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2019 (7) TMI 810 - AAR - GSTLevy of GST- Whether the interest subvention income received by Daimler Financial Services India Private Limited (DFSI) from Mercedes-Benz India Private Limited (MB India) to reduce the effective interest rate to the final customer is chargeable to GST? - HELD THAT:- In the instant case of the agreement titled ‘Mercedes-Benz Financial’, the rate of interest for this loan is specified in Annexure I to this agreement. The methodology of arriving at this rate of interest is given in the Annexure itself as the ‘Net Applicable Fixed Interest Rate’ after deducting the ‘Applicable Fixed Interest Rate Gross’ less the ‘Interest subsidy from MB India’ (ref Para 4.2). The buyer has to pay the ‘Loan Amount’ (SI no 3 of (B) Financial details) specified in the Annexure I with interest at the “Rate of Interest per Annum” (Sl.no. 4 of (B) Financial details Annexure I) specified therein: There is no obligation of the buyer to pay back the principal at the ‘Applicable Fixed Interest Rate Gross’. There is no obligation on part of the buyer in this agreement to pay any further amount beyond the amount calculated as per the “Rate of Interest per Annum”. Hence, the stand of the applicant that the interest subvention amount given by MB India to DFSI is a part of the consideration for the transaction between DFSI and buyer is not correct as the buyer is under no obligation to pay this amount equivalent to the interest subvention to DFS as per the terms of the agreement between FSI and the buyer. In the instant case, there is an MOU / agreement between DFSI and MB India for an amount determined by the agreement interest subvention amount for each loan taken by buyer of MB India’s vehicles. This amount is part of the consideration in this transaction and as per the definition in Section 2(31); this is the amount payable by MB India to DFSI and receivable by DFSI from MB India which is recorded as such in the audited financials of DFSI. As DFSI and MB India are related parties, the value of this supply may be different from the transaction value here. This agreement between DFSI and MB India is for the furtherance of the business of lending of DFSI as they are the preferred financiers of MB India’s vehicles. Customers buying MB India’s vehicle would prefer to take out a loan from DFSI because of their lower interest rates offered as a consequence of their agreement with MB India. Therefore, this transaction between DFSI and MB India is a ‘Supply’ under Section 7 of CGST Act. In the instant case, DFSI is agreeing to provide vehicle loan to buyers of MB India’s vehicles at a lower interest rate as decided between DFSI and MB India and also to provide better customer luxury experience, structured insurance products offerings with claims processing within minimum turnaround time, tailor made products, quick loan approvals, maintain customer relation etc. as per the MOU between FSI and Mb India. Hence, the supply of service by DFSI to MB India is covered under SAC 999792 as Other miscellaneous Services, agreeing to do an act. The interest subvention income received by Daimler Financial Services India Private Limited(DFSI) from Mercedes-Benz India Private Limited (MB India) to reduce the effective interest rate to the final customer is chargeable to GST as a supply under SAC 999792 as Other miscellaneous Services , agreeing to do an act, to 9% CGST and 9% SGST as per Sl no 35 of Notification No 11/2017 Central Tax (Rate) dt. 28.06.2017 as amended are chargeable as per Sl no 35 of Notification No. II(2)/CTR/532(d-14)/2017 vide G.O. (Ms) No. 72 dated 29.06.2017 as amended.
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