The Telangana Bench of the Authority for Advance Rulings (AAR) in its recent ruling in the case of M/s. Healersark Resources Private Limited, has held that supply of boarding and lodging to the students undergoing training under healthcare related vocational program are two distinct supplies in this contract one for accommodation and the other for food.
Facts of the Case:
The applicant is providing lodging and boarding to students undergoing training under healthcare related vocational program under Deendayal Upadyay Grameen Kaushalya Yojana (DDU-GKY) by charging Rs.9000/- per candidate per month; of which Rs.3500/- is towards rent for accommodation at fixed cost and Rs.5500/- towards food on head count/actual number of candidates.
Issue on which Ruling was sought:
Applicant is desirous of ascertaining whether the service provided by them falls under exemption serial no. 14 of Notification No. 12/2017 dt:28.06.2017 as they are charging only Rs.300/- per day. Further, it was desired that what is the applicable GST SAC and GST rate for the supply of service described in this
application and whether it is a composite supply or a mixed supply?
Order of AAR: Deliberation and Ruling
As seen from the information serviced by the applicant, the rent is fixed at the rate of Rs.3500/- whereas the food is charged at Rs.5500/- as per the head count or actual number of candidates. This means that the price is variable to the extent of food supplied and this is not a single price the customer pays, no matter how much of the package is actually received. For the above reason, the two supplies are not integral to one another.
The Hon’ble High Court of Kerala in the case of Abott Health Care Pvt. Ltd., (2020) 74 GSTR 37 (Kerala) held that a composite supply must take into account supplies as affected at a given point in time on “as is where is” basis. In the present case this condition is not fulfilled. Therefore there are two distinct supplies one for accommodation and the other for food.
In view of above the bench comprising Mr. S V Kashi Viswesara Rao (State Member) and Mr. B Reghu Kiran (Central Member) held that it is neither a composite supply nor mixed supply but are two distinct supplies in this contract one for accommodation and the other for food.
The SAC for supply of accommodation is ‘99631’ and as enumerated at serial no. 14 of Notification No. 12/2017 dt: 28.06.2017 this is exempt in the present case as per day rent is below Rs.1000/-.
The SAC for supply of food is ‘99633’ and taxable at the rate is:
i. 6% CGST & SGST each with ITC upto 14.11.2017.
ii. 2.5% CGST & SGST each without ITC thereafter from 15.11.2017 onwards.
Statutory provisions:
Composite supply is defined in the CGST Act in Section 2(30) as follows:
“Composite supply” means a supply made by a taxable person to a recipient of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.
Illustration: Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply.
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
