2023 (5) TMI 71 - AAR - GST

Ambulance supply to government treated as motor vehicle attracting 28% IGST under HSN 8703

In Re: M/s. Raminfo Limited

The AAR, Telangana ruled that supply of ambulances (Mobile Common Service Centers) to Government of Tripura constitutes supply of motor vehicles under ... Classification of supply - Motor vehicles - supply of Ambulances (Mobile Common Service Centers) for providing health services - supply of goods or services or both - rate of GST - determination of liability to pay tax on goods or services or both - admissibility of input tax credit on purchase of vehicles and other components - HELD THAT:- The scope of ‘supply of Motor vehicles’ includes sale, transfer, barter, exchange, renting, disposal or leasing of such vehicles. The applicant is involved in supply of Motor vehicles in the form of Ambulances (Mobile Common Service Centers) to Government of Tripura. Therefore the applicant is in the business of further supply of Motor vehicles which he purchases - As per Section 17(5)(a) of CGST/TGST Act’ 2017 the ITC on purchase of such vehicles which are meant for further supply of such motor vehicles is not a blocked credit as the definition of ‘supply’ includes sale, transfer, barter, exchange, renting, disposal or leasing of such vehicles. The transaction of supply of ambulances to government of Tripura is an interstate supply which attracts tax under IGST head. The rate of tax applicable to the commodity under HSN 8703 is 28% for all transactions after 30.09.2021. It is very clear that this transaction does not fit to the description of vehicle under the tariff heading 8702 as the vehicle, supplied by applicant to government of Tripura, is a seven seater and is meant to transport less than ten or more persons, including the driver, as stated by the applicant. Further they are eligible for taking input tax credit on the tax charged on any supply of goods or services which are used or intended to be used in the course of furtherance of this business provided the applicant fulfils the conditions for availment of ITC as detailed in provisions of Section 16 of CGST/TGST Act’ 2017 - The applicant shall utilize the input tax credit in the electronic credit ledger as prescribed under Section 49 of the CGST Act, 2017 read with Rule 88A of the CGST Rules pertaining to order of utilization of input tax credit. ISSUES PRESENTED AND CONSIDERED 1. Whether the supply of modified seven-seater motor vehicles (converted into ambulances / Mobile Common Service Centres) to a Government department in another State constitutes an inter-State supply attracting IGST and the applicable rate of tax. 2. The determination of liability to pay tax (time and head of tax) for the supply of such goods or services. 3. Admissibility of input tax credit (ITC) on purchase of motor vehicles and components used for modification of vehicles intended for further supply; interaction with the blocked credit provision in Section 17(5)(a) of the GST Act. ISSUE-WISE DETAILED ANALYSIS Issue 1: Whether the transaction is an inter-State supply attracting IGST and the applicable rate of tax Legal framework: Scope of 'supply' under Section 7(1)(a) of the GST Act; levy and classification of goods under the GST tariff (HSN headings 8702 and 8703); IGST applicability for inter-State supplies. Precedent treatment: The Authority considered statutory definitions and tariff descriptions; no judicial precedent was invoked or distinguished in the reasoning. Interpretation and reasoning: The transaction involves purchase of Maruti Suzuki Eeco (7-seater) in State A, modification in the applicant's workshop, and delivery to a Government department in State B (Tripura). The supply is therefore inter-State and attracts IGST. The vehicle as modified is a motor vehicle principally designed for transport of persons and, based on the seating capacity (seven seats), does not fall within heading 8702 (ten or more persons). The appropriate tariff classification is within HSN 8703, for which the applicable GST rate (post-30.09.2021) is 28%. Ratio vs. Obiter: Ratio - the transaction qualifies as inter-State supply attracting IGST; the correct classification is HSN 8703 with 28% GST. Obiter - none material beyond statutory construction and tariff application. Conclusions: The supply of modified seven-seater vehicles (ambulances) to the Government department in another State is an inter-State supply liable to IGST; the applicable rate is 28% under HSN 8703. Issue 2: Determination of liability to pay tax (time and head of tax) for the supply Legal framework: Sections 12 and 13 of the GST Act govern time of supply for goods and services respectively; Section 15 determines transaction value; IGST is payable on inter-State supplies. Precedent treatment: No external case law considered; the Authority applied statutory provisions as framed in the GST Act. Interpretation and reasoning: Because the supplies are inter-State, liability to pay tax arises under the IGST head. The time of taxation for goods is governed by Section 12 and for services by Section 13. The value of supply is the transaction value (price actually paid or payable) as per Section 15; therefore liability arises at the time of supply determined under the relevant sections and calculated on the transaction value stated in the ruling application. Ratio vs. Obiter: Ratio - liability to pay tax is under IGST for inter-State supplies and arises at the time specified by Sections 12/13, with value determined under Section 15. Obiter - procedural references to the application-specific form did not form binding ratio. Conclusions: Liability arises under IGST for the inter-State supply; time of supply follows Sections 12/13; value is transaction value under Section 15 (price actually paid or payable to the purchaser as stated in the application). Issue 3: Admissibility of input tax credit on purchase of vehicles and components; application of Section 17(5)(a) Legal framework: Section 16 (conditions for availment of ITC); Section 17(5)(a) (blocked credits for motor vehicles seating not more than thirteen persons except when used for specified supplies); Section 7(1)(a) definition of 'supply'; order and manner of utilisation of ITC under Section 49 and Rule 88A of the CGST Rules. Precedent treatment: The Authority relied on statutory text and interplay between Sections 7, 16 and 17(5)(a); no judicial precedents were cited or distinguished. Interpretation and reasoning: Section 17(5)(a) blocks ITC for motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons, except where such vehicles are used for (A) further supply of such motor vehicles, (B) transportation of passengers, or (C) imparting driving training. The statutory definition of 'supply' in Section 7(1)(a) includes sale and other forms of disposition. Where the applicant purchases motor vehicles and modifies them for the purpose of further supply (sale) to the Government of Tripura, that activity falls within the exception in Section 17(5)(a)(A). Consequently, ITC on such motor vehicles is not a blocked credit provided other conditions in Section 16 for availment are satisfied. The Authority also clarified that utilisation of ITC shall follow the prescribed order (Section 49 and Rule 88A), including priority rules between IGST, CGST and SGST credits. Ratio vs. Obiter: Ratio - ITC on purchase of motor vehicles intended for further supply (after modification) is admissible and not blocked by Section 17(5)(a), subject to compliance with Section 16 conditions; the order of utilisation follows Section 49 and Rule 88A. Obiter - explanatory references to rule extracts are clarificatory, not novel propositions. Conclusions: Input tax credit on purchase of the seven-seater vehicles and related components used to convert them into ambulances for onward supply is admissible, provided the applicant fulfills the conditions for availment under Section 16. Such ITC is not blocked by Section 17(5)(a) because the vehicles are acquired for further supply of motor vehicles; utilisation of ITC must follow Section 49 and Rule 88A.