2019 (10) TMI 789 - AAR - GST

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

In Re: M/s. Sharma Transports,

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 ... Classification of services - revenue earned through the “operation and maintenance of employee commutation vehicles and transportation services agreement” - whether the said service falls under Passenger Transport service with SAC 9964(vi) or under Renting of Transport Vehicle to carry passengers with SAC 9966(i)? HELD THAT:- SAC 9966 covers “Rental services of transport vehicles with or without operators” and specifically the SAC 996611 covers “Rental services of road vehicles including buses, coaches, cars, trucks and other motor vehicles, with or without operator.” The said services include “rental of buses or coaches, trucks and other motorized freight vehicles, with/without operators for a period of time, not generally dependent on distance. The renter defines how and when the vehicles will be operated, determining schedules, routes, and other operational considerations.” In the instant case the applicant (renter) does not define how and when the vehicles will be operated and also does not determine the schedules, routes and other operational consideration. The client of the applicant decides the same and accordingly the applicant operates the buses. Therefore the services being provided by the applicant are not covered under the SAC 9966. 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.