Composite supply

[SK Krishna]

Dear experts,

Tax payer has two seperate concerns, one supplying CSD Beverages at 28% rate of tax & 12% cess ( Total 40% of tax) and other concern providing transport facility to the first concern(only) at 12% rate of tax. Now Assessing officer questions the seperation of two businesses and alleges that the intention of the tax payer is to evade payment of tax at rate of 40% as composite supply. Kindly provide the following clarifications:

1. Whether the seperation of two businesses of the tax payer is not allowed under the Gst Act?

2.whether the supply has to be treated as two seperate ones or is it a composite supply and liable to be taxed at 40%?

3. Whether any case laws or Rulings were available to defend the case ?

Thanks in advance for all experts for your immense support.

[Shilpi Jain]

The moment the 2 supplies are made by 2 different entities it will not be a composite supply. The split is legal and cannot be questioned in light of the purpose for which it was done.

In case department wants to tax it, let them make amendments in the law to club transactions as is done in Income tax and to some extent in Central Excise also.

Merely because someone is structuring his transactions for saving tax, until it is within the 4 corners of the law, department cannot question it.

[KASTURI SETHI]

I agree with Madam Shilpi Jain.

In case the department directs or instructs to pay tax @ 40%, the burden of proof is cast upon the department and not on the assessee.

[Amit Agrawal]

I concur with my professional colleagues!

Kindly clarify how said tax-payer is saving any taxes if "other concern providing transport facility to the first concern(only) at 12% rate of tax"?

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Padmanathan KV]

I concur with experts but some how does not seems so straightjacket case.

Do throw some more facts relating to activity of first and second concern viz-a-viz the ultimate customer.

Also what is the agreement between first concern and customer? Is it supply with delivery?
and the exact contention of the department?

I think whole arrangement needs to be examined holistically.

AI Summary

Composite supply requires a single supplier bundling items; separate entities' supplies remain distinct and taxable accordingly. When two distinct legal entities independently supply goods and services, the supplies are ordinarily treated as separate transactions rather than a composite supply; composite characterisation requires a single supplier bundling items. The revenue seeking to aggregate such supplies must bear the burden of proof, and resolution depends on a factual and contractual assessment of the parties' roles, delivery terms, and the economic reality of the arrangement.