2021 (6) TMI 522 - AAR - GST

GST applicable to operating mini AC buses for BEST under Notification No. 12/2017-CT(R)

The service of operating mini AC buses for BEST is not exempt from GST under Notification No. 12/2017-CT(R). The service is subject to GST at 18% until ... Transfer of right to use - renting of motor vehicle - hiring of motor vehicle - effective possession and effective control - rental services of transport vehicles - Tariff Heading 9966 - effect of amendment w.e.f. 13.10.2017 on applicable rates - input tax credit and rate choice - residuary entry and preferring specific tariff entriesTransfer of right to use - renting of motor vehicle - effective possession and effective control - Tariff Heading 9966 - Whether the applicant's activity of operating mini AC buses for BEST is exempt as 'services by way of giving on hire to a state transport undertaking' under Notification No.12/2017-CT(R). - HELD THAT: - On the facts of the agreement the applicant owns the buses and provides drivers and maintenance, but BEST controls deployment, routes, schedules, fleet specifications and effectively directs operation; consideration for the service is charged to BEST (not passengers) on a per-kilometre basis. The Authority concludes that there is transfer of the right to use the buses to BEST by effective possession and control, and therefore the transaction constitutes renting of motor vehicles under the GST scheme rather than a passenger-transport service to the public. Because the recipient of the supply is BEST and the activity falls within renting of vehicles, Notification No.12/2017-CT(R) (exemption as hire to a State Transport Undertaking) is not attracted to the subject activity. [Paras 5]The service is not exempt under Notification No.12/2017-CT(R); answered in the negative.Renting of motor vehicle - Tariff Heading 9966 - effect of amendment w.e.f. 13.10.2017 on applicable rates - input tax credit and rate choice - Whether the service would attract GST at 12% under the amended Sr. No.10 of Notification No.11/2017-CT(R) (as amended w.e.f. 13.10.2017) - 'renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient'. - HELD THAT: - The agreement provides for payment on kilometer basis which includes fuel component in the service charges; the amended Sr. No.10 of Notification No.11/2017-CT(R) (w.e.f. 13.10.2017) classifies renting of passenger vehicles where fuel cost is included as chargeable at reduced rates depending on availment of input tax credit. Applying the amendment to the facts, the Authority finds the applicant's activity falls within the entry for renting where fuel is included; consequently, from 13.10.2017 the applicable rate is 12% (subject to the condition regarding input tax credit as set out in the notification). [Paras 5]From 13.10.2017 the service is taxable at 12% under the amended Sr. No.10 of Notification No.11/2017-CT(R), subject to the notification's conditions on input tax credit.Rental services of transport vehicles - Tariff Heading 9966 - effect of amendment w.e.f. 13.10.2017 on applicable rates - Whether the service would attract GST at 18% under the original Sr. No.10 of Notification No.11/2017-CT(R) prior to its amendment on 13.10.2017. - HELD THAT: - Prior to the amendment effective 13.10.2017, Sr. No.10 of Notification No.11/2017-CT(R) treated rental services of transport vehicles with or without operators as taxable at the higher rate (18% as applied by the Authority). The Authority therefore holds that for the period up to 13.10.2017 the applicant's rental services (being transport vehicle rentals with operators) attracted the pre-amendment rate. [Paras 5]The service attracted GST at the pre-amendment rate (18%) up to 13.10.2017.Final Conclusion: The Authority holds that the applicant's operation of mini AC buses for BEST constitutes renting of motor vehicles (transfer of right to use) and is not exempt under Notification No.12/2017-CT(R). The service attracted GST at the pre-amendment rate (18%) until 13.10.2017, and, pursuant to the amendment effective 13.10.2017, the service is chargeable at 12% (subject to the notification's input tax credit conditions) from that date. Issues Involved:1. Exemption from GST for operating mini AC buses under Tariff Heading 9966.2. Applicability of GST @12% for operating mini AC buses under Tariff Heading 9966.3. Applicability of GST @18% for operating mini AC buses under Tariff Heading 9966.Issue-wise Detailed Analysis:1. Exemption from GST for Operating Mini AC Buses Under Tariff Heading 9966:The applicant sought clarification on whether the service of operating mini AC buses for BEST would be exempt from GST under Tariff Heading 9966, as per Notification No. 12/2017-CT(R) dated 28.06.2017. The applicant argued that their service involves renting out buses to BEST, which should be exempt under the said notification. However, the authority found that the service provided by the applicant involves renting of buses where effective possession and control are transferred to BEST. The buses are operated under BEST's control, and the applicant is not free to use them for any other purpose. Therefore, the service does not qualify for exemption under the mentioned notification.2. Applicability of GST @12% for Operating Mini AC Buses Under Tariff Heading 9966:The applicant contended that their service should be subject to GST @12% under Tariff Heading 9966, as per Notification No. 31/2017 dated 13.10.2017, which amended Notification No. 11/2017-CT(R) dated 28.06.2017. The authority agreed with the applicant's interpretation, stating that the service involves renting of motor vehicles where the cost of fuel is included in the consideration charged from BEST. Therefore, the service is taxable at 12% GST from 13.10.2017 onwards, provided the applicant does not avail input tax credit on goods and services used in supplying the service, except for input service in the same line of business.3. Applicability of GST @18% for Operating Mini AC Buses Under Tariff Heading 9966:The applicant also sought clarification on whether their service would be subject to GST @18% under Tariff Heading 9966, as per Notification No. 11/2017-CT(R) dated 28.06.2017. The authority confirmed that the service provided by the applicant falls under the category of rental services of transport vehicles with or without operators. Therefore, the service was subject to GST @18% until the amendment on 13.10.2017. Post-amendment, the applicable GST rate is 12%, as discussed in the previous issue.Conclusion:The authority concluded that the service of operating mini AC buses for BEST is not exempt from GST under Notification No. 12/2017-CT(R). The service is subject to GST @18% until 13.10.2017 and @12% thereafter, provided the conditions regarding input tax credit are met. The detailed analysis and findings support the authority's decision, ensuring compliance with the relevant GST notifications and provisions.