2019 (8) TMI 1283 - AAR - GST

Determining GST Rate for Transportation of Goods: Composite Supply Ruling

The case involved determining the GST rate applicable for transportation of goods using the supplier's vehicle and the classification of the transport ... Rate of GST - transportation of goods using the vehicle owned by the supplier for delivering the goods at the place as per direction of the ICDS Department and apart from selling the goods as per contract entered with Department of Integrated child Development Services (ICDS), Government of Tamil Nadu - GTA service or not - transport service provided by them - HELD THAT:- It is evident that the applicant is awarded the contract to supply ‘Complementary Weaning Food Containing Amylase Activity’ at the designated centers as specified in the bid document which are Anganwadi centers in various blocks in all districts of the state. The applicant is paid at Per MT price, which includes transportation charges - The Bid document clearly asks for a breakup of the bid price for each unit/ MT under the heads of ‘Ex-factory/Ex-warehouse Ex-showroom/ Off-the-shelf, ‘Excise duty if any’, ‘Packing & Forwarding’, ‘Transportation- Factory to Block/ Project’, Transportation- Block/ Project to Center’ and ‘Insurance and other local costs incidental to delivery’. All of this together is used to arrive at the ‘Unit Price per MT’ which is the bid price. Evaluation will take into account cost of inland transportation for delivery of goods to final destination. The bid and the agreements only mention a total quantity to be delivered in during the period in all destinations put together - The applicant cannot assign or sublet any portion of the contract whether it is manufacturing or delivery. Accordingly, the applicant in the have been transporting these products through goods carriage vehicle owned by them. Penalties are also prescribed for failure to deliver as indented with in the timelines specified. Thus any nonperformance on any component of the supply has penalties prescribed. As the entire supply of the food and delivery together is a composite supply, the transportation/ delivery alone is not a 'Goods Transport Agency service'. Applicability of GST - supply of goods and transportation charge provided to an unregistered person - Rate of GST - Transportation charges for using the vehicles owned by the suppliers - natural bundling of services - HELD THAT:- The bid document clearly indicates that the bidder shall have the responsibility to deliver the specified quantities to all the centers. The bid price is also made inclusive of a fixed transportation charge instead of an actual basis. The applicant is also prohibited from assigning or sub lease any part of the contract including the delivery to a third party. The agreement signed and the invoicing also supports this. Therefore, in this case the supply of ‘Complementary Weaning Food Containing Amylase Activity’ is naturally bundled with the delivery at the designated centers as specified as per the bid and agreement and hence, this is a composite supply as per Section 2(30) of the CGST/TNGST Act 2017. The principal supply in this case is the supply of ‘Complementary Weaning Food Containing Amylase Activity’ as seen both in the bid document/ agreement and the pricing break up in that. Composite supply or not - section 8 of the CGST Act - supplier supplies the goods at the delivery point of the buyers and supplier raises invoice for the value of goods and transport charges separately as per the single contract/ purchase Order entered with the buyer - HELD THAT:- As per Section 8, the tax rate applicable to the principal supply is the rate applicable for such composite supply; therefore, in the case at hand, the tax rate applicable to the food products is the rate of tax for this composite supply. Notification No. 39/2017-Central Tax (Rate) dt 18.10.2017 notifies the central tax rate of 2.5 per cent on intrastate supplies of goods - In the instant case, the Complementary Weaning Food Containing Amylase Activity’ is being distributed at ICDS centers free as per the Government scheme and the food is packed in units containers. The applicant has also produced certificates as per the conditions of this notification. Accordingly, the GST rate for the composite supply of ‘Complementary Weaning Food Containing Amylase Activity’ at ICDS centers is 2.5% CGST and 2.5% SGST subject to fulfillment of the conditions of these notifications. This rate is applicable on the entire composite supply. Issues Involved:1. Rate of GST applicable for transportation of goods using the vehicle owned by the supplier.2. Classification of transport service provided by the applicant.3. GST applicability on supply of goods and transportation charge to an unregistered person.4. Classification of transaction as composite supply under section 8 of the CGST Act when goods and transport charges are invoiced separately.Issue-wise Detailed Analysis:1. Rate of GST applicable for transportation of goods using the vehicle owned by the supplier:The applicant is engaged in the manufacture and supply of Complementary Weaning Food containing Amylase Activity to the Department of Integrated Child Development Services (ICDS), Government of Tamil Nadu. They sought clarification on the rate of GST applicable for transport charges received for transportation of these food items through vehicles owned by them. The bid document and agreements indicate that the unit price per metric ton (MT) includes transportation charges. Despite raising separate invoices for goods and transportation, the Authority ruled that this constitutes a composite supply, where the principal supply is the food product. Therefore, the applicable GST rate is 2.5% CGST and 2.5% SGST, subject to the conditions of Notification No. 39/2017-Central Tax (Rate) and the equivalent TN GST Notification.2. Classification of transport service provided by the applicant:The Authority examined whether the transport service provided by the applicant falls under the Goods Transport Agency (GTA) service. The definition of GTA includes the issuance of a consignment note, which the applicant does not issue. Furthermore, since the transportation is an integral part of the composite supply of food products, it is not classified separately as a GTA service. Thus, the transportation service provided by the applicant is not considered a GTA service.3. GST applicability on supply of goods and transportation charge to an unregistered person:The applicant queried whether GST is applicable when supplying goods and transportation services to an unregistered person. The Authority clarified that since the supply of goods and transportation is a composite supply, the entire transaction is subject to GST at the rate applicable to the principal supply, which is the food product. Therefore, the GST rate of 2.5% CGST and 2.5% SGST applies to the entire composite supply, regardless of whether the recipient is registered or unregistered.4. Classification of transaction as composite supply under section 8 of the CGST Act when goods and transport charges are invoiced separately:The applicant raised a query on whether the transaction falls under the category of composite supply if invoices for goods and transport charges are raised separately. The Authority ruled that the supply of Complementary Weaning Food containing Amylase Activity, including its delivery to specified centers, is a composite supply as per section 2(30) of the CGST/TNGST Act 2017. The principal supply is the food product, and the transportation is naturally bundled with it. Therefore, the entire transaction is treated as a composite supply, and the applicable GST rate is that of the principal supply. The Authority also noted that it cannot specify how invoices should be raised, as it is for the applicant and the recipient to determine based on their contractual agreement.Ruling:1. The supply of Complementary Weaning Food containing Amylase Activity at specified destinations is a composite supply, liable to GST.2. The applicable GST rate is 2.5% CGST and 2.5% SGST, subject to the conditions of relevant notifications.3. The transportation service alone is not classified as a Goods Transport Agency service.4. The Authority does not specify how invoices should be raised for the composite supply.