TMI Blog2024 (3) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... he fuel cost of the buses shall be borne by the KSRTC. The applicant will receive service/rental charges daily on a kilometre basis and also additional consideration proportionate to the revenue earned by display of advertisement in the buses and also transportation of cargo/luggage in the buses - Kerala State Road Transport Corporation Ltd is established by the Government of Kerala by Notification dated 15.03.1965 under the Road Transport Corporations Act, 1950 for the operation and management of public transport in the State of Kerala and accordingly is a state transport undertaking under Section 2 (42) of the Motor Vehicles Act, 1988 and consequently a state transport undertaking as defined in Para 2 (zzk) of Notification No. 12/2017 CT (Rate) dated 28.06.2017. The distinction between the activity of renting and hiring and consequently the eligibility of exemption from GST for transactions in the nature of renting of motor vehicles to state transport undertakings in as much as the exemption entry at SI No. 22 of the said notification employs the words services by way of giving on hire became a subject matter of dispute in the wake of ruling issued by an Authority for Advance Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ariff Heading 9966. i.e. 'Services by way of giving on hire to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers' in terms of Notification No. 12/2017-CT(R) dated 28.06.2017 or not? 3.3. If the answer to both the above question is negative, then what is the nature of services provided by the Applicant and what is the rate of tax applicable on such services? 4. Contentions of the Applicant: 4.1. The applicant submits that M/s Scania Commercial Vehicle India Private Limited 'scania' won the tender invited by KSRTC to lease 25 buses under the condition that the winning bidder has to identify and appoint an operator / who shall lease out the buses to KSRTC. Subsequently the applicant has been identified by scania and intimated KSRTC that the applicant is interested in leasing 10 number of Multi Axle Air Conditioned buses. 4.2. Subsequently KSRTC and the applicant entered into an agreement for hiring Scania buses under wet lease on 15.09.2017. The copy of the agreement is attached as Annexure -B. The Applicant submits that the relevant clauses of the agreement are as follows; 4.2.1. As per Clause 1 of the agreement, the applicant h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration received from KSRTC. The rate of tax applicable on the said supply would be 18% in as much as the applicant is also required to make available the drivers, provide for maintenance and upkeep or the buses and the consideration does not include the cost of fuel. In addition to this, the Agreement also provides for the services of 'Sale of space for advertisement' and 'transportation of Cargo/Luggage' for separate consideration from such willing customers. However, KSRTC is of the view that the services provided by the Applicant is exempt from payment of GST in terms of Notification No. 12/2017-CT(R) dated 28.06.2017 being services by way of giving on hire to a state transport undertaking a motor vehicle meant to carry more than twelve passengers. According to KSRTC, they are a state transport undertaking and the applicant has provided services by way of giving on hire motor vehicles. Further, KSRTC is also of the opinion that the applicant can claim the refund of the amount of GST collected and paid by the applicant. 4.5. The applicant states that KSRTC had approached both the Commissioners of Centre and State GST seeking clarification regarding whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant has purchased buses and supplied the buses to KSRTC for being run as a 'stage carriage' on the designated routes. The buses shall be operated and maintained by the applicant. Thus, evidently, there is a supply of service by the applicant to KSRTC. The supply is in the course or furtherance of the business of the applicant. The applicant is entitled for service charges which are calculated on kilometer basis. Thus, there is a consideration. Hence, the applicant's interpretation is that all ingredients of Section 7 of the CGST Act are satisfied in the instant case. 4.10. The contract with KSRTC is for providing buses on lease/ rent and further, operation and maintenance of buses on designated routes as provided by KSRTC. The buses are purchased by the applicant and they provide the drivers for transportation of passengers in these buses. The applicant is also responsible for incurring expenses on maintenance of the buses. In lieu of these services, KSRTC is providing them service charges on kilometer basis. The applicant cannot run the buses except for KSRTC. The overall control of the buses is with KSRTC. Though the ownership of the buses lies with the applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of Orissa 1991 83 STC 325 (Orissa); CCE V/s Sachin Malhotra 2014 (10) TMI 816 and a similar ruling by CESTAT was in the case of R.S Travels Vs CCE 2008 (12) STR 27 and Judgment of the Hon'ble High Court of Andhra Pradesh in Lakshmi Audio Visual Inc Vs Assistant Commissioner 2001 124 STC 426 Kar. The applicant also relies on a similar matter decided by the Hon'ble Maharashtra Authority for Advance Ruling dated 14.06.2021 in the application of M/s M.P. Enterprises and Associates Limited. Accordingly, the applicant submits that the agreement between the applicant and KSRTC is similar to an agreement for renting of shops, hotels etc to the customers. Thus, the subject transaction is in the nature of 'renting' and not 'hiring'. 4.14. The applicant submits that KSRTC is also engaged in providing sale of 'space for advertising' and 'luggage/cargo transportation services'. The revenue from such services is shared with the applicant in terms of Clauses 55 and 56 of the Agreement. Thus, KSRTC is in full possession and control of the buses. In other words, if the possession would have been with the Applicant, there was no requirement for the applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted. 7.3. As per the agreement, the applicant has to provide the required specification of the leased buses along with trained drivers for the operation of such buses. Further, the applicant is solely responsible for operation of the buses in compliance with the routes and timings provided by the KSRTC. The fuel cost of the buses shall be borne by the KSRTC. The applicant will receive service/rental charges daily on a kilometre basis and also additional consideration proportionate to the revenue earned by display of advertisement in the buses and also transportation of cargo/luggage in the buses. 7.4. Kerala State Road Transport Corporation Ltd is established by the Government of Kerala by Notification dated 15.03.1965 under the Road Transport Corporations Act, 1950 for the operation and management of public transport in the State of Kerala and accordingly is a state transport undertaking under Section 2 (42) of the Motor Vehicles Act, 1988 and consequently a state transport undertaking as defined in Para 2 (zzk) of Notification No. 12/2017 CT (Rate) dated 28.06.2017. 7.5. SI. No. 22 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 as amended reads as follows; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06.10.2021, which reads as follows; 8.4 The issue was placed before the 45th GST Council Meeting held on 17.09.2021. As recommended by the GST Council, it is clarified that the expression giving on hire in SI. No. 22 of the Notification No. 12/2017-CT (Rate) includes renting of vehicles. Accordingly, services where the said vehicles are rented or given on hire to State Transport Undertakings or Local Authorities are eligible for the said exemption irrespective of whether such vehicles are run on routes, timings as decided by the State Transport Undertakings or Local Authorities and under effective control of State Transport Undertakings or Local Authorities which determines the rules of operation or plying of vehicles. 7.10. In view of the above clarification that the expression giving on hire includes renting of vehicles the transaction of renting vehicles meant to carry more than twelve passengers to a State Transport Undertaking is eligible for the exemption at SI. No. 22 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. 7.11. Thus, we conclude that the services being provided by the applicant as per Agreement dated 15.09.2017 to KSRTC; a State Transport Unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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