Analysis of Legal View Given By Maharashtra Appellate Authority For Advance Ruling For Goods And Services Tax With Regards to Composite Supply In GST
Ruling : M/s.Kasturba Health Society, Sevagram Road, Sevagram, Vardha- 442102 (5th December 2022)
Facts of the case :
M/s. Kasturba Health Society, Sevagram Road, Sevagram. Vardha- 442102 (Here in after referred as ‘Applicant’) is a society solely focusing on health and medical education.
Applicant has named its education unit as a “MAHATMA GANDHI INSTITUTE OF MEDICAL SCIENCES” followed by naming its Clinical Laboratory as “KASTURBA HOSPITAL” Though both these activities in question are carried on under the different titles but the Legal entity is Appellant Institution. i.e., Kasturba Health Society to whom all the recognition, Licenses and approvals are granted.
Main object of the society was to provide aforesaid service to recipient at nominal cost however in order to support main objective society used to receive nominal amount from 3rd party for making space available to him for providing essential facilities needed by the students and staffs such as Banking, Parking, Refreshment etc. which are Support activities for attainment of main activities.
One of the Main Question asked in advance ruling
- Whether the nominal amount received for making space available to 3rd party for providing essential facilities needed by the students and staffs such as Banking, Parking, Refreshment etc. which are Support activities for attainment of main activities would fall within the meaning of “supply” qualifying for exemption under the category of “educational and / or health care services.”
Ruling by Maharashtra Authority for Advance Ruling (MAAR)
It was held that nominal amount received for essential facilities is taxable at the rate of 18%.
Being Aggrieved by advance ruling of the MAAR applicant prefer appeal before Appellate authority.
View Taken by THE MAHARASHTRA APPELLATE AUTHORITY FOR ADVANCE RULING FOR GOODS AND SERVICES TAX (MAAAR)
It was observed by MAAAR that said activities are not directly provided to the students or who are the patients. Who are the recipients of the main services of the Appellant, i.e., the educational services and health services, which have been held as exempted services hereinabove, rather the said services of immovable renting property by way of providing space for the facilities like canteen, have banking, parking, refreshment been provided to the third parties, who are running these establishments on their own account.
Now Question comes Whether the renting of immovable property services can be construed as ancillary or incidental services to the main services of the educational services or Health Care care services provided by the Appellant, and thereby, whether the said services could be construed as part of the composite supply as envisaged under section 2(30) of the CGST Act, 2017.The provisions under Section 2(30).
Definition of Composite supply
“Composite supply” means a supply made by a taxable person to a recipient consisting of wo 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 of is a principal supply”
Observation by MAAAR
It was observed by the MAAAR that composite supply comprising of two or more supplies of goods or service or both or any combination thereof should be made by a taxable person to a recipient. However, in the instant the main services of the Appellant, i.e., educational services and health care services are provided to the students and patients whereas the services of renting of immovable property are provided to some third party , who run their establishments on their Own account on the land made available to them by the Appellant against certain consideration. Thus, it is apparent that these services under consideration are not provided to a single recipient as mandated under the provisions of composite supply under section 2(30) of the CGST Act, 2017, and accordingly cannot be said to be part of the composite supply. Thus, the said service of renting of immovable property will be considered as separate and independent supplies, and will be taxable at the applicable rate of 18% in terms of the item.
Authors Note : Renting of Immovable property to 3rd Party though for the support of Main object of the society will not be considered as a composite supply as in order to qualify for composite supply it must be provided to same recipient who are enjoying main service.