In the case of Hyundai Rotem Company, the Karnataka Authority for Advance Ruling (AAR) has held that the GST rate is depending upon the nature of activities and separate activities of cost centres can not be termed as composite supply.
The applicant is a foreign company incorporated in South Korea, engaged in the manufacture, supply, testing, commissioning and training in respect of rolling stock. The applicant entered into a contract with Delhi Metro Rail Corporation Limited (DMRC) for the design, manufacture, supply, testing, commissioning and training of 504 Standard Gauge Cars (passenger rolling stock) including training of operation & maintenance personnel and supply of spares & manuals.
As agreed in the contract, the applicant was required to supply various goods and services to DMRC in a phased manner. The detailed instructions concerning obligations of the applicant under the contract are specified through various Cost Centres under tender documents which form part of the Contract.
The Counsel for applicant Sri. Sujit Ghosh, Advocate had urged ruling on treating of the supplies made by all the Cost Centres of RS-10 Contract of DMRC as ‘composite supply’ as defined under Section 2(30) of the Central Goods and Service Tax Act 2017 (‘CGST Act’) read with Section 8(1) of the CGST Act.
A Coram of Dr M.P. Ravi Prasad, Additional Commissioner of Commercial Taxes Member (State) and Sri. T. Kiran Reddy, Additional Commissioner of Customs & Indirect Taxes Member (Central) observed that to consider a supply as a composite supply, the supplies should be so integrated that one cannot be supplied in the ordinary course of business without or independent of the other.
Further observed that the form of the agreement is not important, but its nature/ substance has to be seen to arrive at the correct conclusions.
The authority ruled that clear-cut demarcation of activities to each cost centre demonstrates the intention of the contracting parties that each cost centre is an independent supply centre undertaking either the supply of goods or the supply of services and held that the supplies made by all the Cost Centres of RS-10 contract of DMRC are not to be considered as ‘composite supply’.
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