Maharashtra Authority for Advance Ruling (AAR) has stated that AMCs are a “composite supply” and classified them as service. The issue, raised by Cummins India, which provided AMCs for diesel and natural gas engines sold by it, was regarding the tax classification of the maintenance contract as it entailed provision of service and supply of parts, which are goods.
The ruling will help get clarity on the tax rate for goods that may be supplied under the contract.
Harpreet Singh, partner for indirect taxes at consulting firm KPMG said that this ruling clearly states that the predominant intention of an AMC contract is to receive upkeep services and not replacement of any faulty parts, thus the tax rate of service being provided should be applied. He added that the ruling will provide relief and clarity on taxation of AMCs for air-conditioners, washing machines, handsets, imaging machines and several other sectors.
The ruling will be applicable to all states unless the AAR in another state interprets it differently.
