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Supply made under the AFC project would qualify as ‘Composite Supply’, 18% GST applicable: AAR [Read Order]

AAR - AFC - Composite Supply - GST - Taxscan

The Gujarat Authority of Advance Ruling (AAR) ruled that the main purpose of the Automatic Fare Collection (AFC) )system is to compute the fare automatically and issue tickets along with the integration of the system with the banks, the most appropriate HSN classification is to be ‘8470’. Considering the rate of GST prescribed for HSN ‘8470’ is 18%, GST should be applicable.

The applicant, M/s NEC Technologies India Pvt. Ltd. is engaged in providing solutions and services in multiple areas in public safety, private network, retail, IT, logistics, engineering services, etc.

The applicant sought advance ruling on the issue whether the supply made by NEC under the Automatic Fare Collection (AFC) project would qualify as ‘works contract’ defined under section 2(119) of the CGST Act, 2017; or ‘composite supply’ defined under section 2(30) of the CGST Act, 2017.

The AAR, while addressing the issue ruled that the supply made by the applicant under the Automatic Fare Collection (AFC) project would qualify as ‘composite supply’ defined under section 2(30) of the CGST Act, 2017.

Secondly, whether the supply made by the applicant under the AFC project would qualify as an original work meant predominantly for use other than for commerce, industry, or any other business or profession, thereby attracting GST rate of 12% provided in the Notification No. 24/2017-Central Tax (Rate) dated September 21, 2017.

“The supply made by the applicant under the AFC project does not qualify as an original work meant predominantly for use other than for commerce, industry, or any other business or profession, thereby GST rate of 12% provided in the Notification No. 24/2017-Central Tax (Rate) dated 21st September 2017 would not be applicable,” AAR ruled.

Thirdly, whether the HSN classification of supply made by the applicant would fall under ‘8470’ or ‘9954’.

The AA clarified that The HSN classification of the supply made by the applicant is to be ‘8470’. The Rate of GST for the same is 18%.

Lastly, whether the maintenance and management services post-implementation would qualify as composite supply as defined under section 2(30) of the CGST Act, 2017. Further, whether such supply would be eligible for exemption under Notification No.12/2017-Central Tax (Rate) dated 28th June 2017 in case the value of supply of goods constitutes not more than 25% of the value of the said composite supply.

The AAR clarified that the maintenance and management services to be provided post-implementation of the AFC system under the proposed contract would qualify as “composite supply” with the AFC system, being the principal supply, as defined under section 2(30) of the CGST Act, 2017. Further, such supply would not be eligible for exemption provided under Notification No.12/2017-Central Tax (Rate) dated 28th June 2017 as amended by the Notification No.02/2018–Central Tax (Rate) dated 25th January 2018.

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