In Re: SST Sustainable Transport Solution India Private Limited
GST
2018 (12) TMI 145 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2019 (20) G. S. T. L. 317 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – AAR
Dated:- 15-10-2018
GST-ARA- 68/2018-19/B-129
GST
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 SST SUSTAINABLE TRANSPORT SOLUTIONS INDIA PRIVATE LIMITED, the applicant, seeking an advance ruling in respect of the following ISSUE..
Under which Chapter Heading / Service Code our activity will classify?
At the outset, we would like to make it clear that the provisions of both the CGST Act and the M
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Green City Buses for Transport of General Public and for the same NMC is paying us the Service Charges calculated as per agreement on the Total Run effective kilometers and NMC collects the fare from the passengers.
We are providing following services relating to the transportation of passengers
1. Providing Bus with Driver.
2. Providing Fuel for the Buses
3. Repair & maintenance of the buses,
4. We have established own workshop and service station for maintenance of the buses
5. The NMC is paying us the Service Charges on the basis of per Effective Run kilometres.
6. The rout of the Buses & the applicable fare is decided and collected by the NMC.
AS per the above it is clear that we are providing Services to NMC by providing the Busses along with Driver, Fuel & Maintenance for use of General Public at Large.
We have to start billing for the services and as per the discussions with the Accounts Officer of NMC, the GST applicable for the Green Bus Operations is Nil.
We wa
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ation of law facts, as the Case may be, in respect of the aforesaid question(s) (i.e. applicant's view point and Submissions on issues on which the advance ruling is sought).
BRIEF HISTORY OF THE CASE
M/s. SST Sustainable Transport Solutions India Private Limited (service provider) is a private Limited Company having registered place of business at plot no. C-49, Hingna Road, MIDC, Nagpur- 440028.
The Nagpur Municipal Corporation has been entrusted the task of implementing the AC Green Buses and for this purpose it sought service provider for Purchase, Supply, Operation, Maintenance etc of AC Green Buses. The company had entered into an Agreement with Nagpur Municipal Corporation (NMC) for Operation and maintenance of AC Green Buses Run on Bio Ethanol Fuel for Nagpur Urban Region. The agreement was executed on18th Aug.2017.
(A) Relevant clauses of the Agreement:
a) Relevant obligations of service provider:
1. Providing Bus with Driver, (clause 2.5.2 a & clause 4.1.w)
2. Pro
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) Joint responsibilities:
Clause 3.3.1 provides for joint responsibility to pay taxes and statutory charges related to Bus Services would be divided between the NMC and the service provider however the clause is Silent about payment of SGST-CGST/IGST. Thus as per the provisions of Goods and Services Tax statute the legitimate taxes would be collected by the service provider from NMC and will pay the same.
(B) NATURE OF TANSACTION:
1. Whether transfer of right to use any goods for any purpose
Your applicant is engage in supplying 'AC Green Buses' 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 the transaction would be of the nature of transfer of right to use any goods for any purpose.
Such interpretation could be derived on the lines of
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court has discussed catena of decisions to elaborate the deem sale transfer of right to use goods, one of the case cited by the court is of K.C. Behera v State of Orissa (83 STC 325) = 1990 (11) TMI 354 – ORISSA HIGH COURT where the court has observed ” Buses- bus hired out to State Transport Corporation the contract disentitled from using the vehicle covered by the agreement in any route. The Bus was to be run for Corporation as per the agreement and directions of an officer. The transaction is a “sale” within the extended meaning of the word. Providing of driver by the owner notwithstanding there was a transfer of the right to use bus for consideration, and effective control and possession of the bus vested in the Corporation.” The case is identical to the facts of the present issue. The High Court in the case of G.S. Lamba, supra, has lead down the parameters of transactions for transfer of right to use goods, the relevant essential requirements are reproduced here “(iv) the effect
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ring, operation and comprehensive maintenance of buses. To operate and maintain buses supplied as per the route plan and schedule of trips as per the directions of the Corporation. Make arrangements for fuel, drivers and skilled staff for operation and maintenance etc. Claim hiring charges from NMC. Thus the charges for the operation as a whole would be 'Hiring charges' claim on kilometer basis.
(C) Cause of Advance ruling:
Nagpur Municipal Corporation through its communication letter no. Transport/885/2017 dated 30/12/2017 [copy of the letter is annexed hereto and marked as Exhibit-I] had informed the service provider that the corporation had obtained clarification from the Joint Commissioner of Central Excise, Customs and Service Tax, Nagpur bearing No. IV/ (16)30-6/GST/2017 dated 23/08/2017 [copy of the letter is annexed hereto and marked as Exhibit -II]. The relevant part of the communication made by the Joint Commissioner of Central Excise, Customs and Service Tax, Nagpur dated
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ned Bus and the entry for tax rate is specifically for 'other than air conditioned stage carriage'. Secondly the entry is for supply transaction for 'Transport of passengers' not for leasing or hiring transaction. The nature of transaction between the service provider and the Corporation is of the nature of leasing/renting supply and not of charging fair to the passengers. The “Green Bus Contract Agreement” dated 18th August 2017 (hereinafter called as 'the Agreement') [the copy of the Agreement is annexed hereto and marked as Exhibit -V] provides NMC to collect fare from the commuters as per clause 7.1.h. Thus the entry referred by the Corporation does not cover the transaction between the service provider and the Corporation.
It was informed to the Corporation that the transaction would cover under sr. No 8 (vii) of the Notification No.11/2017-State Tax (Rate) dated 29th June, 2017 [the copy of Notification is annexed hereto and marked as Exhibit -VI] which read as “Passenger transp
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ustoms and Service Tax, Nagpur through letter no, IV/ (16)30-6/GST/ 2017 dated 23/08/2017 Stating that the transaction would attract 'Nil' GST as per Sr. No.15 of the Notification No.12 of 2017- Central Tax (Rate), dated 28.06.2017, stage carriage other than air-conditioned stage carriage is not applicable to the transaction between the applicant and the NMC. NMC cannot give reference of the communication of the Joint Commissioner as it is not relevant in the present issue.
The reliance on the communication of the Joint Commissioner is unwarranted and misleading. For the reasons that, the 'Green Bus' provided to the Corporation is Air Conditioned Bus and the entry 15 of the notification for tax rate is specifically for 'other than air conditioned stage carriage'. Secondly the entry is for supply transaction where 'Transport of passengers' is the recipient of services and not for leasing or hiring transaction. The nature of transaction between the service provider and the Corporation
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t to use any goods for any purpose( whether or not for a specified period) for cash, deferred payment or other valuable consideration.” If the transaction is of the nature of transfer of the right to use any goods for any purpose, your applicant desires advance ruling whether it is classifiable under Sl. No. 15(ii) of the Notification No. 11/2017-State Tax (Rate) dated 29th June 2017.
(5) Your applicant desires advance ruling whether the transaction would be classifiable under Sl. No. 22 (a) of the notification No. 12/2017- State Tax (Rate) dated 29th June, 2017. 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.
(6) NOTE ON INTERPRETATION ON NOTIFICATION ENTRIES FOR RATE OF TAX in respect of the contract between SST Sustainable Transport Solutions and NMC
NOTIFICATION NO 11/2017 DATED 29/06/2017
No 8 (ii) “transport of passengers with or without accomp
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ge carriage” means a motor vehicle constructed or adapted to carry more than six passengers excluding the driver for hire or reward at separate fares paid by or for individual passengers, either for the whole journey or for stage of the journey”
“contract carriage” means a motor vehicle which carries a passenger or passenger or passengers for hire or reward and is engaged under a contract, whether expressed or implied, for the use of such vehicle as a whole for the carriage of passengers mentioned therein and entered into by a person with a holder of a permit in relation to such vehicle or any person authorized by him in this behalf on a fixed or an agreed rate or sum
a. on a time basis, whether or not with reference to any route or distance; or
b. from one point to another, and in either case, without stopping to pick up or set down passengers not included in the contract anywhere during the journey, and includes-
i. a maxicab; and
ii. a motor cab notwithstanding that separ
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rements for operation schedules on trips/ routs in area as prescribed/ directed by NMC. Prima facie it seems that the transaction would be of the nature of transfer of right to use any goods for any purpose.
Such interpretation could be derived on the lines of judgement in case Tripura Syndicate Bus 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, contro
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03-(184)CTR-0527-BOM, 2004-(265)-ITR-0114-BOM =2003 (4) TMI 29 – BOMBAY HIGH COURT the Hon'ble Bombay high Court has held that:
“There is a basic difference between “lease” and “hire”. This difference is borne out by the basic difference in the meaning of the expression “property” and the expression “possession”. A transaction of hire is essentially a contract of Bailment of a vehicle. In the case of a hire, only a license is given to the Hirer to use the vehicle for a temporary period the vehicle so hired – Melluish (Inspector of Taxes) v. BMI (No. 9) Ltd. (1996) 218 ITR 547 (HL) = 1995 (10) TMI 228 – HOUSE OF LORDS. In the case of hire, the hirer has an option to buy the equipment which is one of the main distinguishing feature between the words “hire” and “lease”. However, it is argued on behalf of the assessee that for the purposes of the above Entry, the word “hire” and the word “lease” should be read as equivalent. We do not find any merit in this argument.”
From the conjoint r
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nce of AC Green Buses run on Bio Ethanol Fuel for Nagpur Urban Region” and are providing services relating to transport of passengers in following aspect.
1. Providing Bus with Driver
2. Providing fuel for buses
3. Repair and Maintenance of Buses
4. This operator has set up Workshop and Service station for maintenance of buses
5. The NMC pays to M/s. SST Sustainable Solutions India Pvt Ltd rate as per effective run kilometres.
6. The route and the fare is decided and collected by NMC.
Further the appellant claims that the Service should be classifiable under Chapter Heading 9966-Services by was of giving on hire to a State Transport undertaking, a Motor Vehicle meant to carry more than 12 passengers, does not appears to be correct as the vehicles are rented to NMC which is not a state transport undertaking. The contention of appellant does not appear to be correct as the vehicles are rented to NMC which is a body constituted under Govt. of Maharashtra and not a State Trans
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Sh. Manish Agarwal, C.A. appeared and made oral and written submissions. Jurisdictional Officer, Sh. Paras Chaure, Supt., Principal Commissioner of GST, Nagpur appeared and made written submissions.
05. OBSERVATIONS
We have gone through the facts of the case, documents on record and the submissions made by both, the applicant as well as the department.
From the submissions made by the applicant we find that the issue is pertaining to buses which are hired by the NMC from the applicant. The facts are 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. The applicant has submitted that they are providing the Buses along with Driver, Fuel & Maintenance for use of General Public at Large which can be seen from the
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us 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 of the nature of transfer of right to use any goods and the amounts received by them on kilometer basis would be considered as hiring charges.
It has been rightly pointed out by the applicant that the nature of transaction between the applicant and NMC is of the nature of leasing/renting supply and not of charging fare to the passengers. Since the NMC has received a clarification from the department that the services provided by them i.e. transportation of passengers, are not taxable under the GST laws they are refusing to pay GST to the applicant on hiring charges paid. Thus the applicant has raised the question as follows:-
“Under which Chapter Heading / Service Code our activity will classify?”
We now take up the issue/ question raised by the applicant as under:-
As per sub-clause (0 of clause 5 of Schedule II ap
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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 kilometers per Bus per year.
iv. There is an annual assured payment to be made by NMC to the applicant if the minimum number of kilometers are not travelled.
v. There is also a clause for payment for excess kilometers travelled by the said Buses and finally
vi. There is also a clause for revision of kilometer charges.
In view of the terms of the agreement it is very clear that 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.
Now we shall arrive at the rate of tax that the applicant would hav
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uarely 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 rendered by the applicant.
Here we may also add that the correspondence dated 23.08.2017 made by the department to confirm that as per Sl No. 15(c) of Notification No. 12 of 2017-Central tax (Rate) dated 28.06.2017, stage carriage Other than air-conditioned stage carriage attract '”NIL” rate of GST is applicable to NMC on their further services provided to passenger by way of transportation. The service rendered by the applicant to NMC by way of renting of AC Buses are covered under Sr. No. 10, Heading No 9966 sub-clause (ii) as mentioned and discussed above and are therefore taxable.
05. In view of the extensive deliberations as held hereinabove, we pass an order as follows :
ORDER
(Under section 98 of the Central Goods and Services Tax Act, 2017 and the Mahara
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