Advisory for Taxpayers regarding Generation of EWB where the principal supply is Supply of services.
One of the common issued faced by taxpayers who are dealing with composite supply where there is requirement to ship goods also when executing a service contract. To address this GSTN has issued an advisory on the same.
1. Representations have been received from various trade bodies stating that they are not able to generate EWB bill for movement of those goods where their principle supply is classifiable as a service, since there is no provision for generating E-way Bill by entering SAC (Service Accounting Code-Chapter 99) alone on the E- way bill portal.
2. To overcome this issue, the taxpayers are advised as below:
a) Rule 138 of CGST Rules, 2017, inter alia, states “Information to be furnished prior to commencement of movement of goods and generation of e-way bill.-(1) Every registered person who causes movement of goods of consignment value exceeding fifty thousand rupees….” Thus, E way bill is required to be generated for the movement of Goods.
b) Therefore, in cases where the principal supply is purely a supply of service and involving no movement of goods, the e-way bill is not required to be generated.
c) However, in cases where along with the principal supply of service, movement of some goods is also involved, e-way bill may be generated. Such situations may arise in cases of supply of services like printing services, works contract services, catering services, pandal or shamiana services, etc. In such cases, e-way bill may be generated by entering the details of HSN code of the goods, along with SAC (Service Accounting Code) of services involved.
Circular Number 152/08/2021-GS dated 17th June 2021
- Reference has been received by the Board for a clarification whether services
supplied to a Government Entity by way of construction such as of “a ropeway” are
eligible for concessional rate of 12% GST under entry No. 3 (vi) of Notification No.
11/2017- CT (R) dt. 28.06.2017. On the recommendation of the GST Council, this issue
is clarified as below.
- According to entry No. 3(vi) of notification No. 11/2017-CT (R) dated
28.06.2017, GST rate of 12% is applicable, inter alia, on-
“(vi) Composite supply of works contract as defined in clause (119) of section 2 of the Central
Goods and Services Tax Act, 2017, (other than that covered by items (i), (ia), (ib), (ic), (id),
(ie) and (if) above) provided to the Central Government, State Government, Union Territory,
a local authority a Governmental Authority or a Government Entity, by way of construction,
erection, commissioning, installation, completion, fitting out, repair, maintenance,
renovation, or alteration of –
(a) a civil structure or any other original works meant predominantly for use other
than for commerce, industry, or any other business or profession; “
3. Thus, said entry No 3 (vi) does not apply to any works contract that is meant
for the purposes of commerce, industry, business of profession, even if such service
is provided to the Central Government, State Government, Union Territory, a local
authority a Governmental Authority or a Government Entity. The doubt seems to
have arisen in the instant cases as Explanation to the said entry states, the term
‘business’ shall not include any activity or transaction undertaken by the Central
Government, a State Government or any local authority in which they are engaged
as public authorities. However, this explanation does not apply to Governmental
Authority or Government Entity, as defined in clause (ix) and (x) of the explanation
to said notification. Further, civil constructions, such as rope way for tourism
development shall not be covered by said entry 3(vi) not being a structure that is
meant predominantly for purposes other than business. While road, bridge,
terminal, or railways are covered by entry No. 3(iv) and 3(v) of said notification,
structures like ropeway are not covered by these entries too. Therefore, works
contract service provided by way of construction such as of rope way shall fall under
entry at sl. No. 3(xii) of notification 11/2017-(CTR) and attract GST at the rate of 18%.
Circular Number 153/09/2021-GST dated 17th June 2021
- Certain representations have been received seeking clarification whether
composite supply of service by way of milling of wheat into wheat flour, alongwith
fortification, by any person to a State Government for distribution of such wheat flour
under Public Distribution System is eligible for exemption under entry No. 3A of
Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, and also as regards the
rate of GST on such milling, if it does not fall in said entry No. 3A. The issue has been
examined by GST Council in its 43rd meeting held on 28th May, 2021.
- Entry at Sl. No. 3A of Notification No. 12/2017-Central Tax (Rate) dated
28.06.2017 exempts “composite supply of goods and services in which the value of supply of
goods constitutes not more than 25 per cent of the value of the said composite supply provided
to the Central Government, State Government or Union territory or local authority or a
Governmental authority or a Government Entity by way of any activity in relation to any
function entrusted to a Panchayat under article 243G of the Constitution or in relation to any
function entrusted to a Municipality under article 243W of the Constitution”.
3. As per the recommendation of the GST Council the issue is clarified as below.
3.1 Public Distribution specifically figures at entry 28 of the 11th Schedule to the
constitution, which lists the activities that may be entrusted to a Panchayat under
Article 243G of the Constitution. Hence, said entry No. 3A would apply to composite
supply of milling of wheat and fortification thereof by miller, or of paddy into rice,
provided that value of goods supplied in such composite supply (goods used for
fortification, packing material etc) does not exceed 25% of the value of composite
supply. It is a matter of fact as to whether the value of goods in such composite supply
is up to 25% and requires ascertainment on case-to-case basis.
3.2 In case the supply of service by way of milling of wheat into flour or of paddy
into rice, is not eligible for exemption under Sl. No. 3 A of Notification No. 12/2017-
Central Tax (Rate) dated 28.06.2017 for the reason that value of goods supply in such
a composite supply exceeds 25%, then the applicable GST rate would be 5% if such
composite supply is provided to a registered person, being a job work service (entry
No. 26 of notification No. 11/2017- Central Tax (Rate) dated 28.06.2017). Combined
reading of the definition of job-work [section 2(68), 2(94), 22, 24, 25 and section 51]
makes it clear that a person registered only for the purpose of deduction of tax under
section 51 of the CGST Act is also a registered person for the purposes of the said entry
No. 26, and thus said supply to such person is also entitled for 5% rate.
As per Circular No 34 dated 1 st March 2018, retreading of tyres is classified as composite supply
and basis on the principal supply it will be classified as supply of good or services.
As per Circular No 34 dated 1 st March 2018, bus body building is considered as Composite
Supply and based on the contract to contract, the principal supply is to be determined and basis
on which GST will be determined as supply of goods or services.
Subsection 5 of Section 17 of the GST Act gives the list of items on which GST is not eligible
(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection
(1) of section 18, input tax credit shall not be available in respect of the following,
(a) motor vehicles and other conveyances except when they are used––
(i) for making the following taxable supplies, namely:—
(A) further supply of such vehicles or conveyances ; or
(B) transportation of passengers; or
(C) imparting training on driving, flying, navigating such vehicles
(ii) for transportation of goods;
(b) the following supply of goods or services or both—
(i) food and beverages, outdoor catering, beauty treatment, health services,
cosmetic and plastic surgery except where an inward supply of goods or services
or both of a particular category is used by a registered person for making an
outward taxable supply of the same category of goods or services or both or as
an element of a taxable composite or mixed supply;
(ii) membership of a club, health and fitness centre;
(iii) rent-a-cab, life insurance and health insurance except where––
(A) the Government notifies the services which are obligatory for an
employer to provide to its employees under any law for the time being in
(B) such inward supply of goods or services or both of a particular
category is used by a registered person for making an outward taxable
supply of the same category of goods or services or both or as part of a
taxable composite or mixed supply; and
(iv) travel benefits extended to employees on vacation such as leave or
home travel concession;
(c) works contract services when supplied for construction of an immovable
property (other than plant and machinery) except where it is an input service for further
supply of works contract service;
(d) goods or services or both received by a taxable person for construction of an
immovable property (other than plant or machinery) on his own account including
when such goods or services or both are used in the course or furtherance of business.
Explanation.––For the purposes of clauses (c) and (d), the expression
“construction” includes re-construction, renovation, additions or alterations or repairs,
to the extent of capitalisation, to the said immovable property;
(e) goods or services or both on which tax has been paid under section 10;
(f) goods or services or both received by a non-resident taxable person except
on goods imported by him;
(g) goods or services or both used for personal consumption;
(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free
(i) any tax paid in accordance with the provisions of sections 74, 129 and 130.
Composite Supply as per MGL is, is a supply made by a taxable person having more than on supply of goods or services or in any combination. Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is the principal supply.