TMI Blog2021 (2) TMI 994X X X X Extracts X X X X X X X X Extracts X X X X ..... he goods. The right to use the goods - in this case, the right to use the vehicles - can be said to have been transferred by the Appellant to the rider only if the possession of the said vehicles had been transferred to them - the Rider would have the right to use the vehicle only if he was in lawful possession of it. There has to be, in that case, an act demonstrating the intention to part with the possession of the vehicle. In this context, we have to analyze the terms of the agreement to ascertain whether effective control and possession has been transferred by the supplier Appellant to the recipient of the goods. The agreement provides the rider access to use the vehicles (e-bikes and bicycles). Once access is provided, the rider uses the vehicle. However, while using such vehicle, there is no transfer of any interest in the vehicle in favour of the rider. The vehicle continues to be in possession of the transferor. What is used by the rider is the service which is provided by the Appellant. The rider never gets the possession of the vehicle. Getting access to use the vehicle does not tantamount putting the rider in possession of the vehicle. Except having access to the faci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nting of vehicles like e-bikes (Miracle), bicycles (Move) in Bengaluru, Karnataka through a technology driven mobility platform. They enter into contract/agreement with the customers with regard to usage / renting of the e-bikes (Miracle), bicycles (Move) and charge based on the time of usage of such vehicles. The Appellant is charging GST at 18% on the renting of e-bikes Miracle and Move under HSN Code 9966. The Appellant was of the understanding that the services of renting of e-bikes to customers would be more correctly classifiable under HSN Code 9973 as Leasing or rental services without operator . 4. In this regard, the Appellant approached the Authority for Advance Ruling (AAR) seeking a ruling on the following question: Whether renting of e-bikes(Miracle), bicycles(Move) without operator can be classified under the SAC 9973 - Leasing or rental services without operator - Sl.No.17 (viia) of Notification No.11/2017-Central Tax (Rate) dated 28th June 2017 as amended? 5. The AAR vide its order KAR ADRG No 49/2020 dated 13 th October 2020 = 2020 (10) TMI 434 - AUTHORITY FOR ADVANCE RULING, KARNATAKA held as under: Renting of e-bikes/bicycles without ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s follows: In respect of SL.No 20 of Annexure IV, the Council recommended to amend and correct the classification entries under Notification No 11/2017 CT (R) dated June 26, 2017 with consequent changes in scheme of classification annexed to the said notification so as to align the scheme of classification under GST with the United Nation's Central Product Classification (UNCPC) as proposed and enclosed at 'Enclosure 2 Enclosure 3 ' of Annexure IV, Agenda 8. 6.3. The Appellant submitted that the impugned order has failed to pass any finding on the fact that the Appellant rents out its vehicles without an operator; that the impugned order has merely relied on the preface of the explanatory notes, without reading the actual notes to HSN 9966 and 9973 which further confirm the above clarificatory amendment; that post 1st October 2019, the explanatory notes to Heading 9973 states that this heading includes rental or operational leasing of machinery and equipment and personal and household goods, without operator; that the explanatory notes to HSN 9973 uses the word includes which is an expansive word; that it is a settled position of law that the word 'inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (R) dated 28-06-2017 as follows: For Miracle (e-bikes) Schedule I - 2.5% Sl.No. Chapter/Heading/Sub-Heading/Tariff Item Description of goods Amended Notification 242A 87 Electrically operated vehicles, including two and three wheeled electric vehicles. Explanation : For the purpose of this entry Electrically operated vehicles means vehicles which are run solely on electrical energy derived from an external source or from one or more electrical batteries fitted to such road vehicles and shall include E-bicycles. Notification 01/2017 CT (R) dated 28-06-2017 as amended by Notification No. 12/2019 CT (R) dated 31-07-2019. For Move (bicycles) Schedule II - 6% SI.No. Chapter/Heading/Sub-Heading/Tariff Item Description of goods Amended Notification 208 8712 Bicycles and other cycles (including delivery tricycles), not motorized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9; and Heading 9973 applies to renting / leasing of goods without operator ; that in their case since the e-vehicles being goods are rented without operator and hence, by applying the principle of Note 3 of the Explanatory Notes, the specific Heading 9973 will be applicable to them. 7.3. As regards the rate of tax, the Advocate submitted that renting the e-vehicles without operator to their customers would get covered specifically under Sl. No. 17(iii) of Notf No. 11/2017 CT (R) as amended which reads as under iii) Transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. He relied on the Supreme Court decision in BSNL case which laid down the attributes to consider a transaction as having the transfer of the right to use the goods, and submitted that in their case, all the attributes have been satisfied and hence they are specifically covered under Sl.No 17(iii) of the rate Notf 11/2017 as amended. He also relied on the Supreme Court decision in the case of Great Eastern Shipping which laid down the same principle as in the BSNL case. He also drew attention to the clauses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent notified the rate of GST for supply of services vide Notification No 11/2017 CT (R) dated 28-06-2017. The explanation at Para 4 (ii) of the said notification states that for the purpose of this notification reference to Chapter , Section or Heading , wherever they occur, unless the context otherwise requires, shall mean respectively as Chapter, Section and Heading in the annexed scheme of classification of services. The annexed scheme of classification of services is part of the rate notification. The Scheme of Classification of Services adopted for the purposes of GST is a modified version of the United Nations Central Product Classification (UNCPC). The entry SI.Nos. 119 to 124 of the said Annexure covers the group of services under Heading 9966 relating to Rental services of transport vehicles with or without operators . The entry Sl.Nos 232 to 259 covers the group of services under Heading 9973 relating to Leasing or rental services with or without operator . As can be seen, both the Headings i.e. 9966 and 9973 cover rental services with or without operators. The GST Council in their 37th meeting held on 20th Sept 2019 examined a proposal made by the Fitment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this heading. The e-bikes and bicycle rented out by the Appellant are essentially goods as they are movable property. Although Heading 9966 is specific to renting of transport vehicles, we cannot ignore the fact that the heading is specific only to renting of transport vehicles with an operator. Classifying the Appellant's activity under Heading 9966 especially when their vehicles are rented without an operator, would not be correct. The more specific heading would be renting of goods without operator. Therefore, we hold that the service of renting of e-bikes and bicycles by the Appellant without an operator is classifiable under Heading 9973.We disagree with the finding of the lower Authority that the amendment notification No 20/2019 CT (R) is only an amendment to the GST rate but not to the classification of goods. The lower Authority seems to have overlooked clause (iv) of the amendment notification which clearly amends the Scheme of classification of services annexed to the rate Notf 11/2017 CT (R). Therefore, while the renting service supplied by the Appellant would be classifiable under Heading 9966 upto 30th Sept 2019, the classification changes to Heading 9973 with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l apply on or after 1st July, 2020. - (viia) Leasing or renting of goods Same rate of central tax as applicable on supply of like goods involving transfer of title in goods. - (viii) Leasing or rental services, without operator, other than (i), (ii), (iii), (iv), (vi), and (viia) above.] 9 - 14. The entry SI.No 17(iii) applies when there is a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. Transfer of right to use goods is a well-recognized constitutional and legal concept. Every transfer of goods on lease, license or hiring basis does not result in transfer of right to use goods. The transfer of the right to use any goods is treated as a `deemed sale' under Article 366(29-A)(d) of the Constitution of India. The applicability of Article 366(29A)(d) was discussed at length by the Supreme Court in the case of Bharat Sanchar Nigam Limited and Another v. Union of India and Others [2006 (3) SCC (1) = 2006 (2) S.T.R. 161 (S.C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the right to use the vehicle only if he was in lawful possession of it. There has to be, in that case, an act demonstrating the intention to part with the possession of the vehicle. In this context, we have to analyze the terms of the agreement to ascertain whether effective control and possession has been transferred by the supplier Appellant to the recipient of the goods. 16. When we examine the terms of the User Agreement, we find that the agreement provides the rider access to use the vehicles (e-bikes and bicycles). Once access is provided, the rider uses the vehicle. However, while using such vehicle, there is no transfer of any interest in the vehicle in favour of the rider. The vehicle continues to be in possession of the transferor. What is used by the rider is the service which is provided by the Appellant. The rider never gets the possession of the vehicle. Getting access to use the vehicle does not tantamount putting the rider in possession of the vehicle. Except having access to the facility which the Appellant is providing by virtue of possessing such goods, no such right in the goods is transferred to the rider. Providing access does not amount to right to use goo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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