TaxTMI 
TaxTMI 
2021 (2) TMI 994
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....lu Bikes Pvt Ltd, Villa 119, Adarsh Palm Retreat, Devarabeesanahalli, Bellandur, Bangalore 560103 (herein after referred to as Appellant) against the Advance Ruling order No. KAR ADRG 49/2020 dated: 13th October 2020 = 2020 (10) TMI 434 - AUTHORITY FOR ADVANCE RULING, KARNATAKA. Brief Facts of the case: 3. The Appellant is engaged in renting of vehicles like e-bikes (Miracle), bicycles (Move) in Bengaluru, Karnataka through a technology driven mobility platform. They enter into contract/agreement with the customers with regard to usage / renting of the e-bikes (Miracle), bicycles (Move) and charge based on the time of usage of such vehicles. The Appellant is charging GST at 18% on the renting of e-bikes Miracle and Move under HSN Code 9966. The Appellant was of the understanding that the services of renting of e-bikes to customers would be more correctly classifiable under HSN Code 9973 as "Leasing or rental services without operator". 4. In this regard, the Appellant approached the Authority for Advance Ruling (AAR) seeking a ruling on the following question: "Whether renting of e-bikes(Miracle), bicycles(Move) without operator can be classified under the SAC 9973 - Leasing o....
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....inutes of the 37th GST Council meeting wherein in para 37(B)(xix) it was stated as follows: In respect of SL.No 20 of Annexure IV, the Council recommended to amend and correct the classification entries under Notification No 11/2017 CT (R) dated June 26, 2017 with consequent changes in scheme of classification annexed to the said notification so as to align the scheme of classification under GST with the United Nation's Central Product Classification (UNCPC) as proposed and enclosed at 'Enclosure 2 & Enclosure 3 ' of Annexure IV, Agenda 8. 6.3. The Appellant submitted that the impugned order has failed to pass any finding on the fact that the Appellant rents out its vehicles without an operator; that the impugned order has merely relied on the preface of the explanatory notes, without reading the actual notes to HSN 9966 and 9973 which further confirm the above clarificatory amendment; that post 1st October 2019, the explanatory notes to Heading 9973 states that this heading includes rental or operational leasing of machinery and equipment and personal and household goods, without operator; that the explanatory notes to HSN 9973 uses the word "includes" which is an e....
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....goods, the same has been notified vide Notification No 01/2017 CT (R) dated 28-06-2017 as follows: For Miracle (e-bikes) Schedule I - 2.5% Sl.No. Chapter/Heading/Sub-Heading/Tariff Item Description of goods Amended Notification 242A 87 Electrically operated vehicles, including two and three wheeled electric vehicles. Explanation: For the purpose of this entry "Electrically operated vehicles" means vehicles which are run solely on electrical energy derived from an external source or from one or more electrical batteries fitted to such road vehicles and shall include E-bicycles. Notification 01/2017 CT (R) dated 28-06-2017 as amended by Notification No. 12/2019 CT (R) dated 31-07-2019. For Move (bicycles) Schedule II - 6% SI.No. Chapter/Heading/Sub-Heading/Tariff Item Description of goods Amended Notification 208 8712 Bicycles and other cycles (including delivery tricycles), not motorized Notification 01/2017 CT (R) dated 28-06-2017. 6.6. In view of the above, the Appellant submitted that the rate of tax for renting of vehicles would be applied as the same rate applicable to the respective vehicles as mentioned above viz. 5% for electric vehicles (e-bikes ....
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....ate of tax, the Advocate submitted that renting the e-vehicles without operator to their customers would get covered specifically under Sl. No. 17(iii) of Notf No. 11/2017 CT (R) as amended which reads as under "iii) Transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration." He relied on the Supreme Court decision in BSNL case which laid down the attributes to consider a transaction as having the transfer of the right to use the goods, and submitted that in their case, all the attributes have been satisfied and hence they are specifically covered under Sl.No 17(iii) of the rate Notf 11/2017 as amended. He also relied on the Supreme Court decision in the case of Great Eastern Shipping which laid down the same principle as in the BSNL case. He also drew attention to the clauses of the Appellant's User Agreement to substantiate that there is a transfer in the right to use the e vehicles. 7.4. Alternatively, he submitted that even if entry Sl.No 17(iii) is not applicable to them, they will still get covered under Sl.No 17(viia) and not 17(viii) and will still be liable to pay tax at....
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....n respectively as "Chapter, "Section" and "Heading" in the annexed scheme of classification of services. The annexed scheme of classification of services is part of the rate notification. The Scheme of Classification of Services adopted for the purposes of GST is a modified version of the United Nations Central Product Classification (UNCPC). The entry SI.Nos. 119 to 124 of the said Annexure covers the group of services under Heading 9966 relating to "Rental services of transport vehicles with or without operators". The entry Sl.Nos 232 to 259 covers the group of services under Heading 9973 relating to "Leasing or rental services with or without operator". As can be seen, both the Headings i.e. 9966 and 9973 cover rental services with or without operators. The GST Council in their 37th meeting held on 20th Sept 2019 examined a proposal made by the Fitment Committee to issue a clarification regarding the scope of entries 9966 and 9973. It was brought to the notice of the Council that the description of services under the above two headings in the GST scheme of classification did not match with the description of services under UNCPC and accordingly, the Fitment Committee proposed ce....
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....nder Heading 9966 especially when their vehicles are rented without an operator, would not be correct. The more specific heading would be renting of goods without operator. Therefore, we hold that the service of renting of e-bikes and bicycles by the Appellant without an operator is classifiable under Heading 9973.We disagree with the finding of the lower Authority that the amendment notification No 20/2019 CT (R) is only an amendment to the GST rate but not to the classification of goods. The lower Authority seems to have overlooked clause (iv) of the amendment notification which clearly amends the Scheme of classification of services annexed to the rate Notf 11/2017 CT (R). Therefore, while the renting service supplied by the Appellant would be classifiable under Heading 9966 upto 30th Sept 2019, the classification changes to Heading 9973 with effect from 1st October 2019 consequent to the issue of Notification No 20/2019 CT (R). 13. As regard the rate of tax, we find that, the Appellant had initially claimed before the lower Authority that their services would be taxable under entry SI.No 17 (viia) of rate notification No 11/2017 CT (R). However, in their submissions before us ....
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....s treated as a `deemed sale' under Article 366(29-A)(d) of the Constitution of India. The applicability of Article 366(29A)(d) was discussed at length by the Supreme Court in the case of Bharat Sanchar Nigam Limited and Another v. Union of India and Others [2006 (3) SCC (1) = 2006 (2) S.T.R. 161 (S.C.)] ("BSNL") = 2006 (3) TMI 1 - SUPREME COURT. In BSNL, the Supreme Court held that the purpose of Article 366(29A)(d) was to levy tax on those transactions where there was a "transfer of the right to use any goods" to the purchaser, instead of passing the title or ownership of the goods. Thus, by a fiction of law, these transactions were now treated as 'sale'. Elucidating on the "transfer of the right to use any goods", the Hon'ble Supreme Court held as follows: "97. To constitute a transaction for the transfer of the right to use the goods, the transaction must have the following attributes : (a) there must be goods available for delivery; (b) there must be a consensus ad idem as to the identity of the goods; (c) the transferee should have a legal right to use the goods - consequently all legal consequences of such use including any permissions or licenses requ....