2020 (9) TMI 1104 - AAAR - GST

Appellant's Services Not Classified as GTA; GST Charge Dismissed

The Appellate Authority upheld the ruling that the services provided by the Appellant were not classified as Goods Transport Agency (GTA) services but ... Classification as Goods Transport Agency (GTA) - consignment note as essential condition for GTA - hiring/rental of transport vehicles versus GTA services - entitlement to opt for forward charge under Notification No.20/2017 - proper person to seek advance ruling - jurisdiction of Advance Ruling Authority under section 97(2)Classification as Goods Transport Agency (GTA) - consignment note as essential condition for GTA - hiring/rental of transport vehicles versus GTA services - Appellant's services in the proposed arrangement are not GTA services but rental/hire of transport vehicles. - HELD THAT: - The explanation to Heading 9967 requires issuance of a consignment note by a person providing services in relation to transport of goods by road, and a consignment note denotes receipt of goods from consignor/consignee and privity of contract with the goods owner. In the proposed arrangement the Appellant receives goods from M/s. Posco ISDC Pvt. Ltd., which itself receives goods from consignor/consignee and issues the consignment note and the e-way bill; the Appellant supplies only the vehicle and issues a lorry receipt which does not satisfy the consignment note description. The arrangement and the draft agreement (including insurance and claims being with Posco) establish Posco as the actual transporter/GTA and the Appellant as a vehicle hirer, hence the services fall under rental of transport vehicles and not SAC 996791 GTA services. [Paras 8, 9, 10, 11]Appellant is not acting as a Goods Transport Agency in the proposed transactions; their services are correctly classified as hire/rental of transport vehicles.Entitlement to opt for forward charge under Notification No.20/2017 - classification as Goods Transport Agency (GTA) - Appellant is not entitled to charge GST at 12% on forward charge basis in the proposed arrangement. - HELD THAT: - The entitlement to adopt forward charge under Notification No.20/2017 depends on the supplier being a GTA as defined. Since the Appellant was held not to be the GTA in the proposed arrangement (being only a vehicle hirer), they cannot validly opt to charge 12% GST on a forward charge basis under that notification for these transactions. The ruling does not preclude the Appellant from opting for forward charge in other transactions where they directly contract with consignor/consignee and satisfy GTA requirements. [Paras 9, 12]Appellant cannot charge 12% GST on forward charge basis for the proposed transactions because they are not acting as a GTA in those transactions.Proper person to seek advance ruling - eligibility of recipient to claim input tax credit - Question on whether M/s. Posco ISDC Pvt. Ltd. can claim ITC of GST charged by the Appellant was not to be answered in the Appellant's application and MAAR correctly refrained from answering it. - HELD THAT: - The question concerning Posco's entitlement to claim input tax credit pertains to Posco and does not pertain to the Appellant. Under the advance ruling scheme the authority may decline to answer questions not raised by or not pertaining to the applicant. The Appellate Authority concurs with MAAR that the Appellant was not the proper person to seek a ruling on Posco's ITC eligibility; therefore that question was rightly left unanswered by MAAR. [Paras 13]MAAR correctly refrained from answering the question on Posco's ITC entitlement as it did not pertain to the Appellant.Jurisdiction of Advance Ruling Authority under section 97(2) - MAAR lacked jurisdiction to rule on whether it is procedurally correct to have two GTAs issuing two consignment notes for the same movement of goods, and correctly declined to rule. - HELD THAT: - The procedural question about permissibility of two GTAs issuing consignment notes in a single transportation falls outside the scope of matters covered under section 97(2) for which advance rulings may be sought. MAAR held, and the Appellate Authority concurs, that MAAR does not have jurisdiction to pass a ruling on that procedural issue and therefore properly declined to answer it. [Paras 14]MAAR correctly held it had no jurisdiction under section 97(2) to rule on the procedural question regarding two consignment notes.Final Conclusion: The Appellate Authority upholds the Maharashtra Authority for Advance Ruling's decision: the Appellant is not the GTA in the proposed subcontracting arrangement and their services are rental of transport vehicles; consequently they cannot charge 12% under forward charge for those transactions; MAAR rightly refrained from answering the ITC question as not pertaining to the applicant and correctly declined jurisdiction to rule on the procedural question of two consignment notes. The appeal is dismissed. Issues Involved:1. Classification of services rendered by the Appellant as GTA services.2. Entitlement of the Appellant to charge GST at 12% under the forward charge mechanism.3. Eligibility of M/s. Posco ISDC Pvt. Ltd. to claim ITC on the GST charged by the Appellant.4. Procedural correctness of having two GTA service providers and two consignment notes for the same movement of goods.Detailed Analysis:Issue 1: Classification of Services Rendered by the Appellant as GTA ServicesThe Appellant, registered as a Goods Transport Agency (GTA), sought to classify their services under SAC 996791. The Maharashtra Advance Ruling Authority (MAAR) ruled that the services rendered by the Appellant to M/s. Posco ISDC Pvt. Ltd. as a sub-contractor would not be classified as GTA services. The ruling emphasized that the Appellant did not have a transportation contract with the actual consignor/consignee and did not issue consignment notes directly to them. Instead, M/s. Posco ISDC Pvt. Ltd., which had the transportation contract and issued consignment notes, was classified as the actual GTA. The Appellant's role was limited to providing transport vehicles, classifiable under 'hiring out of transport vehicles.'Issue 2: Entitlement to Charge GST at 12% Under Forward Charge MechanismMAAR held that since the Appellant could not act as a GTA in the proposed transaction, they were not entitled to charge 12% GST on a forward charge basis as per Notification No. 20/2017-C.T. (Rate), dated 22.08.2017. The Appellant's services were classified as non-GTA transportation services, thus disqualifying them from charging GST at 12%.Issue 3: Eligibility of M/s. Posco ISDC Pvt. Ltd. to Claim ITCMAAR refrained from answering this question, stating that it did not pertain to the Appellant and should be addressed by M/s. Posco ISDC Pvt. Ltd. This decision was based on the provisions of Section 97(2) of the CGST Act, 2017, which limits the scope of questions that can be addressed in an advance ruling.Issue 4: Procedural Correctness of Two GTA Service Providers and Two Consignment NotesMAAR declared that the question of whether it is procedurally correct to have two GTA service providers issuing two consignment notes for the same movement of goods was not covered under Section 97(2) of the CGST Act, 2017. Therefore, they did not have jurisdiction to pass a ruling on this matter.Appellant's Grounds of Appeal:The Appellant argued that the Advance Ruling Authority erred in its interpretation and classification of their services. They contended that the whole work being sub-contracted should not change the classification of the service. The Appellant also claimed that the ruling deprived them of the right to opt for forward charge and claim input tax credit (ITC). They further argued that the issuance of a lorry receipt should be treated as a consignment note and that having two consignment notes for the same transportation of goods is logical and permitted.Respondent's Submission:The Respondent concurred with the Appellant on the classification of services as GTA and the entitlement to opt for the forward charge mechanism. However, they did not comment on the procedural correctness of having two GTA service providers and two consignment notes.Personal Hearing:During the personal hearing, the Appellant reiterated their arguments and submitted case laws from the Rajasthan and Uttarakhand Advance Ruling Authorities to support their contention. The jurisdictional officer reiterated the submissions made before the Advance Ruling Authority.Discussions and Findings:The Appellate Authority examined the meaning of GTA under the CGST Act, 2017, and concluded that issuance of a consignment note is an essential condition for any person to act as a GTA. Since the Appellant did not issue consignment notes directly to the consignor/consignee and did not generate E-way bills, they could not be classified as a GTA. The Appellant's services were classified under 'rental services of transport vehicles.'Order:The Appellate Authority upheld the Advance Ruling Order No. GST-ARA-39/2019-20/B-24, dated 05.03.2020, passed by the Maharashtra Advance Ruling Authority. The appeal filed by the Appellant was dismissed.