates for Covid-19 relief supplies. The AAR reviewed the notification and clarified that it applies to specific goods listed in the table, such as medical-grade oxygen, Tocilizumab, Amphotericin B, Remdesvir, and other Covid-19 related items. The notification does not extend to work contract services like those provided by the applicant. Thus, the AAR determined that the notification does not offer any exemption for the applicant's services.Order:The AAR ruled that the applicant's activity of supplying, installing, testing, and commissioning oxygen pipeline systems in government hospitals is classified under SAC 995464 and is subject to an 18% GST rate (9% CGST and 9% SGST). The notification cited by the applicant does not provide any exemption for their services.Ruling:The activity of the applicant merits classification under SAC 995464 and is liable to an 18% GST (9% CGST & 9% SGST).