The Gujarat Authority for Advance Ruling has determined that the supply of aircraft should attract a 5% Goods and Service Tax (GST).
Tata Advanced Systems Ltd, the applicant, is involved in the assembly, manufacturing, and supply of aircraft.
On 29/10/2021, Airbus Defence & Space SAU and Tata Consultancy Services entered into a contract with the applicant as the Indian Aircraft contractor (IAC) for manufacture and supply. The applicant acts as the importer for FILM supplied by Airbus, discharging applicable customs duties on import.
The applicant is entitled to invoice Airbus for reimbursement of all indirect taxes, including customs duties on FILM. Payment terms state that for the manufacture and supply of aircraft, the applicant will raise an invoice on Airbus, inclusive of all applicable taxes.
The invoices will be forwarded by Airbus to MOD for payment. The payment schedule involves receiving certain amounts as advances on a milestone basis and subsequently on a per aircraft delivery basis. Airbus will obtain registration under Goods and Services Tax in India. The applicant sought an advance ruling to clarify the GST rate for aircraft supply.
Rohit Jain, on behalf of the applicant, submitted that the contract with Airbus is a composite supply of goods and services, with the principal supply being the manufacture and supply of airworthy aircraft. The various services provided are considered incidental or ancillary to the main supply of aircraft.
Since the activity qualifies as a composite supply with the principal supply being the supply of goods (aircraft), it is classifiable under CTH 8802 and will attract a GST of 5%.
During the proceedings, the Authority observed that the supply of aircraft and provision of support services are naturally bundled and supplied together in the ordinary course of business. In terms of section 2(30) of the CGST Act, this supply is deemed a composite supply.
Therefore, since the principal supply is the supply of goods (aircraft), it is classified under CTH 8802 and attracts a GST of 5% as per notification No. 1/2017-IT (Rate) dated 28.6.2017 (entry no. 2441). The two-member bench of the Authority of Advance Ruling,
Rithesh Raval (member SGST) and Amit Kumar Mehra (member SGST), held that the supply of aircraft should attract a 5% Goods and Service Tax (GST).
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