The Appellant Authority for Advance Rulings (AAAR), Rajasthan in the case of M/S RESONANCE EDVENTURES LIMITED vide Order no.  RAJ/AAAR/03/2023-24 dated 23.11.2023, modified the decision of AAR, Rajasthan and held that the supply of coaching service by the appellant along with supply of goods/printed material/test papers, uniform, bags and other goods to their students is composite supply and their principal supply is coaching services.

In this case, appellant have been providing coaching services under the physical/classroom mode but due to Covid environment, they shifted their business model through remote channel partner network. The company provided coaching services through a network of partners, including study materials, uniforms, and bags, all included in a lump-sum fee.

The Appellant sought advance rulings on the question as to whether the supply of coaching services to students which also includes along with coaching, supply of goods/printed material/test papers, uniform, bags and other goods to students, would be supply of goods or a supply of services.

The Authority for Advance Rulings, Rajasthan vide order No. RAJ /AAR / 2021-221 35 dated 28.12.2021, held that goods provided (printed material, uniforms, bags, etc.) could be supplied separately and were not dependent on each other, meeting the criteria for a mixed supply. Therefore, the same would be considered as a mixed supply attracting the highest GST rate of 18%.

The Appellant aggrieved by the said ruling filed appeal before the AAAR, Rajasthan contending that the supply should be treated as a composite supply rather than a mixed supply. The appellant argued that the coaching services and the goods provided were inherently bundled, forming a composite supply. For this, the appellant relied upon the ruling AAR, Rajasthan itself in the case of M/s Symmetric Infrastructure Pvt Ltd., Kota vide Ruling dated 02.09.2021.

The Appellant contended that AAR has has erred in following the principles of consistency (consistent interpretation by not following its own interpretation).

The AAAR, Rajasthan observed that  the students paid a lumpsum amount for the coaching which includes, the coaching services, and student kit (printed material, bag, uniform etc) and the same are not separately charged. As far as providing of printed material/study material/forms are concerned, it was observed that it is an essential and inseparable part of providing coaching.

Further, if one or more is removed, the supply would be affected as removal of the student kit would affect the studies of the students (no printed material or study material or exam papers or course planner and only coaching would definitely affect the studies of the students) and furthermore the nature of the ancillary services/goods in this package is facilitative to the students as well – the amount of the printed material, uniform and bags form a small proportion of the total value of the supply as part of the package. Moreover, when the appellant is not separately selling their bags, uniforms and printed material, it is not difficult to infer that their students enjoy these goods only as a part of composite services of educational/coaching services.

The AAAR stated that no student would choose only the student kit and not the coaching. Here the AAR judgement fails prima facie, because the students cannot opt for only coaching service without receiving the student kit. The students will only pay for principal supply and anyways are going to receive the student kit. The student kit is part of the package of the coaching services and is not sold separately by the appellant or even by their network/channel partner. It is therefore to be treated as composite supply.