ITC cannot be denied merely on ground that one of constituent services of mixed supply attracts Nil rate of tax: AAAR

M/s. Shree Arbuda Transport, a partnership firm, having Principal Place of Business at Plot No.51, Office No.6, Kesar Arcade, Gandhidham (Kachchh) [hereinafter referred to as ‘the appellant’] intending to provide services like Transportation and Logistics services, Clearing and Forwarding services and Other allied services for import & export of cargo and for coastal movements. The appellant plans to own a fleet of commercial vehicles like trailers and also hires necessary vehicles from market as well. The appellant has submitted that they are in process of entering into an agreement with a specific client engaged in the business of Export of Rice. The appellant has planned to provide following services at a single consolidated rate (per container) for the entire bundle of services:

• Clearing and Forwarding Agency with the help of sister concern, as the CHA License is in the name of a sister concern M/s. SRS Cargo.
• Transportation of cargo containing agricultural produces, Rice, Tea etc.
• Providing labours for loading of cargo into containers.
• Transportation of empty container from CFS / empty container yard to client’s warehouses at various locations
• Other allied services like:
  • Lift on/Lift off charges to CFS/empty container yard
  • Survey Tally formality for goods loaded in container
  • Obtaining Customs permission for self-sealing
• Obtaining Customs related certificates/clearing such as Bill of Lading, Health Certificate, Non GMO, Phytosanitary Certificate etc. with complete documentation for export shipment.

The appellant has raised the following questions before the Gujarat Authority for Advance Ruling [‘GAAR’], Goods and Service Tax:

(1) If we want to provide all above services for a “Single consolidated Rate” as a package, whether such supply would be treated as “Mixed supply” as per the provisions of Section 2(74) of the CGST Act, 2017, since the services are not naturally bundled and are capable of being provided independently? Or it shall be treated as a “Composite supply”?

(2) What shall be the applicable HSN code and corresponding GST Rate for such bundle of services? (Highest Rate of Service in the bundle is 18%).

(3) Whether the firm shall be eligible to avail ITC on the following:

• Regarding GST paid on Commercial vehicles and Repair & maintenance cost of such vehicles used for transportation of goods/containers.
• ITC on inward supply from CFS/Port/Labour contractor etc. related to such packaged outward supply.

(4) Whether the Exporter client shall be eligible to claim refund of the GST paid by on our (appellant’s) outward supply invoices?

ADVANCE RULING

Question 1: If we want to provide all the above services for a “Single consolidated Rate” as a package, whether such supply would be treated as “Mixed supply” as per the provisions of Section 2(74) of the CGST Act, 2017, since the services are not naturally bundled and are capable of being provided independently? Or it shall be treated as a “Composite supply”?

Answer: Such supply would be treated as ‘mixed supply’ as per the provisions of Section 2(74) of the CGST Act, 2017.

Question 2: What shall be the applicable HSN code and corresponding GST Rate for such a bundle of services? (Highest Rate of Service in the bundle is 18%).

Answer: The applicable HSN / Service Code (Tariff) would be 996719 and the corresponding GST Rate for such ‘mixed supply’ would be the highest rate of the constituent supplies, which is presently 18%.

Question 3: Whether the firm shall be eligible to avail ITC on the following: Regarding GST paid on Commercial vehicles and Repair & maintenance cost of such vehicles used for transportation of goods/containers. – ITC on inward supply from CFS/Port/Labour contractor etc. related to such packaged outward supply.

Answer: Input Tax Credit on inputs, input services, and capital goods cannot be denied merely on the ground that one of the constituent services of the mixed supply attracts a Nil rate of tax if provided separately.

Question 4: Whether the Exporter client shall be eligible to claim a refund of the GST paid on our (appellant’s) outward supply invoices?”

Answer: This question can be answered at the end of the exporter. The appellant is not entitled to raise this question.