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ISSUES PRESENTED AND CONSIDERED
1. Whether renting/leasing of aircraft without operator (dry lease) falls within Heading 9973 (Leasing or rental services without operator) of the service classification notified under GST.
2. If covered by Heading 9973, whether such dry leasing is classifiable specifically under Sl. No. 17(iii) (transfer of the right to use any goods) or, alternatively, under Sl. No. 17(viia) (leasing or renting of goods) of Notification No. 11/2017-CT(R) as amended.
3. The rate of GST applicable on leasing of helicopter/aircraft by the applicant (an SEZ unit) to a lessee in the DTA, assuming classification under the relevant Sl. No(s).
ISSUE-WISE DETAILED ANALYSIS - Issue 1: Classification under Heading 9973
Legal framework: The GST classification follows a modified United Nations Central Product Classification (UNCPC). Post amendment effective 01.10.2019, Heading 9973 is titled "Leasing or rental services without operator". Explanatory notes to Heading 9973 and to UNCPC indicate Division 73 covers "Leasing or rental services without operator", with subclass 7311 covering "Leasing or rental services concerning transport equipment without operator" and subclass 73116 specifically covering "Leasing or rental services concerning aircraft without operator."
Precedent treatment: The Appellate Authority for Advance Ruling in the Yulu Bikes matter construed Heading 9973 broadly post-amendment to include rental of movable transport goods without operator, relying on the word "includes" in explanatory notes; this view is cited and applied.
Interpretation and reasoning: Applying the UNCPC-derived explanatory notes, aircraft dry-lease (where the lessor supplies only the aircraft and the lessee supplies crew, maintenance and operations) falls squarely within "leasing or rental services concerning aircraft without operator." The historical amendment narrowed Heading 9966 to services with operator and placed leasing without operator under 9973; thus transport equipment leased without operator was intended to be covered by Heading 9973. Absence of an express mention of aircraft in domestic explanatory notes is resolved by reference to UNCPC subclass 73116 adopted into GST classification.
Ratio vs. Obiter: Ratio - The authoritative alignment of Heading 9973 with UNCPC subclass 73116 and the conclusion that dry leasing of aircraft is within Heading 9973.
Conclusion: Dry lease of aircraft without operator is classifiable under Heading 9973 (Leasing or rental services without operator).
ISSUE-WISE DETAILED ANALYSIS - Issue 2: Classification under Sl. No. 17(iii) vs. 17(viia)
Legal framework: Notification No. 11/2017-CT(R) (Sl. No. 17 under Heading 9973) contains multiple sub-entries including (iii) "Transfer of the right to use any goods for any purpose ..." taxed at the same rate as supply of like goods involving transfer of title, and (viia) "Leasing or renting of goods" similarly taxed at the same rate as supply of like goods involving transfer of title. The Supreme Court's criteria in BSNL v. UOI for characterising a transaction as transfer of right to use goods are authoritative.
Precedent treatment: The BSNL test (five attributes) is applied to determine whether a lease amounts to transfer of right to use goods. Appellate ruling in Yulu reinforced that renting movable goods without operator can be classified within Heading 9973; however, the present analysis requires application of BSNL attributes to decide whether Sl. No. (iii) (transfer of right to use) is satisfied.
Interpretation and reasoning: Two conditions are identified for applicability of Sl. No. (iii): (a) transfer of the right to use the helicopter to the lessee (meeting BSNL attributes); and (b) helicopter must be "goods" under Section 2(52) CGST Act. The impugned dry-lease agreement was examined and found to satisfy BSNL attributes: delivery of the specific helicopter with log books and manuals (goods available for delivery and consensus ad idem); lessee granted legal right to operate with requisite licences and the lessee assuming operational responsibilities and costs (exclusive legal right and exclusion of lessor's control during lease); lack of any provision permitting lessor to transfer the right again during the lease. Aircraft are movable property and thus fall within the statutory definition of "goods." Hence both conditons are met, supporting classification under Sl. No. 17(iii).
Ratio vs. Obiter: Ratio - Application of BSNL criteria to the dry-lease facts leads to classification under Sl. No. 17(iii). Obiter - Discussion that Sl. No. 17(viia) would be available as an alternative if (iii) did not apply (not decided on the facts because (iii) applies).
Conclusion: The specific dry-lease agreement transfers the right to use the helicopter within the meaning of Sl. No. 17(iii); therefore that entry applies. Sl. No. 17(viia) was not decided because (iii) governs.
ISSUE-WISE DETAILED ANALYSIS - Issue 3: Applicable GST rate
Legal framework: Sl. No. 17(iii) prescribes taxation at "same rate of central tax as on supply of like goods involving transfer of title in goods." Domestic tariff schedules list the rate for "Other aircraft (for example, helicopters, aeroplanes), other than those for personal use" at the specified rate applicable to such goods; Notification No. 1/2017-CT(R) provides the relevant goods tariff and rate guidance. For supplies by an SEZ unit to a DTA lessee, IGST treatment applies for cross-territory supplies as per statutory scheme.
Precedent treatment: The AAR applies the schedule entries for goods and the Sl. No. 17(iii) cross-reference mechanism to determine the service rate by analogy to the goods rate.
Interpretation and reasoning: Since the service falls under Sl. No. 17(iii), the service tax rate equals the rate applicable to the helicopter as a good when supplied by way of transfer of title. The helicopter falls within the tariff item for "Other aircraft ... other than those for personal use." The agreement and lessee's status (a non-scheduled air transport operator) establish commercial, not personal, use. The declared applicable rate on such helicopters/goods is reflected in the notified Schedule and, applying the cross-reference, the GST rate on the leasing service is the same. As the applicant is an SEZ unit supplying to a DTA lessee, IGST at that applicable percentage is leviable.
Ratio vs. Obiter: Ratio - The service rate is the same as the rate on like goods (helicopter) and, on the facts, that rate applies at 5% IGST for this SEZ-to-DTA dry lease (helicopter not for personal use). Obiter - Alternative considerations or entry (viia) were not necessary to decide the rate here.
Conclusion: GST on the dry leasing of the helicopter under the examined agreement is leviable at the same rate as applicable to the helicopter as a good for non-personal use; on the facts presented, IGST at 5% is applicable (applicant being an SEZ unit supplying to DTA).
Cross-References and Practical Implications
1. Classification under Heading 9973 is anchored on the UNCPC-derived explanatory notes (subclass for aircraft 73116) adopted into GST nomenclature; domestic absence of an express aircraft reference is resolved by that adoption.
2. Where the elements set out in BSNL are satisfied by the lease agreement, Sl. No. 17(iii) will govern and prescribe the service rate by reference to the goods rate; Sl. No. 17(viia) remains an alternative classificatory head where (iii) is not satisfied but was unnecessary here.
3. For SEZ suppliers, the nature of the recipient and territorial character of the supply (SEZ to DTA) determines IGST applicability on the service so classified.
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