The Gujarat Authority for Advance Ruling (AAR) has ruled that the contract between Airbus and Tata Group’s company for the supply of aircraft to the defence ministry is a “composite supply”, and would attract 5 per cent goods and services tax (GST).
Under the terms of the contract, 16 of the 56 aircraft will be supplied by Airbus from Spain to the defence ministry in a fly-away condition.
For the remaining 40 aircraft, it entered into a contract with Tata Consultancy Services (TCS) for the manufacture and supply.
In turn, TCS entered into a contract with group company Tata Advanced Systems, which was also responsible for the support services, including maintenance services of the aircraft.
Tata Advanced Systems approached the AAR to know if GST is applicable on the supply of the aircraft.
The company contended that the supply of aircraft and support services are bundled together and hence it should draw 5 per cent GST.
The AAR ruled in favour of the company, saying it would come under the “composite supply” and draw five per cent GST.
The AAR held that supply of aircraft and provision of support services “are naturally bundled and supplied in conjunction with each other in ordinary course of business”.
The authority said the supply of service is possible only when the aircraft are supplied.
It noted that Tata Advanced Systems’ supply involved goods (aircraft) and service (maintenance).
“The ruling emphasises that since these services are naturally bundled and the ancillary service can’t be provided without the main supply in normal trade practice, GST is payable at five per cent as supply of goods,” one of the expert said.