2018 (8) TMI 1071 - AAAR - GST

Classification of UPS and Battery as Composite Supply under GST Act Upheld by Appellate Authority

The appellate authority upheld the ruling of the West Bengal Authority for Advance Ruling, classifying the supply of UPS and Battery as a composite supply ... Composite supply - mixed supply - principal supply - naturally bundled - composite machine - classification under Tariff Head 8504Composite supply - composite machine - classification under Tariff Head 8504 - Supply of a UPS with built in battery is a composite supply and, as a composite machine, is classifiable under Tariff Head 8504. - HELD THAT: - The Authority and this Appellate Authority held that where the battery is an integral, inseparable part of the UPS (i.e., built in), the ancillary battery forms part of a composite supply because the supplies are naturally bundled and the UPS is the principal supply. Note 3 and the Illustration to the definition of composite supply support treating a machine consisting of two or more fitted components as a composite machine. In such cases the composite supply is appropriately classified under Tariff Head 8504 in the rate notifications.UPS supplied with built in batteries is a composite supply and falls under Tariff Head 8504.Mixed supply - naturally bundled - principal supply - Supply of a static converter (UPS) together with an external storage battery (even under a single contract) is not a composite supply but a mixed supply when the battery is separately usable and not naturally bundled with the UPS. - HELD THAT: - The Appellants' contention that an external battery is essential to the UPS was examined and rejected for classification as a composite supply. The Authority's finding-adopted by this Appellate Authority-is that although a UPS cannot provide uninterrupted power without a battery, the test for composite supply is whether the items are naturally bundled and one supply is predominant with the other ancillary and inseparable. A separately supplied storage battery has multiple uses and can be used independently of the UPS; it is therefore not 'naturally bundled' or inseparable and the combined supply for a single price constitutes a mixed supply under the Act.Supply of UPS with an external storage battery is a mixed supply and not a composite supply.Final Conclusion: The WBAAR Ruling that UPS supplied with external storage battery amounts to a mixed supply is upheld; conversely, where the battery is built in and inseparable, the supply is a composite supply classifiable under Tariff Head 8504. The appeal is dismissed. Issues:Classification of supply of UPS along with the battery as a mixed supply or composite supply under the GST Act.Detailed Analysis:The appeal was filed by a company manufacturing power solution products against the ruling of the West Bengal Authority for Advance Ruling, which classified the supply of UPS and Battery as a Mixed Supply under the GST Act. The core issue was whether the supply of UPS with an external storage battery constitutes a composite supply or a mixed supply. The definitions of composite supply, principal supply, and mixed supply under the GST Act were crucial in determining the classification.The appellant argued that UPS with an external battery falls under Tariff Head 8504 and should be taxed at 18% under item No. 375 of Schedule III of the GST Act. They contended that the battery is an integral part of UPS and is naturally bundled with it, making the supply a composite supply. The appellant cited various case laws to support their argument, emphasizing the essential nature of the battery for the UPS to function as an uninterrupted power supply system.The appellate authority examined the arguments and provisions of the GST Act. They agreed with the West Bengal Authority for Advance Ruling's observation that the UPS and battery are naturally bundled when supplied together, forming a composite supply under Tariff Head 8504. The authority highlighted that the battery's strength, make, or number can vary based on customer requirements, indicating that the battery has multiple uses and is not unique to UPS. Therefore, when supplied separately, the battery cannot be considered a composite supply.In conclusion, the appellate authority found no issue with the ruling of the West Bengal Authority for Advance Ruling and dismissed the appeal. The decision was based on the understanding that the UPS and external storage battery, when supplied together, constitute a composite supply under the GST Act. The appellant was informed of the decision through a copy of the order.This detailed analysis of the judgment highlights the legal arguments, case laws cited, relevant definitions under the GST Act, and the final decision reached by the appellate authority regarding the classification of the supply of UPS along with the battery.