TMI Blog2021 (7) TMI 973X X X X Extracts X X X X X X X X Extracts X X X X ..... within the State and registrations are State-specific, the transactions of interstate nature are brought under the IGST Act and the Centre is liable to collect the tax and apportion the same to the Centre and States based on the destination of such goods or services as GST is a consumption based tax. Therefore all stock transfers from one State to another state are treated as supplies and would be covered under the term transfer . Since the registrations are state-specific, the transactions between the two entities of the same concern would be covered under deemed supplies between two deemed distinct persons. Since the applicant states all the goods are purchased in the account of CIPL, Karnataka, as per the provisions of the CGST Act, 2017, the goods are held to be in the account of CIPL, Karnataka as owned assets and in the account of CIPL, Kerala as leased assets, for which CIPL, Kerala is liable to pay consideration for the lease transactions - Further, since the two entities are deemed to be distinct persons, and the transfer of goods are effected from CIPL, Karnataka to CIPL, Kerala without any transfer of ownership of such goods, the same amounts to supply of service as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rala. If the goods are to be transferred immediately after the contract of lease is over, the CIPL, Karnataka should enter into the lease transaction with the CIPL, Tamil Nadu and raise a delivery note and e-way bill with ship from address as CIPL, Kerala and Ship to address as CIPL, Tamil Nadu for those specific goods which are given on lease or rent and in effect, it would amount to CIPL, Karnataka picking the goods and sending to CIPL, Tamil Nadu. It cannot be said that the goods are moving not as a result of supply under section 7 of the CGST Act, 2017. It cannot be termed as a mere movement without any involvement of supply and the said transaction of supply of goods on rental or lease basis by CIPL, Karnataka to CIPL, Tamil Nadu and is liable to tax in the hands of CIPL, Karnataka if the transaction is between CIPL, Karnataka and CIPL, Tamil Nadu. Further the services provided by CIPL, Kerala to CIPL, Karnataka in facilitating the transportation of goods to CIPL, Tamilnadu are exigible to GST - from the applicant's point of view, his lease contract with CIPL, Kerala is continuing and the goods leased should ultimately come back to the applicant from CIPL, Kerala an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a can be said to be mere movement of goods not amounting to a supply in terms of Section 7 of the CGST Act and KGST Act, and thereby not liable to GST? 5. With reference to Question 4 above, what are the documents that should accompany the movement of the goods from CIPL, Kerala to CIPL, Tamil Nadu? 3. Admissibility of the application: The applicant, filed the instant application, in relation to classification of any goods or services or both, application of a notification issued under the provisions of this Act and determination of value of supply of goods or services or both and hence and these questions are related to the issue covered under Section 97(2) of the CGST Act 2017 and hence the application is admitted. 4. Applicant's interpretation of law : The applicant submits their interpretation of law as under: 4.1 The applicant is an Indian Company and a wholly owned subsidiary of Brambles Limited, a company listed on the Australian Securities Exchange (ASX) and has its headquarters in Sydney, Australia. The Applicant is a part of this global organisation and its business is primarily renting of re-usable unit-load equipment for shared use by mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s interpretation of law and/or facts in respect of the questions posed for advance ruling, the applicant submits as under: 5.1 The GST is introduced from 01.07.2017 to replace the various indirect tax levies and is a destination and consumption based tax which is levied on the supply of goods or services or both. GST is levied and collected on value addition at each stage of production or distribution process (all points in supply chain). 5.2 The term Supply is defined under section 7 of the CGST Act to include - (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agree to be made or agreed to be made for a consideration by a person in the course or furtherance of business. ....................... (c) the activities specified in Schedule I, made or agreed to be made without a consideration. 5.3 As per Schedule I of the CGST Act, one of the activities to be considered as supply even if made without consideration, is Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d rupees - (i) in relation to supply; or (ii) for reasons other than supply; or (iii) due to inward supply from an unregistered person, shall, before commencement of such movement, furnish information relating to the said goods as specified in Part A of FORM GST EWB-01, electronically. APPLICANT'S VIEWS The Applicant have provided their views on the questions posed by them and the same are as under: 6. The applicant, with regard to the first question, states that the definition of supply is wide enough to include lease within its ambit. Also, as per point 5(f) of Schedule II, 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 is deemed as Service under GST. 6.1 The term lease is not defined under the GST law. Accordingly, the applicant draws reference to the Indian Accounting Standards (Ind AS) 116 which provides for principles for the recognition, measurement, presentation and disclosure of leases in the books of account. As per the Ind AS, lease is defined as A contract, or part of a contract, that conveys the right to use as asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion entered into between two different registrations of the same Company similar to the lease transaction entered with the third party customer. 6.7 Accordingly, the applicant states, in the current case, CIPL, Karnataka can enter into lease transaction with CIPL branches in other States, registered under the respective State GST legislation across India, such as CIPL, Kerala and such transaction would be taxable under GST as a lease transaction between the two branches which are deemed to be distinct entities for the purpose of GST legislation. 7. The applicant, with regard to the second question, states as under: 7.1 CIPL, Karnataka has entered into agreement with CIPL, Kerala to provide equipment on lease basis for which the consideration would be charged at an agreed rate (i.e lease charges or rental per day) depending on number of days of usage of equipment. Invoice in this regard would be raised by CIPL, Karnataka periodically on the other CIPL branches for the equipment taken on lease by them. 7.2 As per Rule 28 of CGST Rules read with Section 15 of the CGST Act mentioned in the legal background above, in case of transaction between distinct person, invoice valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, a delivery challan is required to be issued for the purpose of transportation of such goods. Also, since the lease charges would be billed basis the number of days of usage by service recipient, the equipment would be transferred to the service recipient at the inception under the delivery challan without discharging taxes and the tax would be paid based on service invoice issued periodically. 8.3 The Rule 138 of the CGST Rules, requires the consignor to issue e-way bill in case the value of goods exceeds ₹ 50,000/-. Accordingly, the applicant states that they would also be issuing e-way bill along with delivery challan in terms of the said Rules. 9. The Applicant, with regard to the question 4, states as under: 9.1 The levy of GST is on the supply and the scope of supply is discussed in Section 7 of the CGST Act. Accordingly, it is necessary to determine whether the movement of equipment between CIPL Offices would qualify as supply under section 7(1) of the CGST Act. Here, the applicant states that it is relevant to understand the meaning of the modes of transfer which have been enumerated in Section 7(1)(a) of the CGST Act:- (i) Sale is defined in section 54 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Act, 1882 as under: A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing or value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. (viii) The term disposal has been interpreted by the Hon hie Supreme Court in the case of Deputy Commissioner of Sales Tax v. Thomas Stephen (1988) 2 SCC 264 to mean transfer of title in goods to any other person and the expression to dispose means to transfer or alienate. 9.2 Basis on the above, the applicant states that all forms of supply enumerated under Section 7(1)(a) of the CGST Act involves either vesting or divesting of rights or creation of an interest or right in property or a thing. Accordingly, in order to constitute supply, the person transferring the goods would be required to transfer its specified interest/ right in property to the recipient of such goods. 9.3 The applicant states that in the present case, the equipment is owned by CIPL, K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant and duly authorised representative of the applicant appeared for personal hearing proceedings and reiterated the facts narrated in their application. DISCUSSION AND FINDINGS: 12. We have considered the submissions made by the Applicant in their application for advance ruling as well as the submissions made by Sri. Lokesh Babu, Chartered Accountant and duly authorised representative of the applicant during the personal hearing. We have also considered the issues involved, on which advance ruling is sought by the applicant, and relevant facts. 13. At the outset, we would like to state that the provisions of both the CGST Act and the KGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the KGST Act. 14. The applicant sought advance ruling in respect of the questions mentioned at para 2 supra. 15. It is pertinent to note that the applicant is a company involved in renting of movable property and is having registrations across many States. It is contemplated that all the assets are owned by the applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny cannot enter into a lease transaction or rental transaction with another branch of the same company as per the provisions of the Companies Act or Income tax Act, 1961, as they are not transactions between two persons and no revenue could be recognized in this transaction. The assets are held in common and there cannot be distinction between assets of CIPL, Karnataka and CIPL, Kerala as per the Companies Act. Hence CIPL, Kerala is also possessing the goods given to it from CIPL, Karnataka as owner of the goods itself and not as a lease hold asset, as far as all the business laws of the country are concerned. 15.5 However Section 9(1) of the CGST Act, 2017 mandates that the levy of tax on the intra-State transactions of supply and Section 22 and 24 requires all taxable persons who are located in a State to obtain registration in that State. Since GST is a tax within the State and registrations are State-specific, the transactions of interstate nature are brought under the IGST Act and the Centre is liable to collect the tax and apportion the same to the Centre and States based on the destination of such goods or services as GST is a consumption based tax. Therefore all stock tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnataka and CIPL, Kerala would amount to lease or renting of the goods for a consideration and hence would be a transaction of supply of services and the nature of such services is lease , as it is for a period of time. 16. The second question is related to the value of supply. In this regard we invite reference to Section 15 of the CGST Act 2017. 16.1 Section 15(1) which is related to the transaction value being considered as the value of supply reads as under:- (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. 16.2 From the above, it can be noted that the transaction value which is the price actually paid cannot be treated as the value of supply as the supplies are between the related persons, i.e. the branches of the same company. Hence we proceed to examine the following provisions of the Act.- 15(4) Where the value of supply of goods or services or both cannot be determined under sub-section (1), the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue a tax invoice, showing the description, value, tax charges thereon and such other particulars, as may be prescribed: Provided that the Government may, on the recommendations of the Council, by notification, - (a) specify the categories of services or supplies in respect of which a tax invoice shall be issued, within such time and in such manner as may be prescribed; (b) subject to the condition mentioned therein, specify the categories of services in respect of which - (i) any other document issued in relation to the supply shall be deemed to be a tax invoice; or (ii) tax invoice may not be issued. 17.2 Further, Rule 47 which is related to the time limit for issuing tax invoice reads as under:- The invoice referred to in rule 46, in the case of the taxable supplies, shall be issued within a period of thirty days from the date of the supply of service; 17.3 In the pertinent case, as the goods are moving out of the State as a consequence of a lease transaction which is a service, the applicant has the option of issuing the tax invoice either before the provision of service or after the provision of service and in case the applicant opts to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istered person, may furnish information in Part A of FORM GST EWB-01, electronically, on the common portal along with such other information as may be required on the common portal and a unique number will be generated on the said portal: ...................... Explanation 2: For the purposes of this rule, the consignment value of goods shall be the value, determined in accordance with the provisions of section 15, declared in an invoice, a bill of supply or a delivery challan, as the case may be, issued in respect of the said consignment and also includes the central tax, State or Union territory tax, integrated tax and cess charged, if any, in the document and shall exclude the value of exempt supply of goods where the invoice is issued in respect of both exempt and taxable supply of goods. 17.6 From the combined reading of the rule, it is seen that the applicant is not supplying goods, but services which involve the movement of such goods given on lease/ rent and hence they are liable to issue a delivery note as per Rule 55 at the time of removal of such goods for the purposes of renting. Further, they shall also generate an e-way bill for movement of such goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIPL, Tamil Nadu. 18.3 In such a case, the goods in movement is a consequence of the lease contract between the CIPL, Karnataka and CIPL, Tamil Nadu which is a supply by CIPL, Karnataka. The transaction is nothing but the combination of the transaction of returning back the goods on lease by CIPL, Kerala to CIPL, Karnataka and again sending the same goods on a new lease contract by CIPL, Karnataka to CIPL, Tamil Nadu. It cannot be said that the goods are moving not as a result of supply under section 7 of the CGST Act, 2017. It cannot be termed as a mere movement without any involvement of supply and the said transaction of supply of goods on rental or lease basis by CIPL, Karnataka to CIPL, Tamil Nadu and is liable to tax in the hands of CIPL, Karnataka if the transaction is between CIPL, Karnataka and CIPL, Tamil Nadu. Further the services provided by CIPL, Kerala to CIPL, Karnataka in facilitating the transportation of goods to CIPL, Tamilnadu are exigible to GST. 18.4 Alternately, CIPL, Kerala may sub-lease the goods to CIPL, Tamil Nadu and in such a case, the transaction is a supply of goods on lease by CIPL, Kerala and the movement is also occasioned by the lease contr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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