2021 (10) TMI 325 - AAR - GST

Classification of cooking gas supply as service not goods; AAR rules on composite supply

The case involved determining the classification of the supply of cooking gas as either goods or services and whether it constituted a composite supply. ... Supply of goods or services - Composite supply - Principal supply - Facility and property management services - Tax liability on composite supplies - Reticulated gas system - Common area maintenance (CAM) chargesComposite supply - Principal supply - Reticulated gas system - Facility and property management services - Common area maintenance (CAM) charges - Classification of supply of cooking gas through pipeline from on site gas banks as supply of goods or supply of services. - HELD THAT: - The Authority examined the nature of the reticulated gas system and the contractual and invoicing arrangements. The gas banks, pipelines, meters and related installations are located in the common areas and their upkeep and maintenance are included within the scope of facility/property management services and Common Area Maintenance charges payable by all apartment owners. A fixed piped gas bank charge is payable by every flat owner irrespective of actual availing of pipeline gas, and the applicant engages service providers to maintain the gas bank and pipelines and receives consolidated maintenance invoices which include such upkeep. The supply of gas through the pipeline, though invoiced separately on consumption, is inextricably linked with and supplied in conjunction with the facility and property management services; the supplies are therefore naturally bundled. Applying the composite supply concept and the rule that a composite supply is treated as the principal supply, the facility/property management services constitute the principal supply which gives the bundle its essential character. Consequently, the supply of cooking gas through the reticulated system is to be treated as a supply of services as part of a composite supply whose principal element is facility and property management services. [Paras 4]Supply of cooking gas through the pipeline from the on site gas banks is classified as supply of services (a composite supply whose principal supply is facility and property management services).Final Conclusion: In the circumstances found, the supply of cooking gas by the applicant through the reticulated/piped gas system is held to be a supply of services (composite supply with facility and property management services as the principal supply). Issues Involved:1. Classification of supply of cooking gas as either supply of goods or supply of services.2. Determination of whether the supply of cooking gas is a composite supply.Issue-wise Detailed Analysis:1. Classification of Supply of Cooking Gas:The applicant, engaged in providing maintenance services to apartment owners, questioned whether the supply of cooking gas through a pipeline should be classified as a supply of goods or services. The applicant argued that the gas should be classified as a supply of goods, citing that they purchase gas cylinders, refill a gas bank, and supply the gas to apartment owners. They contended that since the gas is procured and supplied, it should be treated as a supply of goods, similar to how the vendor classifies it under HSN 271119 with a GST rate of 5%.The Revenue, however, argued that the supply of cooking gas is part of the general maintenance and upkeep services provided by the applicant. They highlighted that the applicant charges a fixed maintenance fee that includes the upkeep of the gas bank and pipelines, and an additional charge based on gas consumption. The Revenue asserted that these charges are part of the same consideration for the contract of general maintenance and should be taxed as services at 18%.2. Determination of Composite Supply:The applicant argued that the supply of cooking gas and maintenance services are not naturally bundled and should not be treated as a composite supply. They emphasized that the gas supply is optional for apartment owners and is invoiced separately based on actual consumption. They further argued that the maintenance of the piped gas connection is distinct from the supply of cooking gas, and thus, the gas supply should be treated as an independent supply of goods.The Revenue countered that the maintenance of the gas bank and pipelines is integral to the overall maintenance services provided by the applicant. They pointed out that the applicant issues a consolidated maintenance bill that includes charges for the upkeep of the gas system, and an additional invoice for gas consumption. The Revenue maintained that the consideration for gas consumption is an additional component of the general maintenance service, making it a composite supply of services.Observations and Findings:The Authority for Advance Ruling (AAR) examined the nature of the supply of cooking gas through the reticulated gas system. They noted that the installation and maintenance of the gas bank and pipelines are part of the common area maintenance services provided by the applicant. The AAR observed that the applicant is responsible for the overall facility and property management, including the maintenance of the gas system, and charges a fixed amount for this service irrespective of gas consumption.The AAR concluded that the supply of cooking gas is inextricably linked with the facility and property management services. They determined that the gas supply, although invoiced separately, is naturally bundled with the maintenance services and is supplied in conjunction with them. Therefore, the supply of cooking gas through the pipeline should be treated as a composite supply of services, with the principal supply being the facility and property management services.Ruling:In the given circumstances, the supply of cooking gas as provided by the applicant shall be classified as a supply of services.