2021 (4) TMI 509 - AAR - GST

Tax implications for various services in the transportation industry clarified by recent ruling

In Re: M/s Kou-Chan Technologies Pvt Ltd.,

The authority ruled that the various supplies by the applicant, vehicle owner, driver, and associate partner do not qualify as a composite supply. Pick-up ... Classification of supply - rate of GST - composite supply of services or not - vehicle owner, the driver and the associate partner together - pick-up charges paid to the Owner/ Driver - service charges collected from the passengers - Associate Partner renders services to the Passengers and to the Drivers/ Vehicle Owners directly - amount received from the Owners / Drivers towards bidding - Goodwill Bonus being paid by Passenger to the Driver for good service - charges for cancelling the trip - charges for insurance - Principal supplier/ Applicant collects GST, along with fare from Passengers and remits that amount. Whether the various supplies (of the applicant, the vehicle owner, the driver and the associate partner together) qualify as Composite supply? - HELD THAT:- The conditions for a supply to be considered as a Composite Supply are (i) the supplier (taxable person) should supply two or more taxable supplies to a recipient, (ii) the said supplies should be naturally bundled and (iii) the supplies should be supplied in conjunction with each other, in the ordinary course of business, one of which is a principal supply. In the instant case, we observe that the applicant is providing two taxable services, i.e. providing an online platform and insurance coverage to the passenger. It is an admitted fact that the insurance coverage to the passenger is optional and also online platform service is neither related to nor ancillary to insurance service. Thus these two supplies are not naturally bundled. Further the said supplies are not in conjunction with each other, in the ordinary course of business. Therefore, we conclude that the activities performed by the applicant do not amount to a composite supply. Whether the pick-up charges paid to the owner / driver fall under GST rate of 5%? - HELD THAT:- The driver need to pick up the passenger before starting of the radio taxi service and hence the pick-up service is incidental to the main service of transportation of passengers by the drivers. The applicant has been made liable for paying the tax in respect of the said service through the e-commerce platform, as if the applicant is the supplier of such service, in terms of Section 9 (5) of the CGST Act, 2017. Further, Notification No. 17/2017-Central Tax (Rate) dated 28.06.2017 stipulates that an electronic commerce operator is supposed to pay GST for services by way of transportation of passengers by a radio taxi - the pick-up charges and basic fare are part of the service of transportation of passengers by a radio taxi and hence the applicant is liable to pay GST @ 5%, on the pick-up charges also. Whether any supply of service exists between the applicant /aggregator and the Associate partner, & if yes, what is the rate at which GST has to be collected and remitted? - HELD THAT:- In the instant case the associate partner is providing services to the applicant. The impugned services of associate partner are covered by clause (ii) of Sr. No. 23 of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 and hence GST @ 18 % has to be paid by associate partners in case the associate partner is registered under GST. In the case where the associate partners are not registered under GST due to threshold limit, no GST is leviable on the amount remitted to the associate partner. Whether the amount received from drivers/owners towards bidding gets covered in the 5 % GST or should it be separately charged at 18%? - HELD THAT:- The amount received as a bidding charge is outside the fold of basic fare i.e. the relevant service is not related to the service provided by the owner/driver to the passenger/customer through the e-commerce operator. We therefore find that 5% GST rate is not applicable - the same is covered by clause (ii) of Sr. No. 23 of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017, at the rate of 18 %. Goodwill bonus being paid by passenger to the driver and on which the applicant collects the service charges - Whether the service charges so collected attract GST and if so at what rate? - HELD THAT:- Goodwill bonus is a voluntary payment made by passengers when they are happy with the service provided by the drivers. It is outside the fold of basic fare charged from the passengers for the trip. The applicant collects service charge on the goodwill amount. We find that the service charge collected for facilitating the payment of goodwill amount to drivers is consideration in terms of Section 2 (31) of CGST Act, 2017 and hence is liable for GST at 18% under heading 9985 vide clause (ii) of Sr. No. 23 of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017. Whether the charges for cancelling the trip for any reason attract GST liability? - HELD THAT:- The applicant has submitted that cancellation charges collected from the passengers may be shared with the owners or drivers. The activity of tolerating the cancellation by the applicant for a consideration is supply of service by virtue of clause (e) of para 5 of Schedule II of CGST Act, 2017 and attracts GST at 18 %. Whether the charges for insurance come under composite supply? - HELD THAT:- It is observed from the terms and conditions that passengers are covered under appropriate insurance against accidents, that the passenger has to opt and give his/her specific consent for the insurance coverage, at the time of booking the ride/trip - thus, its optional on the part of passenger to avail insurance on the trip and the same will not fall under composite supply. If the principal supplier / applicant collects GST, say at 5% along with fare from passengers (as mentioned in the Table submitted by the applicant), does it amount compliance of the GST Rules? - HELD THAT:- 5% GST is only applicable on basic fare. The applicant has to pay GST at 18% on other incomes. Issues Involved:1. Composite Supply Qualification2. GST Rate on Pick-up Charges3. Service Supply Between Applicant and Associate Partner4. GST Rate on Bidding Charges5. GST on Goodwill Bonus Service Charges6. GST on Trip Cancellation Charges7. Composite Supply on Insurance Charges8. Compliance with GST Rules on Collected GSTDetailed Analysis:1. Composite Supply Qualification:The applicant sought clarity on whether the various supplies by the applicant, vehicle owner, driver, and associate partner together qualify as 'Composite Supply'. According to Section 2(30) of the CGST Act, 2017, a composite supply involves two or more taxable supplies naturally bundled and supplied together in the ordinary course of business. The authority concluded that the applicant's services, including providing an online platform and optional insurance, are not naturally bundled and thus do not qualify as a composite supply.2. GST Rate on Pick-up Charges:The applicant questioned if the pick-up charges paid to the owner/driver fall under the GST rate of 5%. The authority noted that the pick-up service is incidental to the main service of passenger transportation by radio taxi. As per Section 9(5) of the CGST Act, 2017, the applicant, as an e-commerce operator, is liable to pay GST on such services. Therefore, the pick-up charges are subject to a GST rate of 5%.3. Service Supply Between Applicant and Associate Partner:The applicant inquired whether any supply of service exists between the applicant/aggregator and the associate partner and the applicable GST rate. The associate partner provides support services to the applicant, including onboarding and managing passengers and drivers. These services are not part of the transportation service and thus are not covered under Section 9(5) of the CGST Act, 2017. The authority ruled that the associate partner's services are subject to an 18% GST rate if the associate partner is registered under GST. If not registered, no GST is applicable.4. GST Rate on Bidding Charges:The applicant sought clarification on the GST rate for the amount received from drivers/owners towards bidding. The authority determined that bidding charges are not related to the transportation service provided by the driver to the passenger. These charges fall under 'other support services' and are subject to an 18% GST rate as per Notification No. 11/2017-Central Tax (Rate).5. GST on Goodwill Bonus Service Charges:The applicant queried if the service charges collected on the goodwill bonus paid by passengers to drivers attract GST. The authority found that the service charge collected for facilitating the payment of the goodwill bonus is considered a supply of service and is liable for GST at 18%.6. GST on Trip Cancellation Charges:The applicant asked whether cancellation charges attract GST liability. The authority ruled that the activity of tolerating trip cancellations for a consideration is a supply of service under clause (e) of para 5 of Schedule II of the CGST Act, 2017, and attracts an 18% GST rate.7. Composite Supply on Insurance Charges:The applicant questioned if the charges for insurance come under composite supply. The authority observed that insurance coverage is optional for passengers and not naturally bundled with the transportation service. Therefore, insurance charges do not constitute a composite supply.8. Compliance with GST Rules on Collected GST:The applicant sought confirmation on whether collecting GST at 5% on fare from passengers complies with GST rules. The authority clarified that while 5% GST is applicable on the basic fare, the applicant must pay 18% GST on other incomes as discussed in the preceding paragraphs.RULING:1. The various supplies do not qualify as a composite supply.2. Pick-up charges fall under a 5% GST rate.3. Services provided by the associate partner to the applicant attract an 18% GST rate if registered under GST.4. Bidding charges are subject to an 18% GST rate.5. Service charges on the goodwill bonus attract an 18% GST rate.6. Cancellation charges attract an 18% GST rate.7. Insurance charges do not constitute a composite supply.8. Collecting GST at 5% on fare does not fully comply with GST rules; 18% GST must be discharged on other incomes.