Order date – 12 August 2022

Facts – 

• The applicant, M/s Hyndai Rotem Company, is a foreign company incorporated in South Korea and is predominantly engaged in manufacture, supply, testing, commissioning and training in respect of rolling stock. 
• The applicant entered into a contract dated 24.05.2013 with Delhi Metro Rail Corporation Limited (DMRC') for design, manufacture, supply, testing, commissioning and training of 504 Standard Gauge Cars (passenger rolling stock) including training of operation & maintenance personnel and supply of spares & manuals.
• The applicant, to undertake the scope of work as agreed in the contract, is required to supply various goods and services to DMRC in a phased manner.
• Therefore the applicant filed an advance ruling to clear the stand of GST for the completion of the abovementioned contract.

Issue – 

• Whether the supplies made under different Cost Centres (Testing in the depot, Unit exchange spares Training and manuals) to the extent of training services of Contract RS-10' to DMRC are to be considered as independent supplies of goods and services and GST rate applicable depending upon the nature of activity performed under such cost centres?

Ruling – 

• The authorities relied on Karnataka Appellate Authority of Advance Ruling in case of Assistant Commissioner of Central Tax, Bangalore vs M/s BEML Limited wherein it was held that for a supply to be considered as a composite supply, its constituent supplies should be so integrated with each other that one cannot be supplied in the ordinary course of business without or independent of the other.
• In this case, although there is only one contract, the scope of work under each cost center is clearly specified and identifiable and is not associated with any other cost center.
• Considering Section 2(30) of the CGST Act' 2017, supplies in the corresponding cost centers are not naturally bundled.
• Therefore, it was held that the supplies made under different cost centres of Contract 'RS-10' to DMRC are to be considered as independent supplies of goods and services and GST rate applicable depending upon the nature of activity performed under such cost centers.
• Also, the form of the agreement is not important, but its nature/ substance has to be seen to arrive at the correct conclusions. The clear-cut demarcation of activities to each cost center demonstrates the intention of the contracting parties that each cost center is independent supply center undertaking either the supply of goods or supply of services.