Page 110 - GSTL_23rd April 2020_Vol 35_Part 4

436 GST LAW TIMES [ Vol. 35
der Section 2(30) of the CGST Act, 2017. Now we proceed to discuss and con-
clude the principal supply of the said composite supply.
11. The term ‘Principal Supply’ is defined under Section 2(90) of the
CGST Act, 2017 and is as under :
“Principal Supply” means the supply of goods or services which constitutes the
predominant element of a composite supply and to which any other supply forming
part of that composite supply is ancillary”
In the instant case, the tender is for “Implementation of ESCO project” which in-
cludes “Design, Supply, Installation, Operation and Maintenance of LED Street Lights”.
Hence the predominant and principal factor is to supply and instal LED street
lights, on the existing street light poles and then to perform the activity of day-to-
day management of the said LED street lights by operating & maintaining such
equipment to achieve energy savings. Thus the day-to-day operation & mainte-
nance of the LED Street lights can only take effect after the supply and installa-
tion of the said LED street lights. The other supply would be severely affected or
may be meaningless, in the absence of supply & installation of the LED Street
lights. Therefore, without installation, there can be no day-to-day management in
the form of operation & maintenance of LED street lights. In view of the above,
the principal supply in the impugned transaction is that of supply of goods i.e.
LED street lights.
12. Therefore, the impugned transaction consists of supply of goods
and services, made in conjunction with each other in the ordinary course of busi-
ness; supply of goods/services are naturally bundled; the contract becomes a
composite supply where the principal supply is that of goods and the supply of
service is incidental/ancillary to such supply of goods.
13. Now we proceed to decide the classification of the aforesaid com-
posite supply and the GST rate applicable thereon. The principal supply of the
said composite supply is that of goods i.e. LED street lights along with relevant
fixtures. The LED lights or fixtures including LED lamps are classified under Chap-
ter Heading 9405 and attracts CGST @ 6%, in terms of Sl. No. 226 of Schedule II
to the Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017, as amended.
14. The applicant contends that their impugned supply qualifies to be a
supply of pure services, provided to the Thane Municipal Corporation (TMC), in
terms of the functions entrusted under Article 243W of the Indian Constitution
and hence the said service is exempted under Entry No. 3 of the Notification No.
12/2017-Central Tax (Rate), dated 28-6-2017. Further they also contest that if
their supply is not entitled for exemption under Entry No. 3 of the said Notifica-
tion, then the said services are entitled for exemption under Entry No. 3A of the
same Notification, as the value of their supply of materials (goods) is less than
25% of the total value of the contract.
15. It is an undisputed fact that the Notification No. 12/2017-Central
Tax (Rate), dated 28-6-2017 is related to the exemptions of the intra-State supply
of services. The Notification is applicable to the composite supplies of goods &
services, where the principal supply is that of services. In the instant case, it is
already concluded, in the preceding paras, that the impugned supply is a com-
posite supply, principal supply being that of the goods. Hence the said Notifica-
tion is not applicable to the instant case. Further, it is an admitted fact that the
applicant need to supply the LED Street Lights, during the entire contract period
as and when it is required and hence the impugned supply becomes continuous
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