2019 (10) TMI 789 - AAR - GST

Classification of Applicant's Services as 'Passenger Transport Services' under Heading 9964

The Authority ruled that the services provided by the applicant to M/s. Volvo Group India Pvt. Ltd. are classified as 'Passenger Transport Services' under ... Passenger Transport Services - Rental services of transport vehicles - Motorcab definition - Entry 8(vii) residual entry - SAC 9964 - SAC 9966Passenger Transport Services - SAC 9964 - SAC 9966 - Motorcab definition - Entry 8(vii) residual entry - Classification of the applicant's composite operation and maintenance of employee commutation vehicles and transportation services as either passenger transport service under SAC 9964 (entry 8(vii)) or rental service of transport vehicles under SAC 9966. - HELD THAT: - The Authority examined whether the service fits within entry 8(ii)/(vi) or the explanatory notes to SAC 9964 and SAC 9966. The Motor Vehicles Act definition of 'motorcab' (carrying not more than six passengers excluding driver) excludes buses used by the applicant; hence entries referring to motorcabs and contract/stage carriage do not apply. The explanatory notes to SAC 9964 (notably classifications covering local land transport by bus and passenger transportation over predetermined routes for a specific segment such as enterprises) correspond to the applicant's operation of buses on set routes and schedules for a single corporate client. Conversely, SAC 9966 (rental services) contemplates a renter who defines operation, schedules and routes; in the present case the client, not the applicant, determines schedules and routes. Applying these determinative features, the Authority concluded the applicant's service is not a rental of transport vehicles but is covered by the residual entry under entry 8(vii) to Notification No. 11/2017 and falls within passenger transport services under SAC 9964. [Paras 8, 9]The services are passenger transport services under Heading 9964, covered by entry 8(vii) of Notification No. 11/2017, and not rental services under SAC 9966.Final Conclusion: The Authority ruled that the applicant's services to the corporate client constitute passenger transport services under SAC 9964 (entry 8(vii)) and are taxable at 9% under the CGST Act and 9% under the KGST Act. Issues: Classification of services for tax purposes under the CGST Act and KGST Act.Analysis:1. Background and Application: M/s. Sharma Transports applied for an Advance Ruling under Section 97 of the CGST Act and KGST Act. The applicant, a partnership firm, is engaged in passenger transportation and employee transportation services for corporate companies.2. Service Agreement Details: The applicant entered into an agreement with M/s. Volvo Group India Pvt. Ltd. for the operation and maintenance of employee commutation vehicles. The applicant owns the buses, maintains them, and provides transportation services to employees, receiving fixed and variable costs based on kilometers run.3. Advance Ruling Question: The applicant sought clarification on the classification of revenue earned from the operation and maintenance agreement. Specifically, whether it falls under passenger transport services or rental services of transport vehicles for tax purposes.4. Applicant's Interpretation: The applicant argued that their services align with Passenger Transport Services under SAC 9964, subject to 5% or 12% tax rates with or without input credit.5. Findings and Discussion: The Authority considered the submissions and relevant provisions of the CGST and KGST Acts. They analyzed the classifications under SAC 9964 for Passenger Transport Services and SAC 9966 for Rental Services of Transport Vehicles.6. Classification Examination: The Authority noted that the applicant's services did not fit under the specific entries of Passenger Transport Services. They further explained that the applicant's services did not qualify as transport by motorcabs under SAC 9964(vi).7. Explanatory Notes Analysis: Detailed examination of explanatory notes revealed that the applicant's services aligned with Local land transport services under SAC 996411, falling under the residual entry 8(vii) of Notification No. 11/2017-Central Tax (Rate).8. Final Ruling: The Authority ruled that the services provided by the applicant to M/s. Volvo Group India Pvt. Ltd. are classified as 'Passenger Transport Services' under Heading 9964. The services are covered under entry 8(vii) of the Notification and are taxable at 9% under both the CGST Act and KGST Act.This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Authority's ruling on the classification of services for tax purposes under the CGST and KGST Acts.