Page 27 - GSTL_26th March 2020_Vol 34_Part 4

2020 ] COMPOSITE SUPPLY FOR LEVY OF GST J123
the distributor of the petitioner. It, therefore, followed that the func-
tioning of the instrument was dependent on the reagents/calibra-
tors/disposables supplied by the distributor, and hence, the sup-
plies effected by both persons had to be clubbed to ascertain the real
“supply” that was effected by the petitioner.
(ii) When both the supplies are taken together as envisaged under the
contract entered into between the parties, then the supply effected
by the petitioner has to be seen as a composite supply, with the in-
strument being the principal supply, and the reagents constituting
the incidental supply. The rate of tax applicable to the instrument
had, therefore, to be applied to the supply of reagents/calibra-
tors/disposables.
Decision of the Hon’ble High Court
Hon’ble High Court found that findings of the AAR as regards a compo-
site supply were wholly without jurisdiction. The AAR went beyond the terms of
reference in embarking upon an enquiry as to whether the supplies effected un-
der the agreement between the petitioner and the customer hospi-
tals/laboratories, constituted a composite supply. As a consequence, the AAR
did not go into the real issue of whether the supply of instrument per se consti-
tuted a taxable supply under the CGST Act. With these observations, Hon’ble
High Court sent the matter back to the AAR for a fresh consideration of the issue.
View of the Hon’ble High Court on the findings of the AAR
For a supply to be seen as a composite supply, it must answer to the def-
inition of the term “composite supply” at the time of its supply. As per Section
2(30) of the CGST Act, 2017, “composite supply” means :
“A supply made by a taxable person to a recipient consisting 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.”
In the instant case, firstly, the supplies are made by two different taxable persons
i.e. the supply of instrument by the petitioner and the supply of the reagents, cali-
brators and disposables by his distributor, who purchase it from petitioner on
principal to principal basis.
Secondly, the two supplies do not answer to the description of being
“naturally bundled and supplied in conjunction with each other in the ordinary
course of business”. While they were not bundled together as a matter of fact, in
the instant case, there is also no material to suggest that they are so bundled and
supplied in conjunction with each other in “the ordinary course of business”.
Hon’ble High Court found two aspects against viewing the two supplies
as composite supply which is against the definition under Section 2(30) of the
CGST Act, 2017.
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GST LAW TIMES  26th March 2020  123