TMI Blog2019 (8) TMI 1009X X X X Extracts X X X X X X X X Extracts X X X X ..... r full input tax credit as they are not paying the full amount to their supplier SML HO as seen in the MOU where payments are netted off against receivables. The applicant in his application has stated that as per proviso to Rule 37, the condition to make actual payment to supplier within 180 days is not applicable to the applicant. However, the proviso clearly states that, the value of supplies made without consideration as specified in Schedule I shall be deemed to have been paid as per second proviso to Section 16(2). In the instant case, there is a consideration to be paid by SML to SML HO as per Para 10 of the MOU and the consideration in specified in the invoices raised by SML HO on the applicant. Hence, proviso to Rule 37 i.e. exemption from making full payment, will not be applicable to the applicant. Accordingly, the applicant will not be eligible for the full ITC as per the inward supplies received from SML HO as they would be required to reverse such ITC if taken as per second proviso Section 16(2) of CGST Act and Rule 37 of CGST Rules - In the instant case, the transaction is an inter-state supply as the supplier is in a different state from the place of supply, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ient office of SML (i.e. SML Tamil Nadu) duly registered under GST receiving such cranes for further supply on hire charges would be eligible to avail input tax credit (ITC) of IGST charged? The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of ₹ 5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1, The applicant has stated that SML operate the cranes on wet Lease basis (own, operate and maintain) and provide entire operating crew, such as crane operators, riggers, helpers, technicians, engineers, etc., whenever a crane is given on rent. SML has a large fleet of more than 400 cranes ranging from 40 MT to 800 MT lifting capacity. All cranes have been imported from various countries such as USA, Germany, Japan, Singapore, China, etc. SML own two types of cranes viz., Crawler cranes and Tyre-mounted hydraulic cranes. The cost of these cranes is significantly high and their average economic life ranges from 25 to 35 years. These cranes are moved/transported on trailers, from one location to another, in knock down condition. As th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant, who in turn sub-hires them to the ultimate customers. On receipt of internal work order from the applicant, SML Maharashtra transports the crane and its components to the customer s location / project location on the instructions of the applicant. For each type of crane given on hire charges, the crane operator maintains a separate monthly log sheet at the customer/ project location, wherein daily and hourly details of crane usage and idle time are maintained, based on which the monthly service invoice is raised by the applicant on respective customers. Further, an invoice from SML Maharashtra is issued to the applicant and the value considered for levying GST is approximately 95% of the value charged to the customer by the applicant. 2.3 The applicant has also stated that as per section 12(2) of Integrated Goods and Services Tax Act, 2017 ( IGST Act), the place of supply of service of leasing/ hire/renting of crane to a registered person shall be the location of such registered person. Therefore, in the said transaction, as the place of supply falls in Tamil Nadu, i.e., the location of applicant, SML Maharashtra discharges IGST on the value of hire charges recovere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nced by the Maharashtra Authority for Advance Ruling is only limited to SML Maharashtra.; that it may be imperative to note that the authority for Advance Ruling observed that supply of cranes, Crane components and trailer on lease / hire charges by SML Maharashtra to the applicant constitutes inter-state taxable supply of service between two distinct person and liable to pay IGST under the provision of IGST Acts.; GST being a consumption based tax, the IGST paid by SML Maharashtra, would be available with the Tamilnadu Government since the place of supply of the said transaction would fall in Tamilnadu in terms of Section 12(2) of the IGST Act. Therefore, they have submitted that the applicant would be entitled to avail credit of IGST charged, on the following grounds i. Applicant receives tax invoice from SML Maharashtra on monthly basis. ii. Applicant actually receives service from SML Maharashtra because only on receiving the cranes on hire charges from SML Maharashtra, can the applicant further Sub-lease the cranes to their ultimate customers iii. IGST charged by SML Mahrashtra is paid in to Government treasury of Tamil Nadu iv. Regular GST ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... components, etc. on lease/ hire for sub-leasing/ sub-hiring purpose for the term based on the period of underlying work-order between the applicant and their customers and can be extended if the underlying work-order is extended (Para 3) SML HO will retain the right, title, interest, ownership in the equipment and the same will remain property of SML HO but SML shall have full right to retain possession for further sub-leasing/ hiring to its customers(Para 4) During the period when the Cranes, Crane components, etc. are in Tamilnadu, the applicant will keep all cranes, components, etc. in good repair, condition and working order and shall procure all parts, mechanisms, devices and servicing required thereof from SML or from third party post obtaining the written consent from SML. For upkeepment and maintenance activity, the applicant will raise a taxable invoice and recover an amount on a cost plus mark-up as mutually agreed between SML and the applicant on a quarterly basis (Para 6) The applicant will locally procure diesel required for running the Cranes and Trailer to Customer Site bringing back (Para 7) SML will be responsible for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act Accordingly, SML HO and SML are distinct persons for the persons of CGST ACT. Further the applicant has entered into a Memorandum of understanding with SML for Crane Trailer Supplies to SML Depot at TN (Chennai) on 01.07. 2017 where SML HO agrees to provide cranes, cranes components, parts trailer on monthly rental basis to SML as and when an internal work order on SML HO is placed by SML. The period will commence from the date the underlying work-order with customer of SML Depot and post the completion of the lease / hire, the cranes and components will be moved to nearest SML depot in Chennai. The ownership rests with SML HO. SML will raise a taxable invoice and recover amounts towards cost plus mark-up for upkeepment and maintenance activity. SML will be charged at the rate as per rates agreed in a respective work order. It is seen from Para 10 of MOU further states that lease/hire charges payable by SML to SML HO is netted off receivable and payable in books of accounts and is considered as deemed payment. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed: Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon. 6.3 The applicant has furnished a set of documents giving a sample transaction along with the application. On perusal, it is seen that the customer has placed a service order for Crane hiring, based on which the applicant has placed a work order on SML and Tax invoice is raised by SML on the applicant and thereupon by the applicant on the customer. The applicant states that in each transaction a tax invoice is raised and the goods are received by SML who further leases them out to its (SML s) customers. The applicant has also submitted sample copies of GST returns filed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration in specified in the invoices raised by SML HO on the applicant. Hence, proviso to Rule 37 i.e. exemption from making full payment, will not be applicable to the applicant. Accordingly, the applicant will not be eligible for the full ITC as per the inward supplies received from SML HO as they would be required to reverse such ITC if taken as per second proviso Section 16(2) of CGST Act and Rule 37 of CGST Rules. In the instant case, the transaction is an inter-state supply as the supplier is in a different state from the place of supply, the applicant would be paying IGST on their inward supplies from SML HO. As per Section 20 (iv) of IGST Act, provisions of Central Goods and Services Tax Act relating to input tax credit shall, mutatis mutandis, apply, so far as may be, in relation to integrated tax as they apply in relation to central tax as if they are enacted under this Act. Accordingly, the applicant is not eligible for the full ITC on the inward supplies received from SML HO, but only to the extent specified in the restrictions as per second proviso Section 16(2) of CGST Act and Rule 37 of CGST Rules read with Section 20(iv) of IGST Act. 7. In view of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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