Whether Supply together of UPS and batteries is Composite supply vis-a-vis Mixed supply or Bundled supply for payment of GST.

PJ/Case Law/2016-2017/3459

Case: SWITCHING AVO ELECTRO POWER LTD.
Citation:2018 (13) G.S.T.L. 84 (A.A.R. - GST)
Issue: Whether Supply together of UPS and batteries is Composite supply vis-a-vis Mixed supply or Bundled supply for payment of GST.
Brief facts: The issues involved in the appeals are filed by SWITCHING AVO ELECTRO POWER LTD.hereinafter referred to as the assessee) The assessee is the supplier of power solutions, including UPS, servo stabilizer, batteries etc., have filed an application, on 21-3-2018, for advance ruling under Composite Supply within the meaning of Section 2(30) of the CGST/WBGST Act, 2017 (hereinafter referred to as “the GST Act”).
Appellant’s contention:The Applicant, stated to be a supplier of power solutions, including UPS, servo stabilizer, batteries etc. Note 3 to Section XVI of the Tariff Act defines a composite machine as the one consisting of two or more machines fitted together to form a whole. Such machines, as well as other machines designed for the purpose of performing two or more complementary or alternative functions, are to be classified as if consisting only of that component or as being that machine, which performs the principal function. Applicability of Note 3 to Section XVI of the Tariff Act (hereinafter referred to as “Note 3”) is, however, not absolute, but subject to the context in which it is being applied. In the present context, Note 3 is applicable subject to the definitions of composite supply and its taxability under Section 8(a) of the GST Act.
Note 3; therefore, is applicable, in this context, to composite machines. Other machines, designed for the purpose of performing two or more complementary or alternative functions, however, can be classified with the help of Note 3 only if they are naturally bundled and supplied in conjunction with one another in the ordinary course of business. A UPS is classified under Tariff Head 8504. It is an electrical apparatus that provides emergency power to a load when the input power source or mains power fails. The UPS serves no purpose if the battery is not supplied or removed. It cannot function as a UPS unless the battery is attached. However, what needs to be considered is whether or not these two items are “naturally bundled”.The stated Illustration to Section 2(30) of the GST Act refers to a supply where the ancillary supplies are inseparable from the principal supply and form an integral part of the composite supply. Note 3 also refers to a composite machine as the one consisting of two or more machines fitted together to form a whole. When a UPS is supplied with built-in batteries so that supply of the battery is inseparable from supply of the UPS, it should be treated as a composite supply and as a composite machine in terms of Note 3. The UPS being the principal supply, the relevant tariff head for the composite supply will be 8504 under Serial No. 375 of Schedule III in terms of Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017 (1125-FT, dated 28-6-2017 of the State tax).
The applicant insists that as the battery, being supplied as part of an integral contract, remains naturally bundled with UPS - the principal supply. If a combination of goods that does not amount to a composite supply is being offered at a single price, such supplies are to be treated as mixed supplies. Mixed supply is defined under Section 2(74) of the GST Act as one where “two or more individual supplies of goods/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”.
Respondent’s contention: The Authority for Advance Ruling stated that it has considered the submissions made by the Rabindra Agarwal, Director, for the Applicant in their application for advance ruling.It has also considered the question/issue on which advance ruling is sought by the applicant, relevant facts having bearing on the question/issue raised, and the applicant’s understanding/interpretation of law in respect of the issue. The applicant sought advance ruling on the question that whether Supply together of UPS and batteries is Composite supply vis-a-vis Mixed supply or Bundled supply for payment of GST. Supply of UPS with Battery is not indivisible as it can be split in two separate supplies if so desired by recipient - As per GST law, if a combination of goods that does not amount to a composite supply is being offered at a single price, such supplies are to be treated as mixed supplies - Based on information supplied by applicant, it is Ruled that supply of UPS and Batteries in this case would be a Mixed supply as defined under Section 2(74) of Central Goods and Services Tax Act, 2017 and taxable accordingly, i.e., higher of two rates - Sections 2(30) and 2(74) of Central Goods and Services Tax Act, 2017.The supply of UPS and Battery is to be considered as Mixed Supply within the meaning of Section 2(74) of the GST Act, as they are supplied under a single contract at a combined single price.
Decision: The advance ruling is in favour of the applicant.
Comment: The gist of the case is that if a combination of goods that does not amount to a composite supply is being offered at a single price, such supplies are to be treated as mixed supplies. Supply of UPS and Batteries in this case would be a Mixed Supply as defined under Section 2(74) of Central Goods and Services Tax Act, 2017 and taxable accordingly.
Prepared by: Bhavika Kanjani

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PJ/Case Law/2016-2017/3459

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