Educational exemption and mixed supply rules applied to school lodging and food services, with full taxability upheld.
Exemption for an educational institution was unavailable because the appellant was not affiliated to a recognised board or university and did not provide approved educational services within the notification. The remedial classes and boarding arrangement were treated as having a separate identity from the school, so the claimed educational exemption failed. On the supply classification issue, lodging, food, housekeeping, laundry and allied facilities were found to be independent and not naturally bundled with any principal supply. The arrangement was therefore a mixed supply, not a composite supply, and the entire consideration was taxable at the applicable rate. The appellate ruling was upheld and the appeal dismissed.
Issues: (i) Whether the appellant was an educational institution entitled to exemption under the relevant notification; (ii) Whether the services of lodging, food and allied facilities constituted a composite supply or a mixed supply and the consequent tax treatment.
Issue (i): Whether the appellant was an educational institution entitled to exemption under the relevant notification.
Analysis: The exemption for an educational institution applies only where the supplier falls within the notified definition and provides covered educational services. The appellant was not affiliated to any recognised board or university and did not provide approved or recognised education within the meaning of the notification. The remedial classes and boarding arrangement were held to be independent of the school, giving the appellant a separate identity. The exemption claimed on the footing of an educational institution was therefore not available.
Conclusion: The appellant was not an educational institution for the purpose of the exemption, and the claim under the notification failed.
Issue (ii): Whether the services of lodging, food and allied facilities constituted a composite supply or a mixed supply and the consequent tax treatment.
Analysis: Composite supply requires two or more supplies to be naturally bundled and supplied in conjunction with each other in the ordinary course of business, with one being the principal supply. Mixed supply arises where multiple supplies are combined for a single price but are not naturally bundled as a composite supply. On the facts, lodging, food, housekeeping, laundry and similar facilities were independent and could be supplied separately; there was no principal supply and no natural bundling. The services were therefore held to be mixed supply, attracting tax on the value of the entire combination at the applicable rate.
Conclusion: The arrangement was a mixed supply and not a composite supply, and the entire consideration was taxable at the applicable rate.
Final Conclusion: The ruling of the Authority for Advance Ruling was upheld, and the appeal was dismissed.
Ratio Decidendi: A supply is a composite supply only when the constituent services are naturally bundled in the ordinary course of business with a principal supply; if the services are independent and separable, the bundle is a mixed supply and the entire consideration is taxable accordingly.
TaxTMI 
AI Drafter ✕
TaxTMI 
