2019 (7) TMI 847 - AAR - GST

GST Ruling: Composite Supplies Taxable at 18%, Input Tax Credit Allowed

The ruling confirmed that the services provided by the applicant to delegates and exhibitors constitute composite supplies classifiable under Service Code ... Composite supply - principal supply - tax liability on composite supply under Section 8 of GST Act - classification of services - Events, exhibitions, conventions and trade shows organisation (HSN 998596) - classification of services - Sponsorship and brand promotion services (HSN 998397) - input tax credit admissibility under Section 16 read with proviso to Section 17(5) - reverse charge mechanism for sponsorship vis-a -vis brand promotionComposite supply - principal supply - tax liability on composite supply under Section 8 of GST Act - classification of services - Events, exhibitions, conventions and trade shows organisation (HSN 998596) - Nature and classification of services provided by the applicant to delegates and exhibitors. - HELD THAT: - The bundled services offered to delegates (technical seminars, exhibition access, hotel accommodation, cultural programmes, meals, airport pick-up/drop etc.) constitute a composite supply because they comprise two or more taxable supplies that are naturally bundled, supplied in conjunction and include a predominant element. The essential purpose of the delegates is attendance at the conference, making organization of the conference the principal supply. In accordance with Section 8(a) of the GST Act, the composite supply is treated as the principal supply. Accordingly, the services to delegates and the exhibition participation service to exhibitors are classifiable under the Annexure to Notification No. 11/2017 as Events, exhibitions, conventions and trade shows organisation and assistance services (Service Code 998596) and taxable at the notified rate.Services to delegates and exhibitors are composite supplies; classifiable under Service Code 998596.Classification of services - Sponsorship and brand promotion services (HSN 998397) - reverse charge mechanism for sponsorship vis-a -vis brand promotion - Nature, classification and chargeability (normal or reverse) of brand promotion packages offered by the applicant. - HELD THAT: - Brand promotion packages, though not defined in GST, fall within the combined entry for Sponsorship services and brand promotion services. The offerings (branding on stage/backdrop, souvenir display, presentations, DVD display etc.) are classifiable under Service Code 998397 in the Annexure to Notification No. 11/2017 and taxable at the notified rate. The entry for sponsorship attracts reverse charge when the recipient is a body corporate or partnership firm only insofar as the supply is sponsorship as per Notification No. 13/2017. The Authority found that the packages offered are brand promotion and not sponsorship to which the reverse-charge sponsorship entry applies; therefore tax is payable by the applicant under normal charge.Brand promotion packages are classifiable under Service Code 998397 and taxable under normal charge; reverse charge does not apply.Input tax credit admissibility under Section 16 read with proviso to Section 17(5) - composite supply by hotel with accommodation as principal supply - Admissibility of input tax credit on services procured for the event (hotel services including accommodation and food, outside caterers, event manager services such as pick-up/drop, stall setup, tenting). - HELD THAT: - Supplies procured from hotels that constitute a composite supply with accommodation as the principal element are to be treated as accommodation supply; CGST/SGST charged thereon is eligible as input tax credit when used in the course of business. Section 17(5) ordinarily disallows credit on supplies such as food and beverages and renting of motor vehicles, but contains a proviso permitting credit where the inward supply of that category is used as an element of an outward taxable composite or mixed supply (or to make an outward supply of the same category). The supplies of food and beverages by outside caterers and rent-a-cab services, when used as elements of the applicant's outward taxable composite supplies (event organisation/brand promotion), qualify for input tax credit under the proviso. Similarly, services of the event manager used as elements of the outward taxable composite supply are eligible for ITC.Input tax credit is admissible on hotel (accommodation and food), outside caterers and event manager services when used as elements of the applicant's outward taxable composite supplies.Final Conclusion: The Authority ruled that (i) services to delegates and exhibitors are composite supplies classifiable under Service Code 998596 (events/exhibitions) taxable at the notified rate; (ii) brand promotion packages are classifiable under Service Code 998397 (sponsorship and brand promotion), taxable under normal charge and not subject to reverse charge as sponsorship; and (iii) input tax credit is admissible on hotel services (including accommodation and food), outside catering and event manager services where such inward supplies are used as elements of the applicant's outward taxable composite supplies. Issues Involved:1. Nature and classification of services provided by the applicant to delegates and exhibitors.2. Nature and classification of brand promotion packages.3. Applicability of reverse charge mechanism for brand promotion services.4. Admissibility of Input Tax Credit (ITC) for various services procured by the applicant.Issue-wise Detailed Analysis:1. Nature and Classification of Services Provided by the Applicant to Delegates and Exhibitors:The applicant, an association engaged in the upliftment and technological advancement of the Corrugation Industry, is organizing a conference and exhibition. The services provided to delegates include technical seminars, exhibition access, hotel accommodation, cultural programs, meals, and airport transfers, all bundled under an all-inclusive registration fee. The applicant contends that these services constitute a 'composite supply' under the GST Act, 2017, as they are naturally bundled and provided in conjunction with each other, with the principal supply being the organization of the conference.The ruling confirms this interpretation, stating that the supply made by the applicant to the delegates is indeed a composite supply, with the principal supply being the organization of the conference. The classification of such services falls under Service Code 998596, described as 'Events, exhibitions, conventions and trade shows organizations and assistance services,' taxable at 18% GST (SGST 9% + CGST 9%).Similarly, the services provided to exhibitors, which include participation in the trade fair, are also classified under Service Code 998596 and are taxable at the same rate.2. Nature and Classification of Brand Promotion Packages:The applicant offers brand promotion packages to interested vendors, which include branding on various event-related items and media. The term 'brand promotion' is not explicitly defined under the GST Act, 2017, but reference is made to the Service Tax regime where brand promotion was a declared service.The ruling classifies brand promotion packages under Service Code 998397, described as 'Sponsorship services and brand promotion services,' taxable at 18% GST (SGST 9% + CGST 9%).3. Applicability of Reverse Charge Mechanism for Brand Promotion Services:The ruling clarifies that brand promotion services provided by the applicant to partnership firms and body corporate do not fall under the category of sponsorship services liable to tax on a reverse charge basis under Section 9(3) of the CGST Act, 2017. Therefore, the applicant is liable to pay GST on such services under the normal charge mechanism.4. Admissibility of Input Tax Credit (ITC) for Various Services Procured by the Applicant:The applicant will procure various supplies during the event, including services by hotels (accommodation, conference venue, food & beverages), outside caterers, and event managers (pickup & drop, exhibition setup, etc.).- Hotel Services: The ruling states that the composite supply by the hotel, where accommodation is the principal supply, qualifies for ITC as it is used in the course of business and is eligible under Section 16 of the GST Act, 2017.- Food and Beverages by Outside Caterers: ITC is admissible for food and beverages supplied by outside caterers as these are used as an element of the outward supply of event organization, which is a taxable composite supply.- Rent-a-Cab Services: ITC is also admissible for rent-a-cab services used for event organization and brand promotion, as these are taxable composite supplies.Ruling:1. The service provided by the applicant to the delegates and exhibitors is a composite supply, classifiable under Service Code 998596, taxable at 18% GST.2. The service of brand promotion packages is a composite supply, classifiable under Service Code 998397, taxable at 18% GST. The applicant is liable to pay GST on such services under the normal charge mechanism.3. ITC is admissible for services provided by hotels, food and beverages supplied by outside caterers, and services provided by event managers.