Appellate Authority reclassifies supply of UPS systems & services as separate, subject to 18% GST.

The Appellate Authority set aside the ruling that the supply of UPS systems and related services constituted a composite supply. The Authority determined that the supplies should be treated as independent supplies of goods and services, each subject to GST at the applicable rate of 18%.

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Issues Involved:
1. Whether the contract entered into with DMRC for supply, erection, installation, commissioning, and testing of UPS system qualifies as a supply of works contract under Section 2(119) of the CGST Act, 2017.
2. Whether such supply made to DMRC would be taxable at the rate of 12% in terms of Sr. No. 3(v) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended w.e.f. 25.01.2018.
3. Whether the supply made by the appellant amounts to a composite supply, wherein the principal supply is the supply of UPS, and thus subject to GST at the rate of 18%.

Detailed Analysis:

1. Contract as Supply of Works Contract:
The appellant entered into a contract with DMRC for the supply, erection, installation, commissioning, and testing of UPS systems. The appellant sought an advance ruling on whether this contract qualifies as a supply of works contract under Section 2(119) of the CGST Act, 2017. The Advance Ruling Authority (AAR) held that the supply of UPS systems made by the appellant to DMRC does not qualify as works contract service. The appellant accepted this ruling.

2. Taxability at the Rate of 12%:
Given that the supply does not qualify as a works contract service, the benefit of a concessional rate of 12% under Sr. No. 3(v) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (as amended) would not be available to the appellant. The appellant did not dispute this aspect of the ruling.

3. Composite Supply:
The AAR further held that the supply made by the appellant qualifies as a composite supply, with the principal supply being the UPS systems, thus subjecting the entire contract to GST at the rate of 18%. The appellant contested this finding, arguing that:
- The supply of UPS systems and the supply of services (erection, installation, commissioning, testing) are provided by two distinct persons (Maharashtra GSTIN and Delhi GSTIN).
- The supplies are not naturally bundled and supplied in conjunction with each other in the ordinary course of business.
- The contract specifies separate consideration for goods and services, and separate invoices are raised for each.

The appellant contended that the supplies should be treated as independent supplies of goods and services, each leviable to GST separately at the rate of 18%.

Appellate Authority's Findings:
The Appellate Authority examined the definition of "composite supply" under Section 2(30) of the CGST Act, 2017, which requires:
- The supply to be made by a single taxable person.
- The supplies to be naturally bundled and supplied in conjunction with each other.
- One of the supplies to be the principal supply.

The Appellate Authority agreed with the appellant's contention that:
- The presence of two distinct taxable persons (Maharashtra GSTIN and Delhi GSTIN) precludes the supplies from being considered a composite supply.
- The supplies are not made in conjunction with each other, as the services are provided only after the goods have been supplied and inspected.
- Both supplies (goods and services) are equally important and indispensable, and neither can be considered ancillary to the other.

The Appellate Authority concluded that the supplies under question do not satisfy the conditions for a composite supply and thus modified the AAR ruling to state that the supplies should be treated as independent supplies of goods and services, each subject to GST at the applicable rate of 18%.

Order:
The Appellate Authority set aside the AAR ruling to the extent that it considered the supplies as a composite supply. The supplies under question are to be treated as independent supplies of goods and services, each leviable to GST separately.

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