Conference and exhibition services provided to delegates/exhibitors taxable as ‘composite supply’ with GST @18%: AAR

Categories: Advance Ruling
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Facts:

M/s All Rajasthan Corrugated Board and Box Manufacturers Association (“the Applicant”) is engaged for the upliftment and technological advancement of Corrugation Industry and to develop a strong- interface with various stakeholders like vendors, customers, government and other associations.

The Applicant is conducting conference and exhibition in Jaipur in December 2019 and it will be attended by delegates, vendors, exhibitors from all states of India including Rajasthan and International vendors as well.

Following facilities will be offered to the delegates in the event at an all-inclusive registration fees:

  • Technical Seminars
  • Access to exhibition
  • Hotel Room Accommodation
  • Cultural programs, lunch & dinner
  • Airport Pick Up & Drop

The interested local, national & international vendors will be offered to participate in the trade fair to showcase and exhibit their products against certain participation charges. Further, various brand promotion packages will be offered to local, national & international vendors in the course of the event.

Issues involved:

I. What shall be the nature of following services and its classification:

a) Services provided by the Applicant to the delegates.
b) Services provided by the Applicant to the exhibitors.

II. In relation to the brand promotion packages offered by the Applicant in the course of the event,

a) What shall be the nature of service and its classification?
b) Whether the Applicant is liable to pay tax on services provided to the brand promoters or the liability to pay tax on such services falls on recipient under reverse charge?

III. Whether Input tax credit (“ITC”) is admissible in respect of tax paid on the following:

a) Services provided by the hotel including accommodation, food & beverages.
b) Supply of food and beverages by outside caterers.
c) Services provided by event manager like pickup & drop, exhibition stall setup, tenting, etc.

Held:

The Hon’ble AAR, Rajasthan vide Advance Ruling No. RAJ/AAR/2019-20/07 dated May 17, 2019 held as under:

  • The services provided by the applicant to the delegates and exhibitors is a composite supply and classifiable under Service Code 998596 having Service description “Events, exhibitions, conventions and trade shows organizations and assistance services” as per Annexure: Scheme of Classification of Services to Notification No. 11/2017-CT(R) dated June 28, 2017 (“Notification No. 11”).
    The above ruling was based on the observation that the facilities offered to delegates in the event at an all-inclusive registration fees comprising of technical seminars, access to exhibition, hotel room accommodation, cultural programs, lunch, dinner, airport pick up and drop constitutes a ‘composite supply’ under the CGST Act, 2017 (“CGST Act”). Further, as the basic intention of the delegates is to attend the conference and all the other services provided are facilities made available to them for an overall good experience of the conference only, the ‘principle supply’ is ‘organisation of conference’.
  • The service of brand promotion packages offered by the Applicant in the course of the event is a composite supply and classifiable under Service Code 998397 having Service description “Sponsorship services and brand promotion services” as per Annexure: Scheme of Classification of Services to Notification No. 11.
  • Brand promotion packages offered by applicant to partnership firms and body corporate do not fall under the category of sponsorship but purely branding, hence, the Applicant is liable to pay tax under normal charge only (not reverse charge as per Notification No. 13/2017 – CT(R) dated June 28, 2017).
  • ITC is admissible to the Applicant in respect of tax paid on the following services and restriction under Section 17(5) of the CGST Act shall not be attracted since the Applicant will be using such inward supply as an element of outward supply of same category taxable as composite supplies :
    a) Services provided by the hotel including accommodation, food & beverages.
    b) Supply of food and beverages by outside caterers
    c) Services provided by event manager like pickup & drop, exhibition stall setup, tenting, etc. 

Citation: [TS-509-AAR-2019-NT]

Important legal provisions:

For easy reference, definition of ‘composite supply’ and ‘principal supply’ under Section 2(30) and Section 2(90) of the CGST Act respectively, is reproduced as under:

Section 2(30): “composite supply” means a supply made by a taxable person to a recipient consisting of two 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 is a principal supply.

Section 2(90): “principal supply” means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary.