ISSUE OF GST INVOICE FOR TAXABLE GOODS AT DIFFERENT RATES

[KERAGODEGOPALARAO ANANTHARAO]

Dear sir,

We are purchasing Growbags at the rate of 18%, We are selling Cocopeat at the rate of 5%.

Cocopeat is filled in Growbags and sell to the customers. What is the rate of filled bag?

Shall we make separate entry in Invoice or shall we make one invoice.

if separate in invoice what is rate of tax? If one in invoice what is rate of tax?

[Rajagopalan Ranganathan]

Sir,

According to section 15 of the CGST Act, 2017 value of packing material is to be included in the transaction value of the goods supplied. Hence the rate of tax will be the same rate that is chargeable on the goods supplied. If the rate of tax on packing material is higher than the rate of tax on the goods supplied, then you can claim the refund of excess credit available in your credit ledger under proviso to section 54 (3) of CGST Act, 2017 on the ground that the rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies).

[KERAGODEGOPALARAO ANANTHARAO]

THANK YOU SO MUCH SIR

[Ganeshan Kalyani]

The rate applicable to main supply i.e. Cocopeat @ 5% is applicable on packing material as well. Packing material is not sold separately. It is incidental to main supply. It is termed as a composite supply in which case the rate applicable to main supply applies on entire transaction value.

[YAGAY andSUN]

We endorse the views of experts. However, for the point of tax planning, you may sell both items separately with the instrutions how to use cocopeat in growbags.

[ABHISHEK TRIPATHI]

Dear Sir,

Department may contest by saying that it is a mixed supply of two individual supply.

prima facie I have doubts calling grow bags as incidental expenses (packing material), because after selling growbags filled with cocopeat, you must be packing and giving it to the customers (at least in some cases). Technically material used to pack grow bags filled with cocopeat should be called as packing material.

I am not very sure to comment on the query, as I think it requires proper research. But to me, grow bags are not packing material at least.

AI Summary

Composite supply: rate of the principal goods applies to packed goods; packing included in transaction value under GST. Packing material value is includible in transaction value; when packing is incidental and the supply is a composite supply dominated by the principal good, the principal good's rate applies to the entire transaction. Alternatively, separate invoicing of components may be employed but risks classification as a mixed supply. If inputs bear a higher tax rate than outputs, refund mechanisms for excess input tax credit may be available. The key factual question is whether the growbag is incidental packing or a distinct supply, which governs invoicing and rate determination.