A coaching institute could not deposit Goods & Services Tax (GST) on the specific items which are for the supply of notebooks, t-shirts, bags, sweatshirts, and others for the students as well as the coaching service mentioned by the Central Board of Indirect Taxes & Custom (CBIC)
“These types of bundled services fall under the category of ‘Composite Supply’ and attract 18 per cent GST,” CBIC Chairman Vivek Johri stated in the weekly communication to the officers and the staff of the indirect tax council.
Composite supply referred to the supply made by the taxable individual to the receipt which consists of the two or exceeding taxable supplies of the goods or services or both or any combination of it, which are sold on the bundled and supplied in conjunction with each other in the normal business form, one of which is said to be the principal supply. The rate on the principal supply would be the rate for the complete supply. In this, the coaching service is said to be the principal supply.
The same observation would be performed after the Alwar (Rajasthan) CGST Commissionerate rendered a procedure concerning the short GST payment on the composite supply of the commercial training or the coaching services as well as with the goods like school bags, notebooks, t-shirts, sweatshirts, umbrellas, and others. to their students.
While the students were imposed with the lump sum amount for the same services or goods, the tax was deposited on the specific supplies of the bags, notebooks, and others, Johri sees and makes it transparent that these supplies are called the composite supply. Rs 3.6 cr was recovered in the same case.
For the concern of the tax furnished on the specific item basis, a GST rate of 12% will be levied on the notebooks, and the 5% rate is to be applied on the t-shirts and the sweatshirts (in case the maximum retail price is less than ₹1,000) and 12 % (for the case maximum retail price is over ₹1,000). 12% will be the rate for umbrellas.
The Effect on Students
Tax experts mentioned that the present GST laws force every commercial training and the coaching institute to levy an 18% tax on the books, course materials, and bags, no matter whether these items are individually taxed neutral or not. Since the start of the GST, the secondary education sector has been complaining concerning the same problem which in turn laid a burden on the students.
“GST is the newest indirect tax on the block, and the underlying concepts will evolve. Businesses face numerous industry-level issues that the board clarifies without comprehending business processes developed over decades. The GST council must pitch in all such matters and ensure that sectoral customized solutions are being given to trade and industry,” he added.
Tax experts mentioned that if some items are integrated into the compliance of the service then it is said to be the composite supply and all the under 18% GST would be liable to pay the GST at the subject rate to the main supply.
In the mentioned case it is the coaching services and hence it is now becoming customary to provide bags, material, and others, and the cost is included in the course fee.
Thus “the attempt to bifurcate it into different items may not be tenable. However, a mixed supply is treated differently wherein the goods/services could be sold together only due to convenience or requirement of the client but are not sold together customarily,” he added.
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