Supply of TCAS is Composite Supply, attracts 18% GST: AAR [Read Order]

The Telangana bench of the State Authority for Advance Rulings (AAR) has held that the activity of executing a contract for design, supply, installation, testing and commissioning of onboard train collision avoidance system (TCAS).

The applicant, M/s. Kernex TCAS JVis executing a contract for South Central Railways for TCAS,is seeking clarification regarding the classification and tariff on TCAS equipment in Railways.

The bench consists of Mr. S V Kasi Viswesara Rao (Additional Commissioner, State Tax) and Mr. B Raghu Kiran (Additional Commissioner, Central Tax)  after analysing the documents, found that the counter offer issued by south central railway dated: 13.11.2019 the contract is for design, supply, installation, testing and commissioning of onboard TCAS equipment in locomotives and track side.

“The counter offer also contains schedule of description mentioning various items to be utilized quantity and value wise in it. There is also a payment schedule for the contract. There is a specific clause 7 regarding GST which mentions that the contractee i.e., South Central Railway shall reimburse the GST if a higher rate is determined even after completion of the contract,” the bench said.

"Composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.

Relying on the above definition, the bench observed that “as seen from the above definitions a composite supply is essentially a naturally bundled supply where two or more different supplies invariably exist along with each other. As against this a mixed supply is a bundled supply is not a bundled supply where the goods/services though supplied together are distinct and separately identifiable. However, a supply can be a mixed supply only if it is a single price.”

While concluding the order, the bench added that “further Para 6 of the Schedule II to the CGST Act, 2017 states that composite supply involving works contract as defined under clause 119 of Section 2 of CGST Act and supply of food, drink etc., shall be treated as services. Therefore a composite supply involving goods and services other than the above will be assessed as a naturally bundled supply and will be taxed at the rate applicable to the principal supply therein. Therefore in view of the above discussions the supply made by the applicant against the counter offer of the South Central Railway is a composite supply and the rate of tax applicable is the rate at which the principal supply has to be taxed i.e., Electrical signalling equipment with HSN code ‘8530’.”

To Read the full text of the Order CLICK HERE

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