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TMI Blog2021 (7) TMI 973X X X X Extracts X X X X X X X X Extracts X X X X ..... the following questions:- 1. Whether the pallets, crates and containers (hereinafter referred as "equipment") leased by CHEP India Private Limited (hereinafter referred to as "CIPL" or the "applicant") located and registered in Karnataka to its other GST registration located across India (say CIPL, Kerala) would be considered as lease transaction and accordingly taxable as supply of services in terms of Section 7 of the Central Goods and Services Tax Act, 2017 ("CGST Act") and Karnataka Goods and Services Tax Act, 2017 ("KGST Act")? 2. If the answer to Question 1 is yes, what is the value on which GST has to be charged i.e. whether it should be lease charges or the value of equipment in terms of Section 15 of the CGST Act and KGST Act read with relevant Rules? 3. What are the documents that should accompany the movement of goods from CUPL, Karnataka to CIPL, Kerala? 4. Whether movement of equipment from CIPL, Kerala to CIPL, Tamil Nadu on the instruction of CIPL, Karnataka 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its customers who would be using it for movement of their goods through the supply chain. CIPL, Kerala would be charging the lease charges to its customers based on the period for which the equipment would be used by the customers. 4.2.5 Also, there are chances that other units of CIPL, (say CIPL, Tamil Nadu) may require certain equipment from CIPL, Karnataka which are available with CIPL, Kerala (under lease from CIPL, Karnataka). In such a case, basis instructions from CIPL, Karnataka, CIPL, Kerala would transfer the equipment to CIPL, Tamil Nadu. In such a case, the moment equipment reaches CIPL, Tamil Nadu, CIPL, Karnataka would stop charging CIPL, Kerala and start charging CIPL, Tamil Nadu towards lease charges (basis number of days of usage). Further, CIPL, Kerala would charge CIPL, Karnataka a consideration for facilitation / arrangement of movement of equipment to CIPL, Tamil Nadu basis the instruction. 5. Regarding the applicant'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 consumpt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to his customer who not being a related person; Provided further that where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of the goods or services. 5.7 As per Rule 55 of the CGST Rules, which deals with transportation of goods without issue of invoice. - (1) For the purposes of- (a) supply of liquid gas where the quantity at the time of removal from the place of business of the supplier is not known. (b) transportation of goods for job work. (c) transportation of goods for reasons other than by way of supply, or such other supplies as may be notified by the Board, the consignor may issue a delivery challan............. As per Rule 138 of the CGST Rules, which deals with e-waybill generation - "Every registered person who causes movement of goods of consignment value exceeding fifty thousand 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." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two registrations of the same company are considered as distinct persons under GST. Accordingly, there can be supply of goods or services between such registration even in case no consideration is involved as per the entry in Schedule I of the CGST Act. 6.6. Basis the joint reading of Section 25 of the CGST Act and Schedule I, the transactions entered with the third party customers and the transactions entered with GST registrations in other States are kept at par when it comes to determination of taxability under the GST. Also, entry in Schedule I or any other provisions in the CGST Act does not restrict the nature of the transaction which can be entered into between different registrations of the Company to be considered as taxable under GST. In other words, since the definition of supply contains lease within its ambit, there can be a lease transaction 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e only in case the person supplying capital goods as goods and not as service. In the current case since the equipment are provided by CIPL, Karnataka on temporary lease (similar to transaction of lease entered into between CIPL, Karnataka and third party customers) and not sold or disposed permanently, the provisions of Section 18(6) of the CGST Act would not be applicable, as per the applicant. 8. The Applicant, with regard to the question 3, states as under: 8.1 As per Rule 55 of the CGST Rules, when goods are transported without invoice and for reasons other than supply of such goods, a delivery challan is required to be issued for purpose of transportation of such goods. 8.2 In the present case, the movement of equipment is not in pursuance of supply of equipment but is a supply of service under the CGST Act. Accordingly, 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person. There must be a mutual transfer of ownership of one thing for the ownership of another." (v) A 'license' is defined under Section 52 of the Indian Easements Act, 1882 to mean: "Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a license." (vi) "Renting": As per Oxford English Reference Dictionary 'rent' means a tenant's periodical payment to an owner or landlord for use of land or premises. (vii) The term lease' is defined in Section 105 of the Transfer of Property 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." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CGST Rules. 10.2 Further, the movement of equipment between CIPL. Kerala to CIPL, Tamil Nadu per se is not taxable under GST. Accordingly, it can be said that movement of equipment are for reasons other than by way of supply. In such a case, no invoice is required to be generated under GST and the movement would be made under the cover of delivery challan in terms of Rule 55 of the CGST Rules. 10.3 The applicant also states that Rule 138 of the CGST Rules, requires the consignor to issue e-way bill in case the value of goods exceeds Rs. 50,000/-. Accordingly, CIPL, Kerala would also be issuing e-way bill along with delivery challan in terms of the said Rules. PERSONAL HEARING: / PROCEEDINGS 11. Sri. Sachin Agarwal, Chartered Accountant 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upply of goods or services as per Schedule II. 15.4 The applicant is a Company incorporated within India as per the Companies Act and is covered under the definition of "person" as per clause (84) of Section 2 of the CGST Act, 2017. The branch of CIPL, in other States is also under the same entity and has no separate existence under the Companies Act. The assets and liabilities of the Company is held in common and hence the assets of one branch do not have separate existence as per the Companies Act or under the Income Tax Act, 1961. They are part of the same entity. There cannot be a transfer of an asset between two persons under these Acts. Therefore, it is clear that the branch of the same company 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, Karnat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he account of CIPL, Kerala as leased assets, for which CIPL, Kerala is liable to pay consideration for the lease transactions. 15.7 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 per entry no. 1(b) of the Schedule II to the CGST Act which states that "any transfer of right in goods or of undivided share in goods without transfer of title thereof, is a supply of services." Hence only for the purposes of the CGST Act, 2017, the transfer of such goods on lease as per the agreement entered to between CIPL, Karnataka 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of supply of goods or services or both as per the second proviso to Rule 28 and hence would be treated as the value of such supply. 17. The third question is "what documents should accompany the movement of goods from CIPL, Karnataka to CIPL, Kerala". In this regard we invite reference to Section 31 of the CGST Act, 2017. 17.1 The impugned transaction is a supply of services and hence the applicant has to raise a tax invoice for the transaction as per Section 31(2) of the CGST Act, 2017, which reads as under:- "(2) A registered person supplying taxable services shall, before or after the provision of service but within a prescribed period, issue 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 sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsignment value exceeding fifty thousand rupees- (i) In relation to a 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, 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: Provided that the transporter, on an authorization received from the registered 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 ces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIPL, Karnataka. Once the lease contract is over and the goods are no more under the control of CIPL, Kerala. 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. 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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