Volvo distributor's warranty services supplied to customers not manufacturer despite Sweden reimbursement under Section 97(2)

The Karnataka AAAR upheld the AAR's decision regarding warranty services provided by a Volvo truck distributor. The appellant's 19-day filing delay was condoned due to statutory audit obligations. The authority confirmed that warranty repair services are supplied to customers, not to Volvo Sweden, despite Sweden reimbursing costs. The manufacturer's obligation to provide warranty coverage doesn't change the service recipient. However, the AAAR declined to rule on whether services constitute zero-rated exports, citing lack of jurisdiction over place of supply determinations under Section 97(2) of the GST Act.

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Issues Involved:
1. Whether the supplies made by the Appellant to M/s Volvo Sweden constitute a supply of services.
2. Whether the supplies by the Appellant amount to export of services to M/s Volvo Sweden and hence zero-rated under GST law.

Issue-Wise Detailed Analysis:

1. Supply of Services:
The Appellant, a joint venture between Volvo Group and Eicher Motors Limited, sells Volvo branded trucks and provides after-sales support, including warranty services. The Appellant sought an advance ruling on whether their activities related to warranty services for Volvo vehicles in India constitute a supply of services to M/s Volvo Sweden.

The Authority for Advance Ruling (AAR) initially held that the Appellant provides a composite supply of goods and services to customers, where the principal supply varies case by case. The AAR concluded that the transaction is either intra-State or inter-State but not an export transaction, and thus, not zero-rated under GST law.

The Appellant argued that the lower Authority misunderstood the definition of 'consideration' under Section 2(31) of the CGST Act. They contended that the reimbursement from M/s Volvo Sweden is not consideration for the transaction between the Appellant and the customer, but rather a separate transaction between the Appellant and M/s Volvo Sweden. The Appellant maintained that the warranty services are provided to Volvo Sweden, not the customers, and cited the case of Blue Star Ltd Vs Commissioner of Service Tax, Mumbai to support their position.

Upon review, the Appellate Authority agreed with the Appellant, stating that the recipient of the service is Volvo Sweden, as the reimbursement for warranty services is paid by Volvo Sweden. The Authority concluded that the supply by the Appellant to Volvo Sweden is a composite supply of goods and services, with the principal supply being a supply of service.

2. Export of Services:
The Appellant also sought a ruling on whether the supply of services to Volvo Sweden qualifies as an export of services, thus making it zero-rated under GST law. The definition of 'export of services' under Section 2(6) of the IGST Act requires that the place of supply of service be outside India.

The Appellate Authority noted that determining the place of supply is not within the jurisdiction of the Authority for Advance Ruling or the Appellate Authority, as per Section 97(2) of the CGST/KGST Act. Consequently, the Authority refrained from answering whether the supply of services to Volvo Sweden amounts to export of services due to lack of jurisdiction.

Conclusion:
The Appellate Authority set aside the Ruling No. KAR ADRG 32/2019 dated 12/09/2019 by the Advance Ruling Authority and concluded:
a) The activities performed by the Appellant regarding repair and servicing of Volvo vehicles for Indian customers during the warranty period constitute a composite supply of goods and services for Volvo Sweden, with the principal supply being a supply of service. The recipient of the supply of service is Volvo Sweden.
b) The Authority refrained from answering whether the supply of services to Volvo Sweden amounts to export of services due to lack of jurisdiction.

The appeal filed by M/s Volvo-Eicher Commercial Vehicles Ltd was disposed of accordingly.

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