Supply of mud engineering services with mud chemicals found composite supply, separate invoices not determinative, prior rulings set aside

Whether the supply of mud engineering expertise together with provision and injection of formulated drilling fluids and chemicals constitutes a composite supply under the GST composite supply definition is examined by applying the mutual essentiality and principal supply tests. The chemicals are prepared and consumed as an integral part of delivering the engineering service and are supplied in conjunction with it; separate billing is not decisive. Applying those principles, the combined supply qualifies as a composite supply and prior adverse advance rulings are set aside, making the service with consumed chemicals one taxable composite transaction.

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Issues: Whether the contract for mud engineering services together with supply of mud chemicals/additives (consumed in execution) qualifies as a composite supply under Section 2(30) of the Goods and Services Tax Act, 2017.

Analysis: Section 2(30) defines composite supply as two or more taxable supplies that are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one being a principal supply. The enquiry requires examining whether the supply of services and the supply of chemicals are mutually essential and intertwined parts of a single contractual obligation such that the goods are supplied in conjunction with the services and are necessary for execution of the contract. The contractual scope requires provision of mud engineering expertise together with provision and injection of formulated drilling fluids and chemicals tailored to the drilling activity; the chemicals are not off the shelf items but are prepared/used as part of the engineering service to maintain drilling parameters. The separate billing or issuance of distinct invoices does not by itself render the supplies separate if the goods and services are integral to achieving the contractual objective and are supplied in conjunction with each other.

Conclusion: The supply of mud engineering services together with the associated mud chemicals/additives consumed during execution constitutes a composite supply under Section 2(30) of the Goods and Services Tax Act, 2017; the impugned advance ruling and appellate advance ruling holding otherwise are set aside.

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