Rate of Tax applicability.

[THYAGARAJAN KALYANASUNDARAM]

Dear Sir,

One of my client has supplying and erecting the water treatment plant to various customers located in India. In the execution of this contract, there will be goods as well labour is involved. And they are procuring the goods under various rates @ 12%, 18% & 28% from the various vendors. Now my query is that, whether he has to charge tax based on principle supply under composite supply (OR) based on the concept of Mixed supply i.e. which attracts highest rate of tax.

Thanks in Advance.

[Himansu Sekhar]

Composite supply

[Ganeshan Kalyani]

Yes composite supply.

AI Summary

Composite supply: tax follows the principal supply component, not the highest-rate mixed-supply rule, for goods plus labour contracts. The transaction of supplying and erecting a water treatment plant comprising goods and labour is characterised as a composite supply; tax is therefore to be determined by identifying the principal supply component and applying the tax rate applicable to that principal supply rather than treating it as a mixed supply attracting the highest rate.