Supply of spare parts and repair services not composite supply

The ruling determined that the supply of spare parts/accessories and repair services do not constitute a composite supply. As per the Repair Rate Contract, spare parts and repair services are distinct and separately identifiable supplies, taxed individually at their applicable rates. The contract's separate rates, work orders, and invoices support this differentiation, aligning with CBIC Circular No.47/21/2018-GST. Consequently, spare parts and repair services are taxed separately based on their respective rates, as specified in the contract.

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Issues:
Whether the supply of spare parts/accessories and repair service can be considered as a composite supply with the principal supply being repair service, and if the tax rate for all supplies should be 18%.

Analysis:
The applicant is in the business of providing boat/vessel repairing services along with spare parts and accessories. They have a Repair Rate Contract with a customer for boat repairs, where spare parts and repair services are provided. The applicant sought clarification on whether spare parts/accessories and repair services constitute a composite supply with the principal supply being repair service, attracting an 18% GST rate.

The Repair Rate Contract specifies separate rates for spare parts and repair services. Work orders are issued separately detailing the parts and services along with their prices. Invoices are also issued separately, indicating the value of spare parts and service charges. The contract allows for the revision of spare parts rates and includes a fall clause for spare parts.

The ruling authority examined the contract clauses and noted that spare parts and repair services are distinct and separately identifiable supplies with separate rates quoted. The issuance of separate work orders and invoices further supports the differentiation between spare parts and repair services. This aligns with the CBIC Circular No.47/21/2018-GST, which states that when a supply includes both goods and services, taxed separately based on their individual rates when shown distinctly.

Therefore, the ruling concluded that spare parts/accessories and repair services do not constitute a composite supply. Since the goods and services are shown separately and taxed at their respective rates, spare parts and repair services are liable to tax individually based on their applicable rates, as per the Repair Rate Contract.

In summary, the judgment clarifies that the supply of spare parts/accessories and repair services are distinct supplies, not forming a composite supply. Each component is taxed separately based on their individual rates as specified in the Repair Rate Contract, in accordance with the CBIC circular guidelines.

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