Whether supplies of goods and services shown separately on invoice, be distinct supplies or a composite supply

by | Nov 5, 2019

This is to apprise you on the recent ruling rendered by the Kerala Authority for Advance Ruling (‘AAR’) in the case of Vista Marine and Hydraulics, 2019-TIOL-431-AAR-GST. In this case, the AAR held that where the supplies are separately identifiable and their values are distinctly indicated on invoice, they will be considered as distinct supplies and exigible to respective rate of tax.

 

In this case, the Applicant was undertaking repair of boats & vessels as well as using spares & accessories for repairing activity whenever required. As per work order, the Applicant raised an invoice on the customer with separate values of goods and services.

 

The moot question was whether the aforementioned supply constitutes to be composite supply with repair service as a principal supply or such supplies will be independent supplies of goods & services. 

 

The AAR placed reliance on Circular No. 47/21/2018- GST dated June 8, 2018 as per which a transaction involving supply of both goods and services whose values are shown separately on the invoice, then such goods and services will be subject to respective rate of tax. The AAR observed that since supplies are distinct and separately identifiable in this case and different values are indicated on the invoice, they will be considered as distinct supplies and exigible to respective rate of tax.

 

NITYA Comments:

 

The Circular and Advance Ruling are incorrect to the extent they lay down a test of composite supply which is not provided in the law. The legislature does not treat multiple supplies to be a composite supply only based on indication of separate values on the invoice. A taxpayer needs to independently assess whether its transaction is a composite supply based on the statutory provisions and related jurisprudence.

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