2018 (10) TMI 1242 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2018 (18) G. S. T. L. 340 (A. A. R. – GST) – Supply or not – inter-state branch transfers – levy of GST – providing medium-sized heavy-duty cranes on rental/lease/ hire basis to its clients without transferring the right to use the cranes – As the movement of cranes involves significant time and cost, SML has set up various branches (SML branch offices) across India at strategic locations to minimize transportation time and costs – with the introduction of GST with effect from 1 July, 2017, all the branches of a single legal person located in different States are treated as distinct person and any supply of taxable goods/ services between distinct persons with or without consideration, is subject to applicable GST.
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Whether movement of tyre mounted cranes or crawler cranes from one GST registered office of SML to another registered office of SML for further supply on hire charges to customers would be treated as “ta
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HO to SML branch offices registered in another state for further supply on hire charges to customer and thus the circular 21/21/2017-IGST is not applicable to the facts of the present transaction.
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If GST is payable on the aforesaid transaction, whether the recipient office of SML duty registered under GST receiving such cranes for further supply on hire charges would be eligible to avail input tax credit of GST charged? – Held that:- This question is in respect of recipient office of SML registered under the GST Act in a taxable territory other than Maharashtra State. We are, therefore, of the opinion that applicant is not proper person to raise this question and therefore we are not expressing our opinion on this question.
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In case when a lyre-mounted crane or crawler crane is moved from one GST registered office of SML to another registered office of SML only for upkeepment and maintenance purpose, without any further supply to unrelated customers, whether such movement o
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Whether GST would be payable Only on the movement of tyre-mounted cranes being goods on wheels or GST would also be payable on movement of both types of cranes (i.e. tyre-mounted cranes and crawler cranes)? – Held that:- Both types of cranes i.e. tyre mounted cranes and crawler cranes are covered by the expression 'all goods on wheel [like crane] ‘used in the circular No. 21/21/2017-GST and as such GST would be payable on the interstate movement of both types of cranes from SML HO Maharashtra to SML branch office in other state for further supply of such cranes on hire charges.
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What should be the value under section 15 of the Central Goods and Services Tax Act, 2017 (CGST Act) and the rules made thereunder for discharging applicable GST on movement of cranes from one GST registered office to another registered office in case the said movement is considered to be a taxable supply? – Held that:- The transaction between SML HO and SML branch office is supply having regards to Secti
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ng GST which is approximately 95% of the value charged by SML branches to the Customer of the branches.
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Ruling:- The movement of tyre mounted cranes or crawler cranes from one GST registered office of SML to another registered office of SML for further supply on hire charges to customers would be treated as “taxable supply” under GST law – Further circular No.2i/21/2017- IGST which exempts from tax interstate movement of rigs, tools, spares, and al! goods on wheels [like cranes] where interstate movement of such goods is not for further supply of same goods is not applicable to the facts of present transaction as in the present case interstate movement of goods from SML HO in Maharashtra to SML branches in other states is for further supply of goods on hire.
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The question whether the recipient office of SML duty registered under GST receiving such cranes for further supply on hire charges would be eligible to avail input tax credit of GST charged, is not answered by this aut
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d for the supply of goods of like, kind and quality by the recipient to his customer.
– GST-ARA-43/2017-18/B-50 Dated:- 15-6-2018 – SHRI B.V. BORHADE, AND SHRI PANKAJ KUMAR, MEMBER PROCEEDINGS Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as the CGST Act and MGST Act ] by Sanghvi Movers Limited, the applicant, seeking an advance ruling in respect of the following questions on: 1. Based on the facts and business model adopted by Sanghvi Movers Limited ( SMV or Applicant or the Company ) under the GST regime as discussed below in detail, whether movement of tyre mounted cranes or crawler cranes from one GST registered office of SML to another registered office of SML for further supply on hire charges to customers would be treated as
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nsaction stated above in question 1 is liable to tax, whether GST would be payable Only on the movement of tyre-mounted cranes being goods on wheels or GST would also be payable on movement of both types of cranes (i.e. tyre-mounted cranes and crawler cranes)? 5. What should be the value under section 15 of the Central Goods and Services Tax Act, 2017 (CGST Act) and the rules made thereunder for discharging applicable GST on movement of cranes from one GST registered office to another registered office in case the said movement is considered to be a taxable supply? 6. At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a s
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imported from various countries such as USA, Germany, Japan, Singapore, China, etc. 3. SML owns two types of cranes, viz. i) Crawler cranes (they are fitted with crawler tracks/ chain belts, as seen on military tanks). These cranes cannot be plied on normal roads, and therefore, do not require any registration from the Regional Transport Office (RTO). ii) Tyre-mounted hydraulic cranes ply on the road and require RTO registration. 4. The cost of these cranes is significantly high and their average economic life ranges from 25 to 35 years. These cranes are moved/ transported on trailers, from one location to another, in knock down condition. 5. As the movement of cranes involves significant time and cost, SML has set up various branches ( SML branch offices ) across India at strategic locations to minimize transportation time and costs. II. Under GST, SML has obtained registration for 10 locations across India, including its head office ( SML Maharashtra ) located in Pune, Maharashtra. I
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to applicable GST. Thus, under GST, Inter-State branch transactions involving services have been brought under the ambit of tax. As a result, SML had to relook at its existing business model and the way it undertakes transactions both internally and externally with customers. 9. In order to comply with the provisions of GST law and ensure operational feasibility, SML has modified its business model. SML Maharashtra has entered into a formal service arrangement with all SML branch offices by entering into a Memorandum of Understanding (MOU), Wherein SML Maharashtra has agreed to provide cranes and crane components to all SML branch offices on hire charges. As part of the service arrangement, whenever SML branch offices receive a final work order from their customers for providing cranes on hire charges, the said SML branch offices will in turn raise an internal work order on SML Maharashtra for providing the requested cranes on hire charges to them. 10. Thus, for each final work order r
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ch offices. 14. For brevity and clarity of facts, an illustration of the transaction flow involved is provided below. 15. For each type of crane given on hire charges, the crane operator maintains a separate monthly log sheet at the customer/ project location, wherein the daily and hourly details of crane usage and idle time are maintained, based on which the monthly service invoice is raised by SML branch offices on respective customers. Further, an invoice from SML Maharashtra is issued to the SML branch office and the value considered for levying GST is approximately 95% of the value charged to the customer by the SML branch, following the principle under Rule 28 of the Central Goods and Services Tax Rules, 2017 ( CGST Rules ) read with section 15 of CGST Act. 16. In most cases, cranes are moved from one GST registered office of SML to another registered office when there is an underlying work order received by the recipient branch office. However, in some cases, it may happen that
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into a service agreement through an MOU, whereby SML Maharashtra shall provide different types of cranes and crane components to all SML branch offices on hire charges as per the requirement of each SML branch office. 19. The ownership and title of cranes and crane components shall vest with SML Maharashtra, However, as and when any SMK, branch offices receive the final work order from their customers for supply of crane on hire charges, the said crane shall be provided by SML Maharashtra to SML branch offices for further sub-hiring purpose. Method of invoicing- As per the monthly log sheet, SML branch offices raise invoices on their respective customers and on the basis of the same, SML Maharashtra in turn raises taxable invoice on the respective SML branch offices. Valuation adopted-SML Maharashtra recovers hire charges equivalent to approximately 95% of hire charges recovered by SML branch offices from their respective customers and discharges GST as applicable on the said value. T
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been made and no input tax credit reversal is required to be made for non-payment of consideration. Hence, the recipient SML branch offices can avail credit of IGST charged by SML Maharashtra on the value of hire charges charged on the invoice. Clarification issued under Circular NO. 21/ 21/ 2017-CGST read with Circular No. 1/1/2017-IGST 23. The GST Council in its 23rd meeting held on 10 November, 2017 clarified that inter-State movement of goods like rigs, tools, spares and goods on wheels like cranes, not being in the course of furtherance of supply of such goods, does not constitute supply. This clarification was issued to give major compliance relief to industry, as there are frequent inter-State movement of such kind in the course of providing services to customers or for the purposes of getting such goods repaired or refurbished or for any self-use. Service provided using such goods would in any case attract applicable tax. 24. In order to give effect to the recommendations of t
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one state to another between various branch offices of the same legal entity for providing the said capital goods on hire or for undertaking repairs and maintenance work. However, as a result of the afore stated provisions under the GST, each and every movement of such capital goods between distinct persons was subject to tax i.e., the movement of goods between inter-State branch offices was being subjected to tax, thereby, causing undue hardship and compliance burden to the leasing industry. 27. Hence, to provide consequential relief to the leasing industry in general, the Central Government vide the aforesaid Circular has clarified that only such movement of goods that would be further supplied by way of sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made would be treated as taxable supply and subjected to GST. 28. Further, the said Circular also clarifies that no GST would be levied in ease such goods are moved for repairs and maintenance a
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ly on hire charges to -customers would be treated as ' taxable supply under GST law or whether GST would not be leviable on the said movement as per the clarification issued by the CBEC vide Circular No. 21/21/2017-CGST read with Circular No. – IGST? Answer: – As per section 24(1) (i) of the CGST act, persons making any inter-state taxable supply shall be compulsorily required to be registered under the CGST Act. As per section of the CGST Act, supply includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by person in the course or furtherance of business. per section 25(4) Of the CGST Act, a person who has obtained or is required to obtain more than One registration. As per section 25(4) of the CGST Act read with Schedule I of the CGST Act, the movement of cranes from SML Maharashtra to SML branch offices for further supply to unrelated customers is a taxab
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d office to another branch office of M/s Sanghvi Movers Ltd for further supply on hire charges to customers is treated as taxable supply under GST. Qu. 2. In the present situation and under the given facts, if GST is payable on the aforesaid transaction, whether the recipient office of SML duly registered under GST receiving such cranes for further supply on hire charges would be eligible to avail input tax credit of GST charged? Answer: – As per section 16(2) of the CGST Act, a registered person shall be entitled to avail credit of any input tax in respect of any supply of goods or services or both to him subject to fulfilment of the following conditions: a. Possession of tax invoice or debit note issued by registered supplier; and b. Receipt of goods or services; and c. Tax charged for such supply is actually paid to the Government; and d. Tax returns have been furnished. Further, as per second proviso to Rule 37 of the CGST Act, input tax credit shall be eligible subject to payment
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o IGST if the cranes are moved for internal use for carrying any goods, or for repairs and maintenance, etc., except in cases where such movement is for further supply of the said cranes on hire charges. Further, the registered branch office proving the upkeepment and maintenance service, charges consideration for the same from SML Maharashtra and levies applicable GST on the same. Thus, as the activity of upkeepment and maintenance is already taxed by SML branch offices, the movement of cranes from One registered branch office to another for undertaking repairs and maintenance activity should not be liable to tax under GST, as it would result in double taxation of a single transaction. As the cranes are moved from one GST registered office to another for upkeepment and maintenance activity, which in itself is a taxable service, the said movement of cranes should not attract levy of GST, as it would result in double taxation of a single transaction. Qu. 4. If the transaction stated abo
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ection 15- The value of a supply of goods or service or both shall be the transaction value, which is the price actually paid or payable for the said supply Of goods or service or both where the supplier and the recipient are not related and the price is the sole consideration for the supply. The value of supply include- any taxes, duties, cases, fees and charges levied under any law for the time. As per my opinion, in such a case of supply of Goods and services between deemed district persons, the value of goods or services determined as open market value, 04. HEARING The case was taken up for preliminary hearing on DT. 10.04.2018, with respect to admission or rejection of the application when Sh. Nitin Vijaivergia, C.A. along with Sh. Vipin Bang and Sh. Abhijit Savarkar, G.M. Taxation appeared and made contentions as per details in their ARA The jurisdictional officer, Sh. B K. Shedge, Dy Commissioner of S.T. (PUN-VAT-E-810) Pune appeared and stated that they would be making submissi
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oyed across India as per the requirements of customers. Its head office ('SML HO Maharashtra ) is located in Pune, Maharashtra. SML operated these cranes on wet lease basis (own operate and maintain) and provides the entire operation crew, such as crane operators, riggers, helpers, mechanicals, engineers, etc., whenever a crane is given on rent. SML owns two types of cranes namely crawler cranes and Tyre-mounted hydraulic cranes. Applicant has stated in details about the goods involved in this transaction but what is significant for present purpose is to understand the business model. As per the model as reproduced in vertabum above applicants Branch offices at different locations negotiate with the customer for supply of cranes on hire charges and receive final work order. The applicant's Branch on receipt of final work order in turn raise internal work order on Head office to provide crane on hire charges along with appropriate support and assistance. However, the title and o
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crane is moved from one registered branch office to another registered branch office for temporary unkeepment and maintenance purpose. In any case, however, the ownership and title to the crane vests with HO. Whenever crane moves from SML HO to SML branch office for further supply on hire, the invoice is issued by SML HO to SML branch office and the value considered For levying GST is approximately 95% of the value charged to customer by the branch. Whereas when crane move from one registered location to another registered location for upkeepment and maintenance activity the respective branch office providing such services levies charges on H.O. along with applicable rate of GST. ON this factual matrix we have been called upon to answer the questions made in the ARA. We now deal each questions as below: Que: 1 Based on the facts and business model adopted by Sanghvi Movers Limited ( SML or Applicant or the Company ) under the GST regime as discussed below in detail, whether movement of
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ther or not in the course or furtherance of business; (c) the activities specified in Schedule l, made or agreed to be made without a consideration; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. (2) Notwithstanding anything contained in sub-section (1),- (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shell be treated neither as a supply of goods nor a supply of services. (3) Subject to the provisions of sub-sections (1) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as- (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods. Further
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either wholly or partly, is a supply of services. 3. Treatment or process Any treatment or process which is applied to another person's goods is a supply of services. 4. Transfer of business assets (a) where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for a consideration, such transfer or disposal is a supply of goods by the person; (b) where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business, whether or not for a consideration, the usage or making available of such goods is a supply of services; (c) where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be dee
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case of non-requirement of such certificate from such authority, from any of the following, namely:- (i) an architect registered with the Council of Architecture constituted under the Architects Act, 1972; (20 of 1972.) or (ii) a chartered engineer registered with the Institution of Engineers (India); or (iii) a licensed surveyor of the respective local body of the city or town or village or development or planning authority; (2) the expression "construction" includes additions, alterations, replacements or remodelling of any existing civil structure; (c) temporary transfer or permitting the use or enjoyment of any intellectual property right; (d) development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software; (e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; and (f) transfer of the right to use any goods for any purpose (whether or not for a
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services. The next issue raised by the applicant for our consideration is under claim that all the branches located in different state are of single legal person and as such the movement of crane for supply on hire from HO in Maharashtra to branch office in another state would not be leviable to under the GST as per the clarification issued by CBEC vide circular No. 21/21/2017-GST r/w Circular No. 01/01/2017. As per general understanding, the HO and branches of one legal entity have no separate existence. However as per section25 (4) of the GST where a person who has obtained or is required to obtain more than one registration, each such registration is treated as distinct person. The relevant section is reproduced as below- Section 25(4): A person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purp
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or commerce. And as per section 5 (1) of the IGST Act said interstate supply is taxable under the provisions of the IGST in the hand of the applicant. Therefore, we conclude that in the present case supply of cranes, cranes components and trailers on lease/ hire charges by the SML HO to SML branches in TN and other state constitute interstate taxable supply of service between two distinct person and liable to pay tax under the provisions of IGST Act. Further we find that the issue of IGST exemption on interstate movement of various modes of conveyance between two distinct person as specified in Section 25(4) of the GST Act, 2017 for carrying goods or passengers or both; or for repair or maintenance except in cases where such movement is for further supply of the same conveyance was examined by the Board vide circular No. 1/1/2017 DT. 7.7.2017. And it was clarified that such movement may not be treated as supply and therefore would not be leviable to IGST. Further the Board in order to
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lar was extended to rigs, tools and spares, and all goods on wheel. [like crane] In view of these two circulars we have to ascertain whether the clarification is applicable to the facts of the case i.e. cranes supplied/provided by the applicant namely – crawler cranes (they are fitted with crawler tracks/chain belts, as seen on military tanks) and Tyre mounted hydraulic cranes that ply on road. Applicant's case is covered by second circular and as per this circular what is exempted is all goods on wheel [like crane]. As regards Tyre mounted crane there shall be no doubt as said crane are on wheel. The issue before us is whether the crawler crane is covered by the expression goods on wheel (like crane used m the second circular) for this purpose we have to understand the meaning of word ' like which is not defined in the act. We may now take assistance of dictionary meaning of the said word to arrive at certain conclusion. The Dictionary meaning of like is – Preposition: like ha
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her supply of goods or supply of service. The reliance by the applicant on this circular to claim interstate movement of cranes as exempt from levy of IGST is misplaced as the cranes moves form SML HO Maharashtra to SML branch in another state for further supply of same cranes. For above deliberation we conclude that IGST would be leviable on the interstate movement of both type of cranes from SML HO to SML branch offices registered in another state for further supply on hire charges to customer and thus the circular 21/21/2017-IGST is not applicable to the facts of the present transaction. Que: 2 In the present situation and under the given facts, if GST is payable on the aforesaid transaction, whether the recipient office of SML duly registered under GST receiving such cranes for further supply on hire charges would be eligible to avail input tax credit Of GST charged? This question is in respect of recipient office of SML registered under the GST Act in a taxable territory other tha
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maintenance purpose and not for further supply of the crane on hire charges. We find that the situation as mentioned above is squarely covered by the clarification issued by Tax Research Unit vide circular no. 21/21/2017- GST DT. 22nd November, 2017. As such the interstate movement of cranes is neither a supply of goods nor supply of services and consequently no IGST would be applicable on such movement. However, tax is leviable on repairs and maintenance done for such goods. Que: 4 If the transaction stated above in question 1 is liable to tax, whether GST would be payable only on the movement of tyre-mounted cranes being goods on wheels or GST would also be payable on movement of both types of cranes (i.e. tyre-mounted cranes and crawler cranes. We have already given answer in respect of question No.1 that both types of cranes i.e. tyre mounted cranes and crawler cranes are covered by the expression 'all goods on wheel [like crane] used in the circular No. 21/21/2017-GST and as s
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nt has explained the method of invoicing in his submissions. As per the method SML branch office on the basis of monthly log sheet raise invoices on their respective customer and on the basis of same, SML Maharashtra that is applicant in turn raises taxable invoice on the respective SML branch offices. SML Maharashtra recovers hire charges equivalent to 95% of hire charges recovered by SML branch offices from their respective customers. Applicant discharges GST as applicable on the said 95% value. On this factual matrix we have been called upon to answer the impugned question. As per section 15 of the GST Act, the value of supply of goods or supply of services or both shall be transaction value that is actually price paid or payable provided that the supplier and recipient are not related person and the price is the sole consideration. For the discussion herein above we find that SML HO and SNIL branches situated in other states are distinct persons as per section 25(4) of the GST Act.
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ication of rule 30 or rule 31, in that order: Provided that where the goods are intended for further supply as such by the recipient, the value shall, at the option of the supplier, be an amount equivalent to ninety percent of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person: Provided further that where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of the goods or services. In the present transaction of supply we find that value considered by the applicant for levying GST is approximately 95% of the value charged to the customer by the SML. Branch. The determination value of supply as aforesaid by the applicant is as per the first proviso to Rule 28 of the GST Rules. We also find from the submission made by the applicant and the terms of MOU that the supply of cranes on hire by SML Maharashtra to SML Branches is for further s
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low in detail, whether movement of tyre mounted cranes or crawler cranes from one GST registered office of SML to another registered office of SML for further supply on hire charges to customers would be treated as taxable supply under GST law or whether GST would not be leviable on the said movement as per the clarification issued by the CBEC vide Circular No. 21/ 21/ 2017- CGST read with Circular No. 1/ 1/ 2017 – IGST? Answer: – Answered in Affirmative, Further circular No.2i/21/2017- IGST which exempts from tax interstate movement of rigs, tools, spares, and al! goods on wheels [like cranes] where interstate movement of such goods is not for further supply of same goods is not applicable to the facts of present transaction as in the present case interstate movement of goods from SML HO in Maharashtra to SML branches in other states is for further supply of goods on hire. Question 2. In the present situation and under the given facts, if GST is payable on the aforesaid transaction, w
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done for such goods. Question 4. If the transaction stated above in question 1 is liable to tax, whether GST would be payable only on the movement of lyre-mounted cranes being goods on wheels or GST would also be payable on movement of both types of cranes (i.e. tyre-mounted cranes and crawler cranes)? Answer: – GST would be payable on the movement of both type of cranes i.e. tyre mounted cranes and crawler cranes. Question 5. What should be the value under section 15 of the Central Goods and Services Tax Act, 2017 (CGST Äct) and the rules made thereunder for discharging applicable GST on movement of cranes from one GST registered office to another registered office in case the said movement is considered to be a taxable supply? Answer: – The value for the purpose of section 15 where the recipient branch office in other state is eligible for full input tax credit would be the value declared in the invoice as open market value of the services for the purpose of levy of tax and alte
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