2025 (6) TMI 504 - AAR - GST

Classification of services - Vehicle Leasing and Logistics Management Services - Appropriate HSN /SAC for the services rendered by the Applicant - applicable rate of GST on the services rendered by the Applicant - HELD THAT - It is observed that the Applicant is not entering into an arrangement with direct or implied intention of transferring the ownership of the goods transport vehicle / trucks at the end of the leasing period or post subsistence of the term of the Agreement. Applicant has leased the goods transport vehicle/trucks but not transferred the right to use such vehicles/trucks. The services of the Applicant would not merit classification under HSN / SAC 997114 or 997119. The Applicant is providing leasing of goods transport vehicle / trucks along with other integrated services like vehicle management which includes repair/maintenance and related corrective measures of the leased vehicles replacement of goods transport vehicles during the time of need supervision of loading/ unloading weighment and transportation of goods on routes pre-specified by the recipient of services refueling of the goods transport vehicles etc in respect of the leased vehicles. The services of Applicant is not only leasing or rental service without operator but it involves other integrated services also. The appropriate classification of services of applicant i.e. Vehicle Leasing and Logistics Management Services should be classified under HSN/SAC 997319 i.e. the residual entry in respect of leasing or rental services of goods without operator which attracts a tax rate of 18%. The services of applicant i.e. Vehicle Leasing and Logistics Management Services classifiable under Leasing or rental services concerning other machinery and equipment without operator (SAC 997319) are taxable @18% under Sl. No. 17 (viii)of Notification no. 11/2017 CT (Rate) date 28.06.2017.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Authority for Advance Ruling (AAR) were:

(a) What is the appropriate Harmonized System of Nomenclature (HSN) or Services Accounting Code (SAC) classification for the services rendered by the Applicant, which involve vehicle leasing and logistics management services?

(b) What is the applicable rate of Goods and Services Tax (GST) on the services rendered by the Applicant, or whether such services would be exempt from GST levy?

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Appropriate HSN/SAC Classification for the Services Rendered

Relevant Legal Framework and Precedents: The classification of services under GST is governed by the Central Goods and Services Tax Act, 2017, and the corresponding State GST Act. The Notification No. 11/2017-CT(R) dated 28 June 2017 provides the applicable GST rates and classifications. SAC codes are used to classify services, with specific entries for leasing or rental services and transport-related services.

Court's Interpretation and Reasoning: The Applicant proposed that their services fall under SAC 997319, which is a residual entry for leasing or rental services of goods without operator. The Applicant's business model involves leasing goods transport vehicles/trucks to Goods Transport Agencies (GTAs), along with integrated logistics management services such as supervision, repair, maintenance, and refueling (though fuel cost is borne by the lessee). The Applicant does not provide operators/drivers, nor do they issue consignment notes, which is a key element in defining Goods Transport Agency services under Clause 2(ze) of Notification No. 11/2017-CT(R).

The Jurisdictional Tax Authority contended that the services were better classified under SAC 996749 (Other supporting services in road transport), attracting 18% GST, as the Applicant provides ancillary services supporting transport by road.

Key Evidence and Findings: The AAR examined the lease agreement between the Applicant and a GTA, which detailed terms such as payment of consideration covering insurance, maintenance, and taxes; the lessee bearing fuel costs; the Applicant's right to supervise and maintain vehicles; and the absence of transfer of ownership or right to use vehicles beyond the lease term. The Applicant does not issue consignment notes and does not provide drivers/operators, which are essential features of GTA services.

Application of Law to Facts: Since the Applicant does not provide operators and does not issue consignment notes, their services do not qualify as Goods Transport Agency services. The leasing services are accompanied by integrated management and maintenance services, but these are ancillary to the primary service of leasing vehicles without operators. Therefore, the residual SAC 997319 for leasing or rental services of goods without operator is the appropriate classification.

Treatment of Competing Arguments: The Applicant's argument for classification under SAC 997319 was accepted over the jurisdictional authority's suggestion of SAC 996749. The distinction was made based on the nature of services-leasing of vehicles without operators and absence of consignment notes-excluding the Applicant from GTA classification or supporting transport services classification.

Conclusion: The services rendered by the Applicant are appropriately classified under SAC 997319 - Leasing or rental services concerning other machinery and equipment without operator.

Issue 2: Applicable Rate of GST or Exemption on Services Rendered

Relevant Legal Framework and Precedents: Notification No. 11/2017-CT(R) dated 28 June 2017 lists GST rates applicable to various services. Sl. No. 17(viii) prescribes 18% GST on leasing or rental services of goods without operator. Notification No. 12/2017-CT(R) dated 28 June 2017 provides exemptions, including for certain GTA services under Sl. No. 22.

Court's Interpretation and Reasoning: The Applicant contended that since the lessee (GTA) has effective control over the vehicles and the Applicant only provides leasing and ancillary management services, the service qualifies as "giving on hire" and is exempt under Sl. No. 22 of Notification No. 12/2017-CT(R). However, the AAR noted that the exemption applies only to GTA services issuing consignment notes, which the Applicant does not provide.

Key Evidence and Findings: The agreement and submissions clarified that the Applicant does not provide operators, does not bear fuel costs, and does not issue consignment notes. The Applicant's services are leasing combined with management, which does not qualify for exemption under GTA provisions.

Application of Law to Facts: The services fall under residual leasing services without operator, attracting 18% GST as per Sl. No. 17(viii) of Notification No. 11/2017-CT(R). The exemption under Sl. No. 22 for GTA services is inapplicable as the Applicant is not a GTA.

Treatment of Competing Arguments: The Applicant's claim for exemption was rejected based on the statutory definitions and the nature of services. The jurisdictional authority's view that the services attract 18% GST was upheld.

Conclusion: The services rendered by the Applicant are subject to GST at the rate of 18% and are not exempt from levy.

3. SIGNIFICANT HOLDINGS

The Authority for Advance Ruling held:

"The appropriate HSN/SAC for the services of applicant is SAC 997319 i.e. 'Leasing or rental services concerning other machinery and equipments without operator'."

"The applicable rate of GST on the services rendered by the Applicant is 18%. The said services i.e. 'Vehicle Leasing and Logistics Management Services' is not exempted from levy of GST."

The ruling clarified that the Applicant's services do not qualify as Goods Transport Agency services under GST law since the Applicant does not issue consignment notes nor provides operators/drivers, and that the leasing services with ancillary management fall under residual leasing services without operator attracting 18% GST.