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The concept of supply under GST gives us an introduction to three types of supplies under GST which is discussed as below :
Take a case of Air conditioning unit repair service. Mr. Y called up the AC service provider for servicing of his AC cabinet unit which was making noise. The service provider opens up the unit and replaces a part and bills Mr. Y raising a material invoice for the part replaced and also for the part of service done on the unit.
How to name this supply whether it is a composite or mixed supply, or is it a segregated supply of goods and services? One can get the answers for all these questions by simply questioning back in most of the cases.
Interpreting as |
Analysis and Result |
Taking a stand that – The supply constitutes of service and it is a composite supply. |
Mr. Y received the services of service provider to repair the AC unit which was not functioning. In the first place, Mr. Y entered into transaction with the service provider with the soul motive of making the noise go from the AC unit. |
Taking a stand that – The supply constitutes of goods and it is a composite supply |
The bill contained two elements, one of which was the replaced part accounting for about 70 percent of the bill. |
Taking a stand that – The supply is a GST mixed supply |
What If there was a single amount on the bill. |
For identifying whether a supply constitutes mixed supply or a composite supply a five point principle could be followed which is as follows
Principle No. 1: Value |
Just because the value of goods in the supply accounts for more than 51% doesn’t satisfy definition of principal supply. |
Principle No. 2: Intention |
This could be a better test as it would reveal what the supplier intended to supply, and what the buyer intended to buy. |
Principle No. 3: Description |
The invoice may throw some light on the nature of the transaction. A GST mixed supply will always have a single value, while a composite supply may or may not. |
Principle No. 4: Common Practice – Industry wide |
One may also look at different practices followed in the industry to reach a conclusion: |
Principle No. 5: Breaking down the nucleus |
Splitting the transaction into separate parts to see if it offers any clues. · The artisan first sells the additional gold foil to the jeweler. · The artisan then takes that gold back and works on the same so that it then looks like a segregated supply of goods and of service. |
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