Example
36
Ganga
India ltd. in Haryana is engaged in manufacturing of machinery. It has supplied
one machine to M/s Y & Co. in Delhi for a value of Rs. 9,00,000 (excluding
Taxes). Cash discount @3% on price of machinery is allowed to M/s Y & Co.
Further, following additional amounts have been charged from M/s Y & Co.
| Particulars | Amount (Rs) | |
| (i) | Expenses pertaining to installation and erection of the machine at M/s Y& co. |
25,000.00 |
| (ii) | Design and engineering charges | 5,000.00 |
| (iii) | Special packing charge | 10,400.00 |
| (iv) | pre delievery inspection charge | 2,000.00 |
M/s
Y & Co. has supplied material worth Rs 12000 free of charge to Ganga India
Ltd. which was used in manufacturing
of machine.
Compute
the value of above supply and integrated tax liability where rate of integrated
tax is says 18% on goods (machinery). Agreement between seller and buyer for
machinery upto the installation of machinery and no separate invoice is raised
for installation and erection services. Installation and erection service is
taxable Say @ 15%.
Ans
Section
8 of CGST Act specifies the tax liability of composite and mixed supplies.
Composite supply means a supply which comprises two or more goods/services,
which are naturally bundled and supplied with each other in the ordinary course
of business, one of which being a principal supply. Hence, the above supply
comprises of supply of machinery with installation services and pre inspection
charge etc. is a composite supply because these are naturally bundled and supply
of machinery in this example is a principal supply. It shall be treated as
supply of machinery as principal supply and tax rate of 18 % is applicable as
applicable on supply of machinery.
Computation
of valuation of supply of machinery and integrated tax payable
| Particulars | Amount (Rs) | |
| (i) | Price of machinery (excluding taxes and duties under GST act) | 900,000.00 |
| (ii) | Expenses pertaining to installation and erection of the machine at M/s Y& co. | 25,000.00 |
| (iii) | Design and engineering charges | 5,000.00 |
| (iv) | Special packing charge | 10,400.00 |
| (iv) | pre delievery inspection charge | 2,000.00 |
| (v) | open market value of material supplied by buyer free of charge | 12,000.00 |
| Total | 954,400.00 | |
| (vii) | Discount(3% of price of machinery = 900000*3%) | 27,000.00 |
| Value of supply (according to section 15) | 927,400.00 | |
| Integrated tax on machinery @18% | 166,932.00 | |
Notes:-
(i)
Section 15 specifies
that taxes central tax, state tax, union territory tax and integrated tax and
compensation tax shall not form part of value of supply.
(ii)
Installation
and erection charge will be included because as per section 8 the above supply
treated as supply of machinery and all supplies part of that supply included as
auxiliary services. If these are provided separately then not treated as
composite and separate value and tax liability is calculated as normal supply of
services.
(iii)
Design
and engineering service and special packing services are included as auxiliary
services that form part as per section 15.
(iv)
Material
supplied by buyer is a non-monetary consideration and as per Rule 27 (Value
of supply of goods or services where the consideration is not wholly in money)
of
Chapter-IV
of CGST Rules,2017 open market
value of material added in value of supply.
(v)
Discount
is specifically excluded from value if known and shown in invoice so not forming
part of value as per section 15.
(vi)
Rate
of principal supply as per section 8 is the tax liability rate, so 18% rate of
machinery is applicable on such supply.