TMI Blog2020 (8) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... s responsible for the payment for the services provided (i.e., the service recipient). This essential difference has been lost sight of by the Appellant. In the present case there is no privity of contract between BMTC and the commuters. Such commuters may be the users of the services provided by BMTC but are not its recipients. The Education Guide provides that a person who arranges or facilitates a provision of a service, but provides the main service on his own account is excluded from the definition of intermediary . The Education Guide specifically recognizes and well explains that all situations of provision of services on a client s behalf, will not qualify as an intermediary . Where the service is provided on the own account of the service provider, the categorization as an intermediary does not arise. The relevant extract of the Education Guide issued by the C.B.E. C. in June 20, 2012 - The clarification fully recognizes an arrangement between a service provider and a service recipient, where customers of the service recipient are dealt with by the service provider, shall not qualify to be an intermediary . This principle well covers the present arrangement. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 15 of the CGST Act, the cost of the bus passes would form part of the value of the service provided by the Appellant? - HELD THAT:- It is amply clear that those instruments which satisfy the conditions of being accepted as consideration/part consideration against purchase of specified goods and the identities of the potential suppliers are indicated in the instruments are to be considered as Vouchers for the purposes of GST. Vouchers are neither money nor actionable claim. It is not a claim to a debt nor does it give a beneficial interest in any movable property to the bearer of the voucher. Similarly, in the instant case, the bus passes are purchased by the commuters on paying a value in money. The commuter produces the bus pass for purchasing the service of transportation. The bus pass only give the commuter the right to travel. If the commuter does not use the bus pass within the duration for which it is valid or loses the bus pass, it becomes invalid and cannot be used to procure the service of transportation. The bus pass is only a contract of carriage. A contract is not property, but only a promise supported by consideration. Thus, the bus pass is not an actionable clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alore Metropolitan Transport Corporation (hereinafter referred to as BMTC ) whereby BMTC allots 1 bus to the Appellant for every 50 passes purchased. The Appellant receives the following types of bus passes from BMTC for distribution: - Non AC regular BMTC bus pass; and - Combo bus pass which can be used for Non-AC and AC buses BMTC does not charge GST for the non-AC bus passes since the same is exempt from GST vide Entry No. 15 of Notification No. 12/2017-CT(R) dated June 28,2017. However, for Combo bus pass (i.e. which can be used for non-AC and AC buses), BMTC charges GST at 5% as per Entry No. 8(ii) of Notification No. 8/2017- IT (R) dated June 28, 2017. 5. The Appellant charges a separate fee of ₹ 300 per commuter as facilitation fee for arranging the transport facility for the said commuters. In this connection the Appellant sought an advance ruling in respect of the following question: a) Whether the value of bus passes distributed by the applicant to the commuters is to be included in the value of facilitation charges as per section 15(2) of the CGST Act, 2017 and KGST Act, 2017? b) Whether the supply of service in the hands of the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 18% as Support services in transport . They submitted that apart from the facilitation charges, they receive the actual amount incurred to obtain such bus passes for distribution and therefore the Appellant cannot be held to be the service recipient of transportation service since the said services are primarily rendered to the commuters who are the ultimate beneficiary of transportation service provided by BMTC. 7.3 They further submitted that they act as a pass-through by mediating the transportation service provided by BMTC to the occupants of ITP B; that they are an intermediary with respect to the supply of bus passes in as much as they arrange the service of transportation by providing the bus passes to the occupants and do not provide the transportation service on its own account; that the Appellant is incapable of providing transportation services owing to a lack of a government permit to do so; that they are providing a service which is merely in the nature of facilitation to enable the commuters to avail the transportation facility provided by BMTC; that as per the definitions of Contract carriage and Stage carriage as given in the Motor Vehicles Act, permits ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entity and Title: BMTC is responsible for providing the buses and carrying out the transportation service. The responsibility of the Applicant is towards facilitation of the same. The same can be substantiated by the agreement between BMTC and the Applicant. 7.6. They relied on the decision of the Maharashtra AAR in M/s. Jotun India Pvt Ltd reported in 2019 (10) TMI 482 which held on a similar arrangement between the applicant, its employees and an insurance company that the applicant is not rendering any service of health insurance to the employees parent and hence there is no supply of services in the instant case of transaction between employer and employee. They stated that the principles upheld in the above case will squarely apply to their case also and the recovery of bus pass amount cannot be treated as an activity in the course of business or for the furtherance of business 7.7. They submitted that the arrangement as per the Agreement between the Appellant and BMTC provides for arranging transportation service; that as per the agreement, the Appellant has merely agreed to facilitate the transportation service and assist the commuters to obtain the passes. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... July 2019. Step 5 BMTC raises invoice on the Appellant on or before 12t July 2019. Step 6 Appellant pays BMTC on or before 15 July 2019 for the bus passes of July 2019. 7.10 In view of the above the Appellant submitted the arrangement is merely facilitating or arranging transport facility and is delivering the bus passes to the commuters; that in the subject transaction, the Appellant has stepped into the shoes of facilitator who has helped bring about an outcome by providing unobtrusive assistance to both commuters and BMTC. They further submitted that they do not possess any transport service permits but merely facilitates transport services between BMTC and the commuters; that the bus passes are provided to the commuters at cost i.e. at the price at which these are received by the Appellant from BMTC; that in this arrangement, they receive and incur expenditure on behalf of the recipient and recover the exact amount from the commuters. Hence the Appellants have restricted themselves to be an agent or facilitator of service and the facilitation charges for making the bus pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided by the Central Government and State Governments. Explanation , -- For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy. They submitted that the value of bus pass is not covered under any clause of section 15(2) as stated above; that the supply of bus pass being a supply for BMTC, will not be covered under clause (b) of the said section; therefore the value of bus passes distributed by the Appellant to the commuters is not to be included in the value of facilitation charges in terms of section 15(2) ofthe CGST Act and KGST Act. PERSONAL HEARING: 8. The Appellants were called for a personal hearing on 10th January 2020 and were represented by Shri. Prashanth Bhat Shri Nitesh Kumar of M/s. Deloitte Touche Tohmatsu India LLP who reiterated the submissions made in the grounds of appeal. In addition, the authorized representatives raised the argument that the bus pass given by the Appellant to the commuters is an Actionable claim . In this regard, the Appellant sought time to make additional submissions on this point. Accordingly, vide letter dated 24 th January 2020, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal Tech Park at Bangalore. It also arranges for the transportation of its employees as well as the employees working with the various corporate clients in the Tech Park. For this purpose, the Appellant has entered into an agreement with BMTC for supply of buses to transport the-to its employees and the employees of the tenants of the International Tech Park. As per the agreement, BMTC will provide the required number of chartered buses at the rate of 1 bus for every 50 bus passes taken by the Appellant. There are two types of bus passes provided by BMTC to the Appellant viz. Non-AC bus pass and Combo bus pass which can be used for both AC bus as well as non-AC bus. The rate payable by the Appellant to BMTC depends on the type of bus provided by BMTC i.e AC or non-AC bus. The agreed upon rate payable by the Appellant to BMTC shall be deemed to include salaries, wages, bonus, overtime pay, any other renumeration and compensation tax and levies payable to the admin, depot and bus crews in accordance with the existing laws and regulations. BMTC only provides the buses along with the crew. The Appellant decides on the schedule for each bus route and the same is communicated to the BMT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement it was Verizon US that was the recipient of such service and it was Verizon US that paid for such service. It was also held by the High Court that in order to determine who the recipient of a service is, the agreement under which such service has been agreed to be provided has to be examined. When the Master Supply Agreement between Verizon India and Verizon US is examined, it is plain that the recipient of the service is Verizon US and it is Verizon US that is obliged to pay for the services provided by Verizon India. 12. Drawing a parallel to the instant case, we find that in order to determine who, the recipient of service is, the agreement under which such service has been agreed to be provided, has to be examined. When the Agreement between BMTC and the Appellant is examined, it is plain that the recipient of the service is the Appellant and it is the Appellant that is obliged to pay for the services provided by BMTC. The position does not change merely because the actual users of the transportation service are the commuters. The recipient of the service is determined by the contract between the parties and by reference to (a) who has the contractual right to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) who provides the main supply on his own account is not covered under the definition of the term intermediary . The importance of this condition has been explained in the Education Guide released under the erstwhile service tax era, which holds true even under the GST regime. The Education Guide provides that a person who arranges or facilitates a provision of a service, but provides the main service on his own account is excluded from the definition of intermediary . The Education Guide specifically recognizes and well explains that all situations of provision of services on a client s behalf, will not qualify as an intermediary . Where the service is provided on the own account of the service provider, the categorization as an intermediary does not arise. The relevant extract of the Education Guide issued by the C.B.E. C. in June 20, 2012 is reproduced: 5.9.6 What are Intermediary Services ? . . . Similarly, persons such as call centres, who provide services to their clients by dealing with the customers of the client on client s behalf but actually provided these services on their own account, will not be categorized as intermediaries. The clarificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the copy of the invoice dated 10.07.2019 raised to M/s. Applied Materials India Pvt Ltd, Bangalore for the issue of bus passes for the period from 01.07.2019 to 31.07.2019, which was furnished by the Appellant. It is also seen from clause 13 of the Agreement with BMTC that all commuters travelling in the buses engaged by the Appellant shall possess the identification cards and the monthly passes issued by the Appellant. This evidences that the bus passes procured by the Appellant from BMTC are issued by them to the commuters as part of the service provided by them on their own account. If they were merely facilitating the service or acting as an intermediary, as claimed by them, the bus passes would have been issued by BMTC to the commuters. In the light of the above discussions, we agree with the ruling given by the lower Authority and hold that the service provided by the Appellant in arranging the transportation of the employees is not rendered in the capacity of an intermediary and is not a facilitation service between BMTC and the commuters. The service of transporting the employees of the corporate clients of the International Tech Park is rendered by the Appellant on his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he movable property itself, and may be existent, accruing, conditional or contingent. The movable property in which such beneficial interest is claimed, must not be in the possession of the claimant. An actionable claim is therefore an intangible right. The Appellant has likened the bus passes to recharge vouchers and have relied on the West Bengal Tax Tribunal decision in the case of Bharti Airtel Ltd vs ACST [2010 (34) VST 202] = 2010 (4) TMI 983 - WEST BENGAL TAXATION TRIBUNAL wherein it is held that recharge vouchers are acknowledgment of receipt of money in advance for rendering telecom services in future and as the money has been received in advance, it constitutes a debt to the service provider. At the outset we state that the case of Bharti Airtel Ltd was rendered by the West Bengal Tax Tribunal in the context of Sale of Goods Act wherein the definition of goods under the said Act excluded actionable claims. Under GST law however, Goods have been defined to include actionable claims. Further, under GST, voucher is specifically defined in Section 2(118) to mean an instrument where there is an obligation to accept it as consideration or part consideration for a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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