TaxTMI 
TaxTMI 
2018 (10) TMI 1515
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....pecifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the "GST Act". 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus - STATEMENT OF RELEVANT FACTS HAVING A BEARING ON THE OUESTION(S) ON WHICH ADVANCE RULING IS REQUIRED. 1. We, HP India Sales Private Limited (hereinafter referred to as "the Applicant" or "We"), being taxable person registered under Section 22 of the Maharashtra State Goods and Services Tax Act, 2017 (referred as "MSGST Act") read with Rule 24 of the Maharashtra Goods and Services tax Rules, 2017 (referred as "MSGST Rules"), having GSTIN 27AAACC9862F1ZI, are engaged inter alia in providing printing supplies to be used in HP's Indigo press machines supplied to customers. 2. The HP Indigo digital printing press (hereinafter referred as HP Indigo) is a printing press uniquely designed for ensuring best quality prints in the i....
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....nbsp; 12. The Applicant has contracted with authorized resellers for making supplies of ElectroInk with consumables to be used in HP Indigo presses by the customers of HP Indigo presses on a back to back basis. 13. The agreement between the Applicant and the resellers is enclosed as Annexure 2 - HP Indigo Supplier Reseller Agreement, detailing the contractual obligations and other terms of agreement. 14. The resellers also have entered into agreements with the end customers for onward sales of such printing supplies. Sample agreement between the reseller and the end customer is enclosed as Annexure 3. 15. The billing for such arrangement shall be based on "per click basis" calculated on a monthly basis depending on the series of Indigo press machine pertaining to which the goods are supplied, number of clicks and the type of print performed. 16. To illustrate, assuming a customer uses the printer to take 100 prints in a month and each print costs Rs. 10/-, then the customer shall be billed Rs. 1,000 ....
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.... Act provides that the nature of a composite supply shall be treated as a supply of the principal supply contained therein. iii. In this regard, Section 2(90) of the MSGST Act defines principal supply as "the supply of goods or services which constitutes predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary" iv. Accordingly, the nature of the predominant element supplied in a composite supply shall be deemed as the nature of the entire value of supply and levying the rate of GST as applicable on the principal supply. v. Drawing inference from the above legal provisions, a bundled supply of goods shall constitute a composite supply under the GST Act where the same is satisfying the following 4 tests: • Such supply involves two or more taxable supplies of goods or services or both or any combination thereof; • The supply of such goods or services is naturally bundled; • The goods or services are supplied in conjunction with each other in the ordinary course of business; and • One of such supply is the principal supply. vi. In this regard, we wish to hig....
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....s and conditions. Reseller may elect to purchase Supplies for the different Indigo Press Product Lines under different programs, provided that Reseller shall purchase all of the Supplies required by it for each Indigo Press Product Line under the same Supplies purchase program." Point "a" of Section G (1) - TIER PROGRAM FOR PURCHASE OF SUPPLIES BY RESELLER at page 4 a. "Click" means a chargeable unit for a Single Color Separation transferred onto substrate, except in the case of textured effect printing, where it is the action of texturing by applying pressure between the substrate and the mold. A Click unit may vary depending on the press model. The Indigo press machine requires all the Supplies do be present in the device and collectively consumed. The invoicing for such supplies is also done on a per click basis, referring to the charges for a combined use of the ElectroInk and all the other consumables supplied. Therefore, the Electolnk along with the consumables are naturally bundled. -The goods or services are supplied in conjunction with each other in the ordinary course of business Point 1 of Section B - Appointment at page 3 "1. HP appoints Reseller as an....
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....lso stands satisfied. - One of such supply is the principal supply The principal supply involved in a bundled supply of goods is the element which is most predominant in a composite supply and other supplies forming part of the bundle are only ancillary thereof. In this regard, the Applicant wishes to submit that the ElectroInk supplied under the above arrangement is the predominant element contained in the bundled supply of goods made to authorised reseller. This can be inferred by the fact that the intention of the customer is to receive quality prints from the Indigo press which cannot be supplied without the "printing ink" being loaded therein. Additionally, other goods supplied in this regard are mere ancillary products to the ElectroInk in order to support the printing of the final image onto the paper. The Applicant also submits that the HP indigo digital offset colour technology guarantees the best quality prints in the industry. Further, the liquid ink supplied in this regard is unique to indigo presses to ensure wide and accurate images matching the media. Accordingly, the printing ink supplied herein is the predominant element to ensure execution of entire su....
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....des supply of such goods as the Government may, subject to such conditions, as it may, by notification, specify". ii. The Applicant supplies the ElectroInk and consumables in a recurrent manner to the reseller, when the end customer prints an image using the supplies. We wish to highlight Point 3 of Section G at page 5 in this regard: "3. Supplies shall remain the property of HP until utilized in the Press(es). HP retains a security interest in all Supplies until HP receives payment for the same. In addition, upon first request by HP, Reseller will take all steps necessary to register a security interest or lien in favor of HP in the Supplies. Reseller acquires the ''Supplies for its Customers' own use only, and may not sell or otherwise transfer such Supplies to any other third party. Reseller shall further take reasonable efforts to advise its Customers in writing of HP's title to the Supplies as detailed in this Section, require that its Customers use the Supplies provided under the Tier Programme for their own use only and refrain from selling or otherwise transferring such Supplies to any other third party. However, in case of any non-complian....
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....e an invoice to Reseller for the supplies utilised under the Tier Program in the preceding month" viii. Therefore, the Applicant understands that "supply" under GST law is not effected at the time of removal of goods from its registered location in Mumbai, but when the goods are used by the customer and correspondingly a statement of accounts is raised based on the number of clicks made by the customer in the preceding month. ix. In this regard, the Applicant understands that the time of supply involved in respect of supply of ElectroInk with consumables to authorised reseller shall be based on the invoice raised basis the statement of accounts covering the number of clicks made by the customer. 22. We shall be glad to furnish such additional information and relevant documents as the Authority may require for passing its decision where the application is admitted. Prayer A. In view of the above factual and legal position, it is most humbly prayed that this Hon'ble Authority may clarify that: i. Supply of printing supplies ink to be used in an Indigo press is a Composite supply, wherein the printing ink is the principal supply; and ....
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....bles the use of very small particle size, down to 1-2 microns. These small particles dispersed in the liquid carrier allow for higher resolution, uniform gloss, sharp image edges, and very thin image layers. The thin image layer closely follows the surface topography of the paper. This gives a highly uniform finish, complementing the paper and resulting in a similar texture both on the image and on the non-image areas. The HP Indigo ElectroInk is available in an increasing range of colours. ElectroInk is supplied in a concentrated form that is loaded into the press in cartridges in a "clean hands" operation. Inside the press it is fed into ink supply tanks, diluted with oil and combined with a charging control fluid, to form a fluid mixture of carrier liquid and colourant particles ready for printing. The mixing is done under accurate automated control, resulting in a stable ink with nearly constant physical traits, leading to consistent prints. Furthermore, ElectroInk incorporates pigments which are the same as offset; this supports both the price and the availability of the final ink product. The Printing Cycle. The HP Indigo printing engine performs the following ope....
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....er for supplies to customers HP India Sales Private Limited (hereinafter referred to as the "Applicant" or "Company" or "we") refer to the clarification sought in relation to the consumables supplied by the Company to Redington India Limited (reseller), to be further supplied to customers for the purpose of effecting print in the indigo press machines. In this regard and further to the personal hearing attended on April 25, 2018, we wish to make the following additional submissions: 1. Latest copy of agreement entered between Applicant and Reseller for supply of indigo press consumables The Applicant wishes to submit that the terms of reseller agreement (copy provided as Annexure 2 to the Statement of facts submitted along with the application for advance ruling) entered on July 19, 2013 stands valid as on date. Further, any rate revision required to the supply program are agreed mutually between the Applicant and the reseller from time-to-time. However, in this regard no amendment is made to the master agreement dated July 19, 2013. 2. Break-up of revenue earned by Applicant during the last financial year between tier and a-Ia-carte program The Applicant wishes t....
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....uperior quality of imaging products for effecting a print. The imaging products as defined in SI. No. 6 of Section A of the HP reseller agreement (submitted as Annexure 2 to the statement of facts) consists primarily of ElectroInk, along with ancillaries such as photo imaging plate, binary ink developer, printing blankets, imaging oil. Further, a single tax invoice is raised by the Applicant for all the goods supplied herein, based on the consumption report generated on a monthly basis (submitted as Annexure 4 to the statement of facts). Accordingly, HP indigo tier program satisfies the requirement of supply being made by a taxable person to a recipient consisting of two or more taxable supply of goods. • The supply of such goods is naturally bundled: The term naturally bundled is not defined in the GST Act. However, in common parlance the term can be understood based on the intention of the parties to the contract. The intention plays a significant role in ascertaining whether such supplies qualify as being naturally bundled. In this regard, the Applicant wishes to draw reference to the relevant extracts of the reseller agreement (submitted as Annexure 2 t....
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....d invoiced based on such consumption. Highlighting, relevant extracts of the agreement as under: Section 2 page 3 "The unused supplies under the terms of this agreement which are in the possession of the customer shall at all time remain the exclusive property of Redington" Section 4 page 3 Invoice for the supplies will be raised based on the reading from the Print impression Counter noted..." Accordingly, the intention of the applicant, reseller and customer is to supply and receive the consumables used in an indigo press machine as a single supply. • Supplied in conjunction with each other in the ordinani course of business: The term "in conjunction" in common parlance refers to "being used together". In this regard the Applicant wishes to submit the following the following chart explaining the flow of indigo press consumables in effecting a print: Accordingly, to effect prints from the indigo press machine, the device shall require supplies of printing ink, binary ink developer, photo imaging plate, blanket and other ancillaries. The supplies are required to be used in conjunction with each other" to produce the desired output. Further, such ....
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....s no separate use for customer. • Additional conditions for a composite supply Drawing reference to the clarification issued by the Central Board of Indirect Taxes and Customs ("CBIC") on the concept of Composite supply via a flyer, whether a supply qualifies as a composite supply would depend upon the normal or frequent practices followed in the area of business to which services relate. Such normal and frequent practices adopted in a business can be ascertained from several indicators some of which are listed below: a. The perception of the customer- As explained above, the perception of the customer is to receive (consume) all such goods together in order to obtain the desired output. The same can further understood by the fact that the customer agrees to pay the consideration on click basis, i.e. the point in time when the supply of all the consumable actually occurs. Where these consumables were not naturally bundled, the consumer would have selected different payment terms for each of the product at the respective point of their consumption. These goods are provided as a package to all the customers of the Indigo press machine under the Tier program, evi....
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.... All customers enrolled under the tier program are supplied consumables as a bundle. Further, HP's agreement with Redington as indicated earlier provides that such goods shall be used only for commercial printing purpose ensure that these goods are not sold, and cannot be used individually. f. The different elements are integral to one overall supply. If one or more is removed, the nature of the supply would be affected. The desired print output can only be achieved where all these goods are used as a bundle. They are integral to ensure the final output by the customer is in the manner required. Therefore, considering the above facts and explanations, the HP indigo consumables supplied under the tier program satisfies all the conditions of a composite supply. 03. CONTENTION - AS PER THE CONCERNED OFFICER- The submission of Departments as reproduced verbatim, could be seen thus- 1) The applicant submitted that the supply of ink along with oil, plates, consumables, blanket, bib etc. to the reseller is composite supply consisting of supply of goods or services which are naturally bundled and supply with conjunction with each other in ordinary course of busi....
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....al. In which Resin and Hardener are supplied together and in conjunction to each other. The use of each goods is so naturally bundled that separate item could not be sold M-seal is a two-part epoxy system. The light coloured clay is Epoxy resin filled with silica powder and the dark colored clay is Polyamide Hardener filled with Silica powder. When these two are mixed together a chemical reaction called curing of Epoxy happens and the system hardens. Considering the above aspects it is respectfully submitted that the claim of applicant that it is a naturally bundled supply composite supply in which supply of ink is a principle supply should not be allowed. These goods are required to be taxed as per separate HSN provided by the applicant. B) Departments submission regarding Time and Supply. Submission on the issue of Continuous supply.- In ordinary course of business the supplies are made available to actual user through the network of Distributor and Reseller. The transaction between importer / manufacturer and its distributor is recognized as independent and separate transaction. Further there are separate transactions of such distributor to reseller an....
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....ission made by the applicant and jurisdictional officer in connection to the questions asked in Advance Ruling. As per the documentary evidences and written submissions produced on the record, it is observed that- 5.1 Applicant M/s. H.P. India Sales Pvt. Ltd. is a registered person and is providing to its authorised reseller and distributor printing supplies which mainly consist of ElectroInk (i.e. ink), ancillaries such oil, binary ink developer, bib blanket, print imaging plate and other machine products used in HP's Indigo press machine. Thus applicant is providing Electro Ink with consumables to its authorised reseller and distributors. The business model adopted by the applicant is of two type: Tier and A-La -Carte. As per of the terms of contract with the authorised reseller, applicant is making supplies of ElectroInk with consumables to be used in HP Indigo Presses by the customers of HP Indigo Presses on back to back basis. Further resellers also have entered into agreements with the end customers for outward sales of such printing Supplies. In this model the billing is based on 'Per Click basis' calculated on a monthly basis taking into account the number of....
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.... Illustration: Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply. Thus the essential ingredients that constitute Composite Supply are - (i) the supply consists of two or more taxable supplies of goods or services or both or any combination thereof, (ii) such supplies are naturally bundled (iii) supplied in conjunction with each other and (iv) such supplied are in the ordinary course of business, one of which is a principal supply. Now let us examine whether the applicant satisfies the ingredient of composite supply. In the light of facts discussed above, there is no doubt to conclude that the impugned transaction consists of two or more taxable supplies of goods and also the goods are supplied in conjunction. Thus the ingredients of the definition of composite supply at (i) and (iii) above are satisfied. The next ingredient of the composite supply for our consideration is whether these supplies are naturally bundled. The concept of bundled service has been explained in the Education Guide issued by CBEC in the year 2012 even ....
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....ss Product Line under the same Supplies purchase program." This clause of the purchase agreement assume significance of the factual background that there exists a notable difference between the conventional offset and HP Indigo Digital offset Printing Technology. The terms of the contract as mentioned above clearly indicate that the recipient of the supply has no option to select individual supply but to accept it as bundled supply. Thus the transaction of supply of ElectroInk with consumables cannot be considered as Naturally bundled Supply but a compulsory supply. Thus the transaction before us cannot be said to be naturally bundled supply. 5.4 Now we have to decide another aspect of composite supply i.e. whether the goods are supplied in the ordinary course of business. In this regard useful reference can be made to GST Flyers issued by CBEC in which certain tests are laid down which are listed below to ascertain supply of goods or services or both in the ordinary course of business. 1) The perception of the consumer or the service receiver 2) Majority of service providers in a particular area of business provide similar bundle of services 3) The nature of t....
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....ls to satisfy the tests mentioned above, the supply of Electro Ink along with consumable cannot be considered as a composite supply as defined under section 2(30) of the GST Act. 5.5 The next question as a corollary of the above finding is to decide whether the transaction is a mixed supply as defined under section 2 (74) of the GST Act which read as: Section 2(74) "mixed supply" means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. Illustration: A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately; There is no dispute that applicant's supplies consist of two or more than two supplies. It is also not in dispute that the supplies are made in conjunction with each other and made for a single price. We have already observed that each of t....
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....e at the time of supply, as determined in accordance with the provisions of this section. (2) The time supply of goods shall be the earlier of the following dates, namely :- (a) the date of issue of invoice by the supplier or the last date on which he is required, under sub-section (1) of section 31, to issue the invoice with respect to the supply; or (b) the date on which the supplier receives the payment with respect to the supply: Provided that where the supplier of taxable goods receives an amount up to one thousand rupees in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice in respect of such excess amount. Explanation 1.-For the purposes of clauses (a) and (b), "supply" shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment. Explanation 2.-For the purposes of clause (b)," the date on which the supplier receives the payment" shall be the date on which the payment is entered in his books of account or the date on which the payment is credited to his bank account, whichever i....
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....the provisions of section 12(2) of the GST Act. 5.8. Value of Supply- The next issue pertains to values of supply of ElectroInk with consumables under the Indigo Press Contract, the details of such supplies are as below:- SI. No. Nature of product HSN Consumption (%) 1. Printing Ink (ElectroInk) 32151190 41% 2. Blanket 59111000 16% 3. PIP - Photo imaging plate 59119090/ 84439100 13% 4. OMP -Other machine products (miscellaneous) Multiple 10% 5. BID - Binary ink developer 84439100 10% 6. OIL 27101980 7% 7. Blanket Web 59111000 2% 8. Other Consumables Multiple 1% As discussed above we have found that the impugned transaction is a mixed supply with nature of supply as continuous supply of goods for single price and therefore the Value of supply of goods as per section 15 of the GST Act shall be the transaction value as reflected in the invoice issue by the applicant. 06. In view of the deliberations held hereinabove, we pass the order as under: ORDER (Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act....