QUESTION

ABC is Supply Installment and commissioning testing of Fire Fighting fire alarm equipments. They charge gst under SAC code for their services provided to clients. Now in some cases they have to buy batteries for the panels to show the exact place of fire. In some cases they also supply the battery along with fire fighting equipments. They purchase batteries from market @ 28%? While providing services for other fire fighting equipments along with battery what should they charges GST? What will be the SAC or HSN code for sale? What will be the rate at which they should bill and charge the clients?

ANSWER

Facts of the case:
Registered person is in the business of Installing and Testing of fire fighting facilities. Under some supplies, batteries are sold along with fire fighting equipment. These batteries are procured from the market @ 28% GST. To determine the nature and taxability of outward supply.

Law Applicable:
1. Section 8 of CGST Act is laid as under;

"The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:

(a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and

(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."

2. Section 2(30) CGST defines composite supply as follows;

" '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 "

3. Section 2(74) CGST defines mixed supply as follow;

" 'mixed supply' means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply "

Interpretation:
As per the above stated law, mixed supplies shall be taxed at the highest of the GST rates applicable on the supplies forming the bundle. In case of a composite supply the entire consideration for the bundle shall be subjected to the rate that is applicable to the principal supply.

Now, in the current case, the battery is being supplied with the fire fighting system.
The question of whether supply is mixed supply or a composite supply is a question of fact and not a question of law.
Therefore, if in the general trade practice of suppliers of the fire fighting system, a battery is supplied along with the principal supply in ordinary course of business then the same shall be treated as a composite supply and GST rate and HSN of the Fire fighting system shall be applicable if a single price is charged for both.
If however, supply of battery is not a common practice in the business of supplying fire fighting systems then this becomes an artificial bundle and shall be treated as mixed supply. HSN and GST rate of the highest taxable item shall be applicable on the entire consideration.

Conclusion:
This is a question of fact and not a question on law.
HSN and GST rates shall be applicable dependent on whether the general trade practice considers this as mixed supply or composite supply.
Kindly describe your products in detail and send a photo of your product to enable us to provide the correct HSN and GST rates. (Reply dt. 27/01/2022)