Whether the supply of camshafts along with the design and
development services constitutes a composite supply
Authority
For Advance Ruling: Maharashtra
Advance
Ruling No. MAH/AAAR/DS-RM/16/2022-23
Date: 20.01.2023
M/S Precision Camshafts Limited
Summary
Precision Camshafts Limited (PCL) filed an appeal before the
Maharashtra Appellate Authority for Advance Ruling (AAAR) challenging the
ruling of the Maharashtra Authority for Advance Ruling (AAR). The AAAR's
decision focused on the nature of services provided by PCL, which are related
to the manufacturing and development of camshafts and associated tools. The
AAAR evaluated whether PCL's services could be classified under intermediary
services, as was contended by the applicant, and provided a detailed ruling on
this matter.
Relevant Sections/Rules &
Notifications/Circulars on the Subject
- Section
97 of the CGST Act, 2017:
Pertains to the procedure for obtaining advance rulings.
- Section
98 of the CGST Act, 2017:
Discusses the powers and procedure of the Authority for Advance Ruling,
including the pronouncement of advance rulings.
- Section
101 of the CGST Act, 2017:
Outlines the provisions for appeals to the Appellate Authority for Advance
Ruling.
Facts and Contentions Submitted by
the Applicant
- PCL
is engaged in manufacturing camshafts and the development of tools and
patterns used for this purpose.
- PCL
contended that the services provided by them are not intermediary services
but are provided on a principal-to-principal basis.
- The
applicant argued that the AAR had misinterpreted the nature of their
services and had gone beyond its powers in issuing its ruling.
Questions Raised before AAR
1.
Whether the services provided by PCL
in the form of design and development of tools and patterns for manufacturing
camshafts fall under the category of intermediary services.
2.
Whether the supply of camshafts
along with the design and development services constitutes a composite supply.
3.
The applicable GST rate for the
services provided by PCL.
Discussion & Ruling by AAR
The AAR initially ruled that:
- The
services provided by PCL were intermediary services.
- The
supply constituted a composite supply, with the principal supply being the
service of design and development.
- The
applicable GST rate was determined based on the classification as
intermediary services.
Ruling by AAAR
Upon review, the AAAR ruled that:
- Intermediary
Services: The services provided by PCL
in designing and developing tools and patterns for manufacturing camshafts
are not intermediary services. PCL operates on a principal-to-principal
basis with its customers, providing the said services directly and not
merely facilitating a supply between two parties.
- Composite
Supply: The supply of camshafts along
with design and development services does constitute a composite supply.
However, the principal supply is the supply of goods, i.e., the camshafts
themselves, rather than the design and development services.
- Supply
of Goods or Services: The
AAAR clarified that the principal supply in this composite supply is the
camshafts (goods).
- Applicable
GST Rate: The applicable GST rate would
be the rate for the supply of camshafts, which are classified under HSN
Code 8483.90.00. This rate is typically 18% under the current GST regime
for machinery parts.
Conclusion
The AAAR's ruling clarified the following points:
- PCL's
activities of designing and developing manufacturing tools are not
intermediary services.
- The
supply of camshafts, combined with design and development services,
constitutes a composite supply, with the camshafts being the principal
supply.
- The
GST rate applicable to PCL's supply is 18%, corresponding to the supply of
camshafts under HSN Code 8483.90.00.
Disclaimer: All the Information is based on the notification, circular
and order issued by the Govt. authority and judgement delivered by the
court or the authority information is strictly for educational purposes and on the
basis of our best understanding of laws & not binding on anyone.
