2019 (11) TMI 40 - AAR - GST

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 ... Classification of supply - composite supply or not - supply of spare parts / accessories and repair service - principal supply is repair service - taxable at 18% or not? HELD THAT:- The supply of spares parts / accessories and repair service are distinct and separately identifiable supplies for which the rates are quoted differently and work orders are issued separately specifying the spares / accessories to be supplied and the services to be supplied and the rates applicable thereon as per the rates quoted in the Repair Rate Contract can't be considered as a composite supply. Where a supply involves supply of both goods and services and the value of such goods and services supplied are shown separately, the goods and services would be liable to tax at the rates as applicable to such goods and services separately. 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.