2018 (12) TMI 145 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2019 (20) G. S. T. L. 317 (A. A. R. – GST) – Classification of services – Supply of Services or not – Services to NMC by providing the Busses along with Driver, Fuel & Maintenance for use of General Public at Large – under which Chapter Heading / Service Code the activity is required to be classified? – Held that:- The applicant has entered into an agreement with NMC and as per the agreement, they are providing the Services of Running AC Green City Buses for Transport of General Public, for which NMC is paying them Service Charges calculated on the Total Run effective kilometers and the fare from the passengers is collected by NMC – NMC is providing transportation services to the passengers and the applicant, for such transportation, is supplying to NMC Buses along with drivers, fuels, maintenance, etc. In effect, it is found that there is no connection between the applicant and the passengers.
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The applicant is just
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agreement have been transferred to NMC for a period of 15 years from the commercial operations date (COD). COD in the agreement has been defined as the date on which period of 6 months are completed from the date of execution of the agreement.
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In the subject case there is transfer of the right to use any goods (Buses) for any purpose i.e for transportation purpose and for a specified period of 15 years for cash. Thus as per sub-clause (f) of clause 5 of Schedule II appended to both, the CGST Act, 2017 and the MGST Act, 2017 the subject activity of the applicant would be considered as Supply of Services.
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The applicant is rendering services to NMC by way of giving out on rent/hire, Buses which are further used by NMC for transportation of passengers. Such renting of Buses by the applicant squarely falls under Sr. No. 10, Heading No. 9966 sub- clause (ii) as rental Service of transport vehicles, in this case with operators and therefore attracts CGST and SGST @ 9% each on rem
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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 similar provision under the CGST Act / MGST Act would be mentioned as being under the GST Act . 02. FACTS AND CONTENTION – AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- we, M/s. SST SUSTAINABLE TRANSPORT SOLUTIONS INDIA PRIVATE LIMITED, a private limited company having its Registered office at Plot NO. C-49, Hingna Road, MIDC, Nagpur-440028 had entered into an agreement i.e. Service Provider Agreement dated 18/08/2017 with Nagpur Municipal Corporation (NMC) for Operation and maintenance of AC Green Buses Running on Bio Ethanol Fuel for Nagpur Urban Region . As per the agreement we are pro
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en Bus Operations is Nil. We want to confirm from your office that under which Chapter Heading / Service Code our above activity will classify. As per our interpretation and looking to the services provided by us to the General Public at Large, the same should classify under chapter heading 9966 i.e. Services by way of giving on hire – (a) to a state transport undertaking, a motor vehicle meant to carry more than twelve Passengers; or (b) to a goods transport agency, a means of transportation of goods. (c) motor vehicle for transport of students, faculty and staff, to a person providing services of transportation of students, faculty and staff to an educational institution providing services by way of pre-school education and education upto higher secondary school or equivalent. Kindly give your confirmation about the classification of our activity on the basis of the above and as per our Agreement With NMC, Copy of which is enclosed herewith for your perusal. Statement containing the
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4.1.w) 2. Providing Fuel for Buses,(clause 4.1 c) 3. Repair & maintenance of the Buses, 4. The service provider shall operate and maintain the Bus provided for AC Green Buses Service in accordance with the basic requirements of the Scope of work and requirements for operation schedules on trips/ routes in area as prescribed/ directed by NMC (clause 4.8 a) 5. Service provider has right to receive payment of hiring charges from NMC (clause 5.1.a) (b) The main obligations of the NMC are 1. The NMC is required to pay Service Charges on the basis of per Effective Run Kilometers. As per clause 3.1,3.2, 3.3 of the agreement, 2. NMC would provide certain premises for set up the parking yard and facilities to operate and maintenance of buses as per clause 4.2 of the agreement. 3. NMC would provide the space for fuel filling stations, 4. NMC shall have complete and full right for collection of fare for the Bus Service and to determine and implement methodology for the same. (clause 7.1 h) (c
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t in case of Tripura Bus Syndicate 122 STC 175 = 2001 (1) TMI 946 – GAUHATI HIGH COURT, and in the case of Godavari Finance co (2008) SCC 0107 S.C.= 2008 (4) TMI 766 – SUPREME COURT it is observed that though the drivers were the employee of the owner of the vehicle they have to follow the directions and instructions of the transferee and thus the vehicles under the effective control of the hirer. In the case of Rajasthan State Road Transport Corporation, 1997 (007) SCC 481 = 1997 (9) TMI 634 – SUPREME COURT OF INDIA, while deciding the case of compensation, Supreme Court has observed that notwithstanding the fact that the driver would continue to be on the pay roll of the owner, he has to act under the instructions, control and command of the conductor and other officers and the effective control is transferred to hirer. Reference can also be made to the case of G.S. Lamba and Sons (43 VST 323) = 2011 (1) TMI 1196 – ANDHRA PRADESH HIGH COURT where in Hon ble Andhra Pradesh High court
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l control does not mean always physical control and even if the manner, method, modification modalities and time of use of goods; and(v) the approvals, concessions, licences or permit in relation to goods would also available to the user of the goods even if such licences or permits are in the name Of the owner(transferor) of the goods, and (vi) during the period of Contract exclusive right to use goods along with permits, licences, etc vests in the lessee. It is also pertinent to mentioned here that logo of NMC is pasted on the vehicle provided to NMC thus the ratio decidendee of GS Lambas case is squarely applicable to the present issue. In light of the position of law there is a possibility that the transaction is of the nature of transfer of right to use any goods for any purpose cannot be denied. 2. Whether Hiring charges: The applicant is engaged in the business to undertake and carry on the activity of providing all kind of services in the nature of plying, hiring, operation and
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ed verbatim hereunder- This is to confirm that as per Sl. No.15 of the Notification No.12 of 2017- Central Tax (Rate), dated 28.06.2017, stage carriage other than air- conditioned stage carriage attracts NIL rate of CST. In response to the communication of NMC dated 30/12/2017 the company had filed return reply through letter dated 12 Feb.2018 [the copy of the letter is annexed hereto and marked as Exhibit -III] which states that the clarification issued by the Joint Commissioner is in respect of the transaction of supply between the Corporation and the passengers-traveler to whom the Corporation would charge fare charges. Sr. No. 15 (c) of the Notification No 12/2017-State Tax (Rate) dated 29th June, 2017 read thus stage carriage other than air- conditioned Stage carriage -rate of tax Nil [the copy of Notification is annexed hereto and marked as exhibit-IV] It is pertinent to mention here that the Green Bus provided to the Corporation is Air Conditioned Bus and the entry for tax rate
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v),(v) and (vi) above – rate of CGST -9%) The Corporation did not agree with the said rate and stickup to its earlier stand, this has been communicated by the Corporation through its letter dated 21/06/ 2018 [the copy Of the letter is annexed hereto and marked as exhibit -VII] (D) SUBMISSION: Your applicant, to know the correct rate of tax on the transaction of supply between the service provider and NMC and desires advance ruling under sub-section (1) of section 97 of the Maharashtra Goods and Service Tax Act, 2017. Accordingly, has filed an application in form GST ARA-01 on 03/07/2018 under Application Reference No. AD270718000170G. Your applicant had made required payment under Payment Reference Number- IP2707180000010. And sought advance ruling under clause (a) of sub-section (2) of section 97 of the MGST Act, 2017. In this connection your applicant submits that- (1) The communication from the Joint Commissioner of Central Excise, Customs and Service Tax, Nagpur through letter no,
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ing fare to the passengers. (2) Your applicant desires advance ruling whether the transaction would be classifiable under Sl No 10(ii) of the notification No. 11/2017- State Tax (Rate) dated 29th June, 2017 liable to tax @ 9%. Which reads as rental service of transport vehicles with or without operators, other than (i) above liable to tax @ 9% SGST. (3) Your applicant desires advance ruling whether the transaction would be classifiable under Sl No 8(vii)) of the notification No. 11/2017- State Tax (Rate) dated 29th June, 2017 liable to tax @ 9%. Which reads as Passenger transport service other than (i), (ii), (iii), (iv), (v)and (vi) liable to tax @ 9% SGST. (4) Your applicant desires to know whether the transaction would be classifiable under sub-clause (f) of clause 5 of Schedule II appended to the MSGST Act, 2017 [copy of schedule II is annexed hereto and mark as exhibit-VIII] which reads as (f) transfer of the right to use any goods for any purpose( whether or not for a specified p
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motor cab (b) Air conditioned stage carriage (c) Radio taxi Expln- (a) contract carriage has the meaning assigned to it in clause (7) of section 2 of the MVA 1988 (59 of 1988), (b) stage carriage has the meaning assigned to it in clause (40) of section 2 of the MVA 1988 (59 of 1988), This entry is in respect of transport of passengers, SST is not entered in to the contract to transport the passengers but to providing vehicles and related services to NMC, the entry is therefore not applicable to the transactions between SST and NMC. No. 8 (vii) Passenger transport service other than (i), (ii), (iii), (iv),(v) and (vi) above-rate of SGST-9% This entry is in respect of transport of passengers, SST is not entered in to the contract to transport the passengers but to providing vehicles and related services to NMC, the entry is therefore not applicable to the transactions between SST and NMC. stage carriage means a motor vehicle constructed or adapted to carry more than six passengers exclud
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operators, other than (i) above liable to tax @ 9% SGST. The company is under the belief that the transaction would cover under this entry, however it is not clear as to whether the transaction would fall to cover as rental services or leasing of vehicle. Sl. No. 15(ii) of the Notification No 11/2017-State Tax (Rate) dated 29th June 2017 read with schedule II appended to MGST Act transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. The rate of tax would be the same rate of MGST for supply of like goods involved in transfer of title in goods. Your applicant is engaged in supplying AC Green Bus to Nagpur Municipal Corporation, on the basis of operation, repairs & maintenance, providing drivers, etc in accordance with the basic requirements of the scope of work, and requirements for operation schedules on trips/ routs in area as prescribed/ directed by NMC. Prima facie it seems that
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e position of law there is a possibility that the transaction is of the nature of transfer of right to use any goods for any purpose cannot be denied. Notification No. 12/2017- State Tax (Rate) dated 29th June, 2017. SI No 22 (a) Which reads as Service by way of giving on hire- (a) to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers; or liable to tax at Nil rate. This entry would be for hiring services the question whether the classification of transaction is of the nature of hiring services. In a lease, ownership lies with the lessor. The lessee has the right to use the equipment and does not have the option to purchase. Whereas in hire purchase, the hirer has the option to purchase. The hirer becomes the owner of the asset/ equipment immediately after the last installment is paid. In the case of Kotak Mahindra Finance Ltd. 2003-(184)CTR-0527-BOM, 2004-(265)-ITR-0114-BOM =2003 (4) TMI 29 – BOMBAY HIGH COURT the Hon ble Bombay high Court has hel
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may not fall to cover under entry Sl.No. 22 (a) Which reads as Service by way of giving on hire- (a) to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers; or covered under notification NO 12 of 2017 state Tax (rate ) dated 29/06/2017 03. CONTENTION – AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- In the present case, the applicant, M/s. SST Sustainable Transport Solutions India Pvt., Ltd., MIDC, Hingna Nagpur, has represented before the authority for advance ruling regarding classification of their services. In their application, M/s. SST Sustainable Transport Solutions India Pvt. Ltd., MIDC, Hingna Nagpur has informed that they have entered into a contract with Nagpur Municipal Corporation (Body constituted under Govt. of Maharashtra) for operation and Maintenance of AC Green Buses run on Bio Ethanol Fuel for Nagpur Urban Region and are providing services relating to transport of passengers in following
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(Motor vehicle designed to carry passengers) where the cost of fuel is included in the consideration charge from the service recipient and falls under service code 996601 attracting GST @ 5% (with no ITC) or 12% (with ITC) [Notification No. 31/2017-Central Tax (Rate) dated 13.10.2017]. 04. HEARING The case was taken up for Preliminary hearing on dt. 11.09.2018 when Sh. Sanjay Gadkari, GST Practitioner along with Sh. Sopan Jachak, Sh. Ashish Sharma, Company Secretary and Sh. Varad Gokhale operation manager appeared and requested for admission of application as per contentions in their ARA. Nobody was present form the side of Jurisdictional Officer. The application was admitted and called for final hearing on 19.09.2018, Sh- Sanjay Gadkari, GST Practitioner along with Sh. Sopan Jachak, Sh. Varad Gokhale operation Manager and Sh. Manish Agarwal, C.A. appeared and made oral and written submissions. Jurisdictional Officer, Sh. Paras Chaure, Supt., Principal Commissioner of GST, Nagpur appe
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of the buses are also undertaken by the applicant for which they have their own workshop and service station. 4. NMC is paying to the applicant, Service Charges on the basis of per Effective Run kilometres. 5. The route of the Buses & the applicable fare is decided and collected by the NMC from the passengers. From the above it is clearly seen that NMC is providing transportation services to the passengers and the applicant, for such transportation, is supplying to NMC Buses along with drivers, fuels, maintenance, etc. In effect we find that there is no connection between the applicant and the passengers. We find that the applicant is just hiring out these AC Buses to NMC and we also find that the effective control is with the applicant so far as the Buses are concerned which are provided to NMC. We also find the Bus Routes are decided by NMC as also the Bus Fares, which are collected from the passengers. Hence it is crystal clear that in the subject case the transaction would be
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ment or other valuable consideration: would be considered as Supply of Services. In the subject case the applicant vide Service Provider Agreement entered into by them with NMC have transferred of right to use the goods i.e. AC Buses belonging to them. The said rights as per the agreement have been transferred to NMC for a period of 15 years from the commercial operations date (COD). COD in the agreement has been defined as the date on which period of 6 months are completed from the date of execution of the agreement. From the terms of payment mentioned in the agreement between the applicant and NMC it is seen that: i. NMC shall pay to the applicant an amount on the basis of kilometers logged by the AC Buses. ii. The applicant shall submit invoice at the end of each 10 days and NMC, within 15 days of receipt of invoice shall verify the same and make payments. iii. NMC has given a guarantee that the Buses so provided to them would travel a number of kilometers not less than 68,000 kilom
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ing 9966 (Rental Services of transport vehicles) (i) Renting of motorcab where the cost of fuel is included in the consideration charged from the service recipient. 2.5 Provided that credit of input tax charged on goods and services used in supplying the service has not been taken. [Please refer to Explanation no. (iv)] (ii) Rental services of transport vehicles with or without operators, other than (i) above. 9 – The parallel Sr. No. 10 in Notification No. 11/2017-State Tax (Rate) dated 29.06.2017, mentioned by the applicant is the same. From the discussions above we find that the applicant is rendering services to NMC by way of giving out on rent/hire, Buses which are further used by NMC for transportation of passengers. Such renting of Buses by the applicant squarely falls under Sr. No. 10, Heading No. 9966 sub- clause (ii) as rental Service of transport vehicles, in this case with operators and therefore attracts CGST and SGST @ 9% each on remuneration received for such services re
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