Ruling on GST for Machine Rentals: Separate supply of reagents, 9% CGST, 9% KGST

The ruling determined that the applicant is liable to pay GST on machines under the Part Reagent Rental Placement Contracts (PRC) model but not under the Reagent Rental Placement Contracts (RRC) model. The supply of reagents along with machine rental and services in both RRC and PRC contracts is considered a separate supply. The rate of tax for the rental services of equipment is 9% CGST and 9% KGST. The applicant is eligible for input tax credit on the purchase of machinery for use in RRC/PRC contracts, subject to specified conditions.

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Issues Involved:
1. Liability to pay GST on machines given under RRC/PRC models.
2. Classification of supply of reagents along with machine rental and services under RRC/PRC contracts.
3. Rate of tax for the service of machine under RRC/PRC models.
4. Value on which GST has to be paid and the time of supply in RRC/PRC models.
5. Eligibility for input tax credit on the purchase of machinery for use in RRC/PRC contracts.

Detailed Analysis:

1. Liability to Pay GST on Machines Given Under RRC/PRC Models:
The applicant is not liable to pay GST on machines given to customers under the Reagent Rental Placement Contracts (RRC) model as there is no consideration involved in providing the equipment and the ownership remains with the applicant. However, under the Part Reagent Rental Placement Contracts (PRC) model, the applicant is liable to pay GST on the machines given to customers as a non-refundable deposit is received, constituting consideration for the rental of equipment.

2. Classification of Supply of Reagents Along with Machine Rental and Services:
The supply of reagents along with machine rental and services under both RRC and PRC contracts is considered a separate supply, independent of the machine rental services. The applicant argued that these supplies should be treated as composite supply with reagents as the principal supply. However, the ruling determined that these are independent supplies due to the separate considerations involved.

3. Rate of Tax for the Service of Machine Under RRC/PRC Models:
For the PRC model, the rate of tax for the rental service of equipment is 9% CGST and 9% KGST, as per Entry No. 17 (iii) of Notification No. 11/2017-Central Tax (Rate). The equipment falls under HSN Code 90278090.

4. Value on Which GST Has to Be Paid and the Time of Supply:
- RRC Model:
- Supply of Reagents: GST is payable at the time of supply of reagents on the transaction value.
- Supply of Services (Tolerating an Act): GST is payable at the time of supply of such services on the transaction value.
- PRC Model:
- Supply of Rental Services in Equipment: GST is payable at the time of supply of the equipment on the amount of non-refundable payment received or invoiced.
- Supply of Reagents: GST is payable at the time of supply of reagents on the transaction value.
- Supply of Services (Tolerating an Act): GST is payable at the time of supply of such services on the transaction value.

5. Eligibility for Input Tax Credit on the Purchase of Machinery:
The applicant is eligible for the input tax credit on the purchase of machinery used in RRC/PRC contracts. The machinery is considered capital goods as it is capitalized in the books of accounts and used in the course or furtherance of business. The input tax credit is subject to the conditions and limitations prescribed under Sections 16 and 17 of the CGST Act.

Ruling:
1. The applicant is liable to pay GST on machines/equipment under the PRC model but not under the RRC model.
2. The supply of reagents along with machine rental services in both RRC and PRC contracts is a separate supply.
3. The rate of tax for the supply of rental services of equipment is 9% CGST and 9% KGST.
4. The value on which GST has to be paid and the time of supply are:
- RRC Model:
- For the supply of reagents: At the time of supply of reagents on the transaction value.
- For the supply of services (tolerating an act): At the time of supply of such services on the transaction value.
- PRC Model:
- For the supply of rental services in equipment: At the time of supply of the equipment on the non-refundable payment received or invoiced.
- For the supply of reagents: At the time of supply of reagents on the transaction value.
- For the supply of services (tolerating an act): At the time of supply of such services on the transaction value.
5. The applicant is eligible for the input tax credit on the purchase of equipment for use in RRC/PRC contracts.

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