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2022 (4) TMI 1139 - AAR - GSTClassification of services - Valuation - Pure Agent - portion of the certain additional services viz., payment of road tax/registration fees, insurance premium, etc., rendered by the applicant in the course of its Leasing of the vehicle/s to the Lessee - falls under the category of “services of a pure agent” or not - recovery of Motor Vehicle Registration fee, Motor Vehicle life Tax & RTO charges etc., by the applicant from the lessee for the registration of the vehicle - forming part of taxable supply or not - HELD THAT:- It is seen that they enter into a Master Agreement for 'operating lease' with their lessee outlining the terms and conditions for such operating lease to be extended by them to the lessee. It is also seen that the applicant enters into supplemental Operating Lease agreement when the Lessee approaches them to lease a desired vehicle wherein the terms and conditions of the Master Agreement are referred and agreed to be adopted. Thus, it is evident that the applicant extends the services of 'Operating Lease' to the Lessee. A careful reading of some of the following clauses of the agreement reveals that the ownership of the leased equipment does not pass on to the Lessee and remains with the Applicant, as is the dicta of an “Operating Lease” - Operational leasing is a taxable supply of service under the GST Act. From the flow chart indicating the leasing supplies, it is seen that presently, the applicant arrives at the EMI considering the entire value including the on road components charged on them and the lease rental is fixed on monthly basis. Valuation of supply - whether the 'On-road Component' raised through a Debit note to be considered as additional services in which the applicant is a 'Pure agent' or should form part of the value of supply of 'Operational lease' undertaken by them? - HELD THAT:- As per Section 15, the value of a supply, where the supplier and the recipient are not related and the price is the sole consideration, is the transaction value, which is the price actually paid or payable for the said supply. In the case at hand, the applicant purchases the vehicle identified by the lessee from the dealer also identified by the lessee and supplies the vehicle as 'Operational lease'. The supply under consideration in the instant case, is the supply of the vehicle by the dealer to the applicant. The dealer and the applicant are not related persons and therefore the consideration charged by the dealer for the supply of the vehicle to the applicant is the Transaction Value' for the purposes of GST. From the submissions, it is seen that the Dealer raises a Tax Invoice' towards the basic price of the vehicle with the applicable GST levies and a 'Debit Note' towards the 'On-road Component' comprising of Registration charges, road tax, etc. Payment of On-road components such as registration fees, Insurance fees etc., are mandatory for the vehicle to be able to be used on road, as per the provisions of Motor Vehicles Act - In the case at hand, the vehicle is given on 'Operating lease', wherein the ownership of the vehicle is held by the applicant and through the terms and conditions for the leasing transactions, the applicant has permitted the lessee to register the vehicle in the name of the lessee. The fact that the vehicle is allowed to be registered in the name of the lessee does not alter the other fact that the applicant is the owner of the vehicle and the lessee is a mere bailee of the goods on account of the applicant - The applicant is not paying these charges on behalf of the lessee to the dealer but is paying the charges to make the vehicle usable on road following the provisions of Motor Vehicle Act and related statutory provisions etc before leasing such vehicles to the lessee for operations. The applicant has failed to establish themselves as a 'pure agent' and therefore the expenditure or cost incurred by the applicant in respect of the 'On-road components' are incurred by them in the transaction of Purchase of vehicle' for the supply of 'Operational lease' to their recipient. In this connection, it is pertinent to note that section 15(2) of the GST Act, provides that any tax/duty levied under any other law and any incidental expenses incurred should also form a part of the Transaction Value'. Applying the same to the case at hand, the 'On-road components' are incidental charges incurred by the applicant in purchasing the vehicles for supply under the 'Operational lease' to the Lessee. Therefore, the value of 'On-road component' cannot be considered as additional charges or the applicant can't be held as acting as a Pure agent' in respect of supply of the 'On-road Component'. Additional payments made by the Applicant towards Motor Vehicle Registration fee, Motor Vehicle life Tax, RTO charges etc., for getting the vehicle to use on the Road, which are recovered from the Lessee, forms part of the supply of Leasing services and therefore should form part of the taxable supply.
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