2020 (1) TMI 29 - AAR - GST

AAR rules services as mixed supply, GST rate set at 18%.

The Authority for Advance Ruling (AAR) determined that the services provided by the applicant, including consultancy and provision of duty credit scrips, ... Rate of GST - consultant rendering services in the field relating to Import-Export compliances to customers with State and Central Office under Customs, Ministry of Finance & Commerce - composite supply or mixed supply? - whether the services provided along with the duty credit scrip are composite in nature, the principal supply being service rendered or usage of scrip? - HELD THAT:- It is seen that the applicant is an all round consultancy company providing all sorts of technical help, documentary support and allied advisory services on matters relating to foreign trade, Customs duty & Excise duty along with expert advice & consultancy related to the Ministry of Finance & Commerce. It is stated that the applicant is entering in providing a one stop solution, which is a new concept in which they offer Document Management Solution, Installation of JAVA in client system & maintenance till the contract period, Broadcasting, Business Consulting Services and RTI-other legal service along with procuring and supplying Duty Credit Scrips. It is seen that the duty credit scrip is purchased by the applicant by means of transfer, which means that the scrip belongs to the applicant and he can import goods against the scrip if he chooses so. The applicant further re transfers the scrip to his client. Both these activities are to be done through the systems put in place by DGFT. These activities are independent of the activities of data management or consultancy services that the applicant offers. The applicant can very well supply only the duty credit scrip by buying it and re selling it or only act as a consultant for the transaction by identifying the seller of the scrip and getting it transferred in the name of their client. Data management activities assisting the client in clearance of goods from customs can also be performed without a supply of duty credit scrip - Such supply of services along with the duty credit scrip as in the service order furnished by the applicant in the case of Sitaram Shipping Services is not naturally bundled together and is not a composite supply. These are several individual supplies which are made in conjunction with each other as specified in the service order by the client at a single price but is not a composite supply. In effect, they are mixed supplies. In the instant case the mixed supply consists of the supply of duty credit scrip and supply of various services of data management, consultancy , legal services etc. The supply of duty credit scrip HSN 4907 is exempt as per Sl.No. 122A of Notfn. No. 2/2017-C.T.(Rate) dated 28.06.2017 as amended by Notification No. 35/2017-C.T.(Rate) dated 13th October 2017 and Sl.No. 122A of Notfn. II(2)/CTR/532(d-5)/2017 G.O. (Ms) No. 63 dated 29.06.2017 as amended by G.O. (Ms) No. 133, dated 13.10.2017. The various services that the applicant is supplying of SAC 998216/998312/998415/998434/998466/998595 etc mentioned in para 4.2 above are all taxable at 9% CGST vide Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 as amended and at 9% SGST vide Notification No. II(2)/CTR/532(d-14)/ 2017 vide G.O. (Ms) No. 72 dated 29.06.2017 as amended. Therefore, as per Section 8 of the ACT, the rate of tax of this mixed supply which is billed at a single price is the rate of the highest rate of the services supplied which is 18%. Issues Involved:1. Determination of the applicable rate of GST for the services provided by the applicant.2. Whether the services provided by the applicant are composite in nature or constitute mixed supply.Issue-wise Detailed Analysis:1. Determination of the applicable rate of GST for the services provided by the applicant:The applicant, engaged in consultancy services related to Import-Export compliances, sought an advance ruling on the applicable GST rate for their services provided for a whole sum price. The applicant's services include guidance on customs clearance, obtaining and utilizing transferable incentives, document preparation, and other related services. The applicant charges a lump sum fee that includes consultancy charges and the price for duty credit/transferable incentives. The consultancy charges are taxable under GST at the rate of 18% under Service Accounting Code 9982. The duty credit scrips themselves are exempt from GST as per Notification No. 35/2017-Central Tax (Rate) dated 13.10.2017. The applicant sought clarification on whether their services, which include the provision of duty credit scrips, are composite in nature and the applicable GST rate for the consideration received.2. Whether the services provided by the applicant are composite in nature or constitute mixed supply:The applicant argued that their services, which include consultancy and the provision of duty credit scrips, are composite in nature, with the principal supply being the consultancy services. However, the Authority for Advance Ruling (AAR) found that the services provided by the applicant are not naturally bundled and do not constitute a composite supply. The AAR observed that the duty credit scrips could be supplied independently of the consultancy services. The services provided, such as data management, consultancy, and legal services, can be performed without the supply of duty credit scrips. Therefore, the AAR concluded that the services provided by the applicant are mixed supplies, consisting of several individual supplies made in conjunction with each other at a single price.Judgment:The AAR ruled that the supplies made by the applicant, as enumerated in the service order of M/s. Sitaraman Shipping Service, are 'Mixed supply.' As per Section 8 of the CGST Act and TNGST Act, the tax liability on a mixed supply is determined based on the highest rate applicable to any of the supplies within the mixed supply. In this case, the highest rate applicable is 18% GST (9% CGST and 9% SGST) for the various services supplied by the applicant. Therefore, the applicable rate of GST for the consideration received from the customers for the said services provided is 18%.