TaxTMI 
TaxTMI 
2019 (3) TMI 1865
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt of cost of parts replaced, if any, to the customer during the warranty period. 3) The Applicant has submitted application for Advance Ruling dated 13.12.2018 enclosing duly filled Form ARA-01(the application form for Advance Ruling) along with annexures and attachment. 4) The Applicant in his application sought clarification and Advance Ruling as follows: - i) Whether repair services carried out by the Applicant under the Dealership Agreement with HMIL, to fulfill the warranty obligation of HMIL which also involves supply of parts should be classified as a composite supply of services under Section 2(30) of CGST Act/ Section 2(30) of SGST Act, 2017? ii) Whether the entire repair services including supply of spares can be classified under S. No 25 in Notification 11/2017-Central Tax (Rate) dated 28th June, 2017 / parallel Notification issued under SGST Act subjected to tax at the rate of 9% under CGST? 5) The application for advance ruling was forwarded to the Jurisdictional CGST Officer to offer their comments/views/verification report, which was resolved vide letter C.No. V(30)123/Tech/Misc. Corri./Lko-II/18/521 dated 19.02.2019. 6) The applicant w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....een replaced will become the property of HMIL. iii) HMIL reimburses the dealer for repair and / or replacement of any part of Hyundai vehicles during the warranty period. In order to serve customers during the warranty period, HMIL has issued a Warranty policy and procedure manual which is part of the Dealership Agreement. As per the policy, HMIL agrees to compensate the dealer for all the warranty repairs and campaign repairs in accordance with the procedures and the rates prescribed by HMIL from time to time. 9) Warranty repair service provided by PCSL to HMIL:- As per para 1.6 of Exhibit I attached to Form ARA-01, the repair charges comprises of reimbursement for:- a) Labour charges and b) Parts at parts markup rate. 10) Current invoicing methodology:- The warranty repair provides by the company to HMIL is currently considered as composite supply of services and the services including the incidental supply of parts are subjected to tax under SAC 998729 "maintenance and repair services of the other goods". The below table illustrates the components of the final summary issued to HMIL:- S.No. Category Description SAC IGST Rate ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ovided by them involve only the labour charges without any replacement of defective parts and at times, in the event of any defective parts, such "Warranty Repair Service" would involve both the repairing service alongwith replacement of defective parts/components. The supply of parts/components in such warranty repair activity is integral to the "Warranty Repair Service" and is only incidental or ancillary to the main activity of 'Repairing Services'. "Warranty Repair Service" undertaken by them is predominantly a service which is provided by them to the customers on behalf of I-IMIL and to this extent the aforesaid activity of "Warranty Repair Service" should be construed as a supply of services and any replacement of defective parts/components is just an ancillary to the main services of repair. Therefore, the supplies of Labour Services and Parts/components together considered as "Warranty Repair Service" and the same are naturally bundled in the ordinary course of business. Accordingly, such "Warranty Repair. Service along with parts" should be construed as a 'Composite Supply of Service' with Warranty Repair Service" being the 'Principal/Predominant Supply....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s with supply of Parts/components remains as ancillary. v) To sum up, since the supply of repair services in the present case, the supply of both, goods and services are made in conjunction with each other in the ordinary course of business and therefore, considering the provisions of the GST laws we find that supply of services/ parts is naturally bundled, with the supply of parts being incidental to the supply of services and therefore, such contract are to be considered as a 'composite supply' of services where the principal supply is services and the supply of goods (Parts) is incidental to such supply of services. vi) Further, Section 8 of CGST/SGST Act, 2017 provides that - The tax liability on a composite supply shall be determined in the following manner, namely: (a) A composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply." (b) In view of above statutory provision as stipulated under Section 8 of CGST/SGST Act, 2017, the tax liability on such "Warranty Repair Service with parts/components" shall be determined as per the tax liability applicable to 'Repai....