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2020 ] IN RE : HALLIBURTON OFFSHORE SERVICES INC. (OIL INDIA) 149
(b) a mixed supply comprising two or more supplies shall be
treated as a supply of that particular supply which attracts the
highest rate of tax.”
7.3 In terms of the foregoing, a composite supply is to be taxed as per
the principal supply. The term ‘principal supply’ has been defined under Section
2(90) of the CGST Act as under :
“2. Definitions. -
(90) “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 sup-
ply is ancillary.”
7.4 In the present case, as the supply of mud engineering services is the
principal supply, the supply made under the Contract would be classified under
HSN 9986 which covers the services of exploration or drilling and GST at the rate
of 12% would be applicable to the entire Contract as a whole.
8. If the answer to Para (a) is no, then whether such supply of mud
chemicals and additives on consumption basis at OIL India’s location in India
provided under the Contract qualify for concessional GST rate of 5% against an
Essentiality Certificate (‘EC’) under Notification No. 50/2017-Cus., dated 30
June, 2017.
8.1 If the supply of mud engineering services along with the supply of
mud chemicals and additives provided under the Contract by the Applicant does
not qualify as composite supply, then it becomes relevant to determine the classi-
fication of mud chemicals and additives supplied by the Applicant.
8.2 As mentioned above, the Applicant is undertaking supply of mud
chemicals (such as drilling mud, completion fluids and well bore cleanup chemi-
cals/additives or any other chemicals) in the course of supplying such mud en-
gineering services, waste management, fluid management services and operation
and maintenance of Mud Plant.
8.3 The relevant clauses relating to supply of material of the Contract
have been provided under :
“16.1.2 The Contractor will be required to maintain adequate stock of
mud chemicals in a project warehouse. All imported or long lead time on
critical chemicals shall be stocked in sufficient volume to cater uninterrupt-
ed drilling program. Locally available non-critical items with less lead time
can have a smaller minimum volume. The Contractor shall be responsible
to maintain minimum stocks. The chemicals and additives imported exclu-
sively for this project will be duty free based on EC (Essentiality Certificate)
issued by DGH with confirmation letter given by the Company.
16.1.3 It is the Contractor’s responsibility to confer with their mud engi-
neers on the drilling unit to ensure that adequate stocks are maintained at
the drilling site. The stock levels shall be reported and duly approved by
OIL on daily/weekly basis.
16.2.2 The Contractor shall supply complete line of mud chemicals, barites
and additives conforming to relevant API/BIS specifications required for
preparation and maintenance of mud and completion fluid. The Contractor
shall maintain adequate stock of all chemicals including contingency back
up chemicals and ensure timely supply as per operation requirement of the
well for uninterrupted operations. However, the payment will be made on
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