TMI Blog2019 (4) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... sation Cess Act or vice versa. As per Notification No.2/2017 - Compensation Cess (Rate} dated 28-06-2017, services of transfer of right to use any goods is liable for Compensation Cess, whereas the rental services and passenger transport services are not liable for Compensation Cess as it does not involve transfer of right to use of motor vehicles. As per Section 2(p) of the Compensation Cess Act taxable supply means a supply of goods or services or both which is chargeable the cess under this Act. Therefore leasing supplies are taxable supply for the purpose of Compensation Cess Act and rental business Is not regarded as taxable supply for the purpose of Compensation Cess Act as the same is not chargeable to Cess under the said Act - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t tax credit as defined in Section 2(g) of the GST (Compensation to States) Act, 2017 of the cess paid on purchase of motor vehicles used in providing services of transportation of passengers or renting of motor vehicles given the fact that as a matter of business policy, the said motor vehicles would be initially used for supply of RAC services and disposed of after three or four years of such use. The authorized representative of the applicant is heard. It is pointed out that in leasing business the applicant purchase motor vehicles from vehicle dealers on payment of GST and Compensation Cess. After purchasing such vehicles, the applicant, on operating lease basis, transfer the right to use of such vehicles to his customers. In terms o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of purchase of the Motor Vehicles. This is because at this stage there is no liability of Compensation Cess on the outward supplies of renting services and further Compensation Cess can be utilized only for payment of such Cess in terms of the proviso to Section 11 of the Compensation Cess Act. In order to provide the superior customer services, the applicant substitute new vehicles once in three to four years. The applicant sells the old vehicles on outright basis to third party customers as part of regular business practice and on such sales, they are paying GST and Compensation Cess. The CGST Act and Compensation Cess Act are pari-materia in nature and levy two separate taxes. i.e.. GST and Compensation Cess respectively on simulta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be wholly exempt from tax under Section 11, or under Section 6 of the Integrated Goods and Services Tax Act, and Includes non-taxable supply; Accordingly Compensation Cess is not chargeable on rental service, being an exempted supply. The vehicles used for rental business service are generally sold after three - four years of purchase. Therefore. the sale of vehicles being taxable supply. Compensation Cess will be attracted as the sale is effected within 5 years, of such purchases. As per Sec, 11 of the Compensation Cess Act. provisions of the CGST Act and IGST Act and Rules made thereunder including provisions relating to ITC shall mutantis mutandis apply in relation to levy and collection of the Cess leviable under the Compensation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation Cess paid on purchase of vehicles used for rental business and subsequently, used for effecting taxable supply by way of sale on such vehicles. In view of the observations stated above, the following rulings are issued: Whether the applicant is eligible to take credit of the input tax credit as defined in Sec.2(g) of the GST (Compensation to States) Act, 2017 of the Cess paid on purchase of motor vehicles used in providing services of transportation of passengers or renting motor vehicles given the fact that as a matter of business policy, the said motor vehicles would be initially used for supply of rental business services and disposed of after three or four years of such use. Considering the provision envisaged In Rule 43 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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