Composite supply

[THYAGARAJAN KALYANASUNDARAM]

Dear expert,

I would like know what is the rate of tax for contract under painting work. The paint is under 28% and the labour under 18%. Here which one is principal supply.

Thanks in advance.

[Kishan Barai]

Principal supply is paint for painting work, so 28% according to my view.

[Vamsi Krishna]

Generally for composite tax cases, principal rate of tax only applies.

Its better to enter works contract with the contractor where he will get paint and bill you. In such case 18% tax shall be levied.

(I hope the painting is for construction activity,pls read Works contract definition)

[THYAGARAJAN KALYANASUNDARAM]

Thank u do much for your kind response.

[KASTURI SETHI]

Dear Querist,

In the example cited by you, GST @18% is applicable.

[Kishan Barai]

If your are doing contract work for Painting Company then 18%

Or

But if you do painting work for other house / Office then to purchase paint 28% would be Applicable & for your services 18%

Please correct me if I am wrong

[KASTURI SETHI]

Sh.Kishan Barai Ji,

Sir, You are absolutely right.

[KASTURI SETHI]

In such situation ITC overflows and no refund is admissible.

[Vamsi Krishna]

If you are executing works for Immovable property it is termed as Works contract and 18% rate is applicable (Ref 2(119) for definition of works contract).

If you are not covered under the above definition, you will fall into composite supply under sec.8 where principal supply concept will come into picture.

Under composite supply since supply is rated @ 28%, your further works on it may also be charged under 28%.

[KASTURI SETHI]

Sh. Vamsi Krishna ji,

Thanks for throwing more light on the issue.

[Vamsi Krishna]

Its pleasure to be part of forum having experts.. welcome sir..

[THYAGARAJAN KALYANASUNDARAM]

Dear expert,

Thanks a lot for your valuable instant reply and support sir.

AI Summary

Composite supply: principal supply determines tax rate for bundled goods and services, affecting invoicing and input credit.
Tax treatment of a painting contract depends on whether it is a works contract for immovable property or a composite supply. If a works contract applies, the works-contract rate governs. If a composite supply applies, the rate of the principal supply governs the entire transaction. Structuring (e.g., contractor purchasing paint) can affect incidence, and mismatches between goods and service rates can cause non refundable input tax credit overflow, so precise classification and invoicing are necessary.