Classification of services—packing of tea bags—In the instant application, applicant seeks a ruling on the classification of the services provided in way of packing of tea bags and the rate of GST thereon.

the Applicant received a communication from one of the recipients of the services provided, namely, M/s Hindustan Unilever Ltd informing that the service should be taxed @5% and classified as manufacturing service on physical inputs owned by others (SAC 9988) for food and food products

It is to be decided whether the Applicant’s services to HUL are classifiable as packaging service or manufacturing service or both.

The Applicant used to classify it as packaging service under SAC 998540 and charges 18% GST.

Held that— These two services (service for manufacturing tea bags and the service for packaging of the manufactured tea bags) are supplied in terms of a single contract (refer to the Agreement) and at a single price (as may be ascertained from the invoices). The flow chart shows that the services are supplied as processes in a continuous assembly line, where packaging of tea bags in cartons and wrapping is ancillary to manufacturing tea bags. The tea bags, of course, cannot be delivered unless they are suitably packed. The Applicant is, therefore, making a composite supply to HUL where the service of manufacturing tea bags from the physical inputs owned by HUL is the principal supply.

Ruling— The Applicant makes a composite supply to Hindustan Unilever Ltd, where the service of manufacturing tea bags from the physical inputs owned by the latter is the principal supply. It is classifiable under SAC 9988 and taxable at 5% rate under Sl No. 26(f) of Notification No. 11/2017–CT (Rate) dated 28/06/2017, as amended from time to time. Applicability of this Ruling with respect to other recipients is subject to the specific nature of the contracts with them.[M/S. VEDIKA EXPORTS TEA PVT. LTD.] [AUTHORITY FOR ADVANCE RULING, WEST BENGAL][2019] 8 TAXLOK.COM 035 (AAR-WB)