GST Update No 133 on taxability of uniform, bags supplied with coaching service

The concept of composite/mixed supply in the GST regime is contentious issue as there is thin line of difference as to when these concepts come into picture. The revenue authorities tend to apply the concept which generates maximum revenue whereas the assessees tend to apply the concept which leads to minimum tax liability. Hence, the tug of war continues as regards applicability of the concept. Recently, the issue regarding taxability of study material, test papers, uniform, bags etc. supplied along with coaching service was raised before the Rajasthan AAR in the case of M/S RESONANCE EDUVENTURES LIMITED. The outcome of this decision is the subject matter of discussion of our present update. The applicant is providing services of coaching to the students which also includes supply of goods, printed materials/test papers, uniform, bags etc. for which a lumpsum amount is charged. The AAR referred to the provisions of ‘mixed supply’ stated in section 2(74) of the CGST Act, 2017 and held that the activities undertaken by the applicant is covered by mixed supply. The definition of mixed supply reads as follows:- (74) ?mixed supply means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. It is submitted that as the supply of uniform, bags etc. along with coaching service is not naturally bundled and cannot be treated as composite supply, the same is to be considered as mixed supply as stated above. The primary reason being that each of the supplies can be supplied separately and is not dependant on any other. Consequently, as per section 8 of the CGST Act, 2017, mixed supply is liable to be taxed at the highest rate of tax. Hence, it was concluded that the entire transaction is liable to be taxed at the rate of 18%. The above decision is totally in consonance with the statutory provisions contained in CGST Act, 2017with respect to composite and mixed supply. It is observed by applying the theory of trade parlance that usually uniform, bags etc are not being supplied along with coaching service. However, it is common practise to provide study material along with the provision of coaching service by the institutes. Hence, if it was the case of supply of study materials along with coaching service, one may interpret the transaction to be of composite supply as supply of study material is naturally bundled with the coaching service. However, in the present case, apart from supply of study material, uniform, bags etc. were also supplied which are usually not supplied in normal course of provision of this service. Therefore, the activity was correctly tagged as mixed supply liable to GST at the highest rate of tax.

Comments

GST Update No 133 on taxability of uniform, bags supplied with coaching service

Post a Comment

Query