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The supply made under the Automatic Fare Collection (AFC) project would qualify as ‘composite supply’ & HSN classification is to be ‘8470’ with 18% GST.

Classification of supply— The applicant is engaged in providing of solutions and services in multiple areas in public safety, private network, retail, IT, logistics, engineering services etc..
As per the applicant, they have been awarded a comprehensive contract by the Surat Municipal Corporation and M/s Surat Smart City Development Limited or design, development, implementation, maintenance and management of open loop solution based Automatic Fare Collection System for Bus Rapid Transit System and City Bus Operation in Surat City.

Advance Ruling in respect of the following questions:

(A) Whether the supply made by NEC under the Automatic Fare Collection (AFC) project would qualify as:

a. ‘works contract’ defined under Section 2(119) of the CGST Act, 2017; or

b. ‘composite supply’ defined under Section 2(30) of the CGST Act, 2017?

(B) Whether the supply made by NEC under the AFC project would qualify as an original works meant predominantly for use other than for commerce, industry, or any other business or profession, thereby attracting GST rate of 12% provided in the Notification 24/2017-Central Tax (Rate) dated 21 September 2017?

(C) Whether the HSN classification of supply made by NEC would fall under ‘8470’ or ‘9954’?

(D) Whether the maintenance and management services post implementation would qualify as composite supply as defined under Section 2(30) of the CGST Act, 2017? Further, whether such supply would be eligible for exemption under Notification No.12/2017-Central Tax (Rate) dated 28 June 2017 in case value of supply of goods constitutes not more than 25% of the value of the said composite supply?

Held that—
The supply made by the applicant under the Automatic Fare Collection (AFC) project would qualify as ‘composite supply’ defined under Section 2(30) of the CGST Act, 2017.

The supply made by the applicant under the AFC project does not qualify as an original works meant predominantly for use other than for commerce, industry, or any other business or profession, thereby GST rate of 12% would not be applicable.

The HSN classification of the supply made by the applicant is to be ‘8470’. The Rate of GST for the same is 18%.

The maintenance and management services to be provided post implementation of the AFC system under proposed contract would qualify as “composite supply” with the AFC system, being the principle supply, as defined under Section 2(30) of the CGST Act, 2017. Further, such supply would not be eligible for exemption provided under Notification No.12/2017-Central Tax (Rate) dated 28th June, 2017—NEC Technologies India Pvt. Ltd., In Re… [2020] 24 TAXLOK.COM 038 (AAR-Gujarat)