Supply of goods with transportation should be treated as composite supply: AAR

Supply of goods with transportation should be treated as composite supply: AAR

Supply of goods with transportation services are naturally bundled; treated as composite supply. (IAC Electricals (P.) Ltd – May 28, 2018)

GST : The applicant, a manufacturer of Overhead Power Transmission Line Hardware and Accessories had entered into two separate contracts one for supply of materials at ex-factory price (First Contract), and other for supply of allied services like transportation, insurance, loading/unloading etc for delivery of materials at contractee’s site(Second Contract). The recipient has not contracted for ex-factory supply of materials, but for the composite supply involving delivery of the goods at the contractee’s site, which includes transportation, in-transit insurance etc. Terms of the contracts are such that all these supplies are inseparable and, therefore, naturally bundled.

(Section 8 (a) read with Section 2(30) of the CGST Act, 2017)

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The Applicant is stated to be a manufacturer of Overhead Power Transmission Line Hardware and Accessories. His question is related to contracts obtained from M/s Power Grid Corporation of India (hereinafter referred to as “the Contractee”) who has entered into two separate contracts – one for supply of materials at ex-factory price (hereinafter referred to as “the First Contract”), and the other for supply of allied services like transportation, insurance, loading/unloading etc for delivery of materials at the contractee’s site (hereinafter referred to as “the Second Contract”). The Applicant states that as per the Second Contract since they are not a Goods Transport Agency they arrange for the supply and delivery of materials through various other suppliers of these services. The Contractee is charged for these services at a pre-fixed rate, irrespective of the actual cost incurred. However, the Contractee is unwilling to bear the cost of GST on such services provided to them by the Applicant through various Service Suppliers. The Applicant, hence, wants a Ruling regarding the taxability of these services supplied by them.
Advance Ruling is admissible on this question under section 97 (2)(a)&(e) of the CGST/ WBGST Act, 2017 (hereinafter referred to as “the GST Act”).
The officer concerned, in his written response, raises no objection to the admission of the application.