GST: Maintenance services classified as composite supply with applicable tax rates

The Authority classified the maintenance services provided under two agreements as a 'composite supply' under the GST Act. It determined that the principal supply is the operation and maintenance services, with spare parts and consumables being ancillary. The applicable tax rate for maintenance services is 18%, while for mixed supplies, the highest tax rate applies. The ruling also noted that the determination of the place of supply was not within the Authority's jurisdiction.

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Issues Involved:
1. Classification of maintenance services under the GST Act.
2. Determination of the principal supply between goods and services.
3. Applicable tax rate for the principal supply.
4. Relevant place of supply and type of tax to be discharged.

Issue-wise Detailed Analysis:

1. Classification of Maintenance Services:
The applicant sought clarification on whether the maintenance services provided under two agreements (comprehensive maintenance services agreement and supply of parts and services agreement) should be classified as 'composite supply' under Section 2(30) of the CGST Act and RJ SGST Act or as 'mixed supply' under Section 2(74) of the GST Act. The Authority found that the integrated contract made by the applicant is classifiable under 'composite supply' as per Section 2(30) of the GST Act, meaning it consists of two or more taxable supplies that are naturally bundled and supplied together in the ordinary course of business, with one being the principal supply. However, the contract for parts and services was classified under 'mixed supply' as per Section 2(74) of the CGST/RGST Act, 2017, where individual supplies of goods or services are made in conjunction for a single price but do not constitute a composite supply.

2. Determination of the Principal Supply:
The concept of principal supply applies only to composite supplies. The Authority determined that in the case of composite supply, the applicant is primarily providing operation and maintenance services, making these the principal supply. The supply of goods (spare parts and consumables) is ancillary to the maintenance services. The maintenance services ensure the uninterrupted operation of the equipment, and the supply of goods is incidental to these services.

3. Applicable Tax Rate for the Principal Supply:
The maintenance services provided under the agreements were classified as a composite supply of maintenance services. The applicable tax rate for these services falls under the 'Chapter Heading of 9987- Maintenance, repair and installation (except construction) services' with the Service Accounting Code (SAC) 998717. The prescribed GST rate for these services is 18% (CGST @ 9% and SGST @ 9% or IGST @ 18%). For mixed supplies, the applicant must pay the highest rate of tax as per Section 8(b) of the CGST Act, 2017, which states that a mixed supply shall be treated as a supply of that particular supply which attracts the highest rate of tax.

4. Relevant Place of Supply and Type of Tax to be Discharged:
The applicant queried about the relevant place of supply and the type of tax to be discharged (CGST & SGST or IGST). The Authority noted that the determination of the place of supply is governed by Chapter V of the IGST Act, 2017, specifically Section 10 for goods and Section 12 for services. However, the Authority for Advance Ruling under Section 96 of the SGST Act, 2017, cannot determine the place of supply as it is not specified under Section 97(2) of the CGST/SGST Act, 2017. Hence, the query regarding the place of supply was disposed of without a specific ruling.

Ruling:
1. Activities under the 'Comprehensive Maintenance Contract' are treated as a composite supply of services, while activities under the 'Equipment Parts Supply and Services Agreement' are treated as mixed supply.
2. For the 'Comprehensive Maintenance Contract,' the principal supply is the operation and maintenance services, with other services being ancillary.
3. The service code for maintenance and repair services of commercial and industrial machinery is 9987171, with a prescribed GST rate of 18%. For mixed supplies, the highest rate of tax applies as per Section 8(b) of the CGST Act, 2017.
4. The query regarding the place of supply was disposed of as it does not fall under the categories mentioned in Section 97(2) of the CGST/SGST Act, 2017.

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