TaxTMI 
TaxTMI 
2021 (7) TMI 973
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.... sought advance ruling in respect of the following questions:- 1. Whether the pallets, crates and containers (hereinafter referred as "equipment") leased by CHEP India Private Limited (hereinafter referred to as "CIPL" or the "applicant") located and registered in Karnataka to its other GST registration located across India (say CIPL, Kerala) would be considered as lease transaction and accordingly taxable as supply of services in terms of Section 7 of the Central Goods and Services Tax Act, 2017 ("CGST Act") and Karnataka Goods and Services Tax Act, 2017 ("KGST Act")? 2. If the answer to Question 1 is yes, what is the value on which GST has to be charged i.e. whether it should be lease charges or the value of equipment in terms of Section 15 of the CGST Act and KGST Act read with relevant Rules? 3. What are the documents that should accompany the movement of goods from CUPL, Karnataka to CIPL, Kerala? 4. Whether movement of equipment from CIPL, Kerala to CIPL, Tamil Nadu on the instruction of CIPL, Karnataka can be said to be mere movement of goods not amounting to a supply in terms of Section 7 of the CGST Act and KGST Act, and thereby not liab....
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.... usage) to CIPL, Kerala. 4.2.4 CIPL, Kerala would thereafter be issuing the equipment to its customers who would be using it for movement of their goods through the supply chain. CIPL, Kerala would be charging the lease charges to its customers based on the period for which the equipment would be used by the customers. 4.2.5 Also, there are chances that other units of CIPL, (say CIPL, Tamil Nadu) may require certain equipment from CIPL, Karnataka which are available with CIPL, Kerala (under lease from CIPL, Karnataka). In such a case, basis instructions from CIPL, Karnataka, CIPL, Kerala would transfer the equipment to CIPL, Tamil Nadu. In such a case, the moment equipment reaches CIPL, Tamil Nadu, CIPL, Karnataka would stop charging CIPL, Kerala and start charging CIPL, Tamil Nadu towards lease charges (basis number of days of usage). Further, CIPL, Kerala would charge CIPL, Karnataka a consideration for facilitation / arrangement of movement of equipment to CIPL, Tamil Nadu basis the instruction. 5. Regarding the applicant's interpretation of law and/or facts in respect of the questions posed for advance ruling, the applicant submits as under: 5.1 The GST is intro....
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....he option of the supplier, be an amount equivalent to ninety percent of the price charged for the supply of goods of the like kind and quality by the recipient to his customer who not being a related person; Provided further that where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of the goods or services. 5.7 As per Rule 55 of the CGST Rules, which deals with transportation of goods without issue of invoice. - (1) For the purposes of- (a) supply of liquid gas where the quantity at the time of removal from the place of business of the supplier is not known. (b) transportation of goods for job work. (c) transportation of goods for reasons other than by way of supply, or such other supplies as may be notified by the Board, the consignor may issue a delivery challan............. As per Rule 138 of the CGST Rules, which deals with e-waybill generation - "Every registered person who causes movement of goods of consignment value exceeding fifty thousand rupees - (i) in relation to supply; or (ii) for reasons other than su....
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.... basis period of usage of equipment. 6.5 Regarding the issue whether lease transaction can be entered into between different registrations of the same company, the applicant states that Section 25 of the CGST Act has created a deeming provision basis which two registrations of the same company are considered as distinct persons under GST. Accordingly, there can be supply of goods or services between such registration even in case no consideration is involved as per the entry in Schedule I of the CGST Act. 6.6. Basis the joint reading of Section 25 of the CGST Act and Schedule I, the transactions entered with the third party customers and the transactions entered with GST registrations in other States are kept at par when it comes to determination of taxability under the GST. Also, entry in Schedule I or any other provisions in the CGST Act does not restrict the nature of the transaction which can be entered into between different registrations of the Company to be considered as taxable under GST. In other words, since the definition of supply contains lease within its ambit, there can be a lease transaction entered into between two different registrations of the same Company ....
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....on 15, whichever is higher." The intention behind the provision is that the person should be reversing the proportionate credit availed on capital goods in case such capital goods are disposed or sold or transferred after usage. However, the said provision would be applicable only in case the person supplying capital goods as goods and not as service. In the current case since the equipment are provided by CIPL, Karnataka on temporary lease (similar to transaction of lease entered into between CIPL, Karnataka and third party customers) and not sold or disposed permanently, the provisions of Section 18(6) of the CGST Act would not be applicable, as per the applicant. 8. The Applicant, with regard to the question 3, states as under: 8.1 As per Rule 55 of the CGST Rules, when goods are transported without invoice and for reasons other than supply of such goods, a delivery challan is required to be issued for purpose of transportation of such goods. 8.2 In the present case, the movement of equipment is not in pursuance of supply of equipment but is a supply of service under the CGST Act. Accordingly, a delivery challan is required to be issued for the purpose of transportation....
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....g money only, the transaction is called an "exchange". Further, the Hon Tile Supreme Court in the case of I.T. Commissioner Bombay v. Rasiklal Moneklal, AIR 1989 SC 1333 held as below: "An exchange involves the transfer of property by one person to another and reciprocally the transfer of property by that other person to the first person. There must be a mutual transfer of ownership of one thing for the ownership of another." (v) A 'license' is defined under Section 52 of the Indian Easements Act, 1882 to mean: "Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a license." (vi) "Renting": As per Oxford English Reference Dictionary 'rent' means a tenant's periodical payment to an owner or landlord for use of land or premises. (vii) The term lease' is defined in Section 105 of the Transfer of Property Act, 1882 as under: "A lea....
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.... such service of facilitating the movement of equipment would be taxable under GST in the hands of CIPL, Kerala in respect of the consideration / fee that it would receive for the service. 10. The Applicant, with regard to the question 5, states as under: 10.1 In case of supply of goods for reasons other than by way of supply, a delivery challan is required to be issued in terms of Rule 55 of the CGST Rules. 10.2 Further, the movement of equipment between CIPL. Kerala to CIPL, Tamil Nadu per se is not taxable under GST. Accordingly, it can be said that movement of equipment are for reasons other than by way of supply. In such a case, no invoice is required to be generated under GST and the movement would be made under the cover of delivery challan in terms of Rule 55 of the CGST Rules. 10.3 The applicant also states that Rule 138 of the CGST Rules, requires the consignor to issue e-way bill in case the value of goods exceeds Rs. 50,000/-. Accordingly, CIPL, Kerala would also be issuing e-way bill along with delivery challan in terms of the said Rules. PERSONAL HEARING: / PROCEEDINGS 11. Sri. Sachin Agarwal, Chartered Accountant and duly authorised representative o....
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....ation; (1A) Where certain activities or transactions, constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II." 15.3 In view of the above, the two issues required to be decided are (i) whether the transaction of the CIPL, Karnataka with the CIPL, Kerala in providing the goods is a transaction of supply and if yes, (ii) whether it is a supply of goods or services as per Schedule II. 15.4 The applicant is a Company incorporated within India as per the Companies Act and is covered under the definition of "person" as per clause (84) of Section 2 of the CGST Act, 2017. The branch of CIPL, in other States is also under the same entity and has no separate existence under the Companies Act. The assets and liabilities of the Company is held in common and hence the assets of one branch do not have separate existence as per the Companies Act or under the Income Tax Act, 1961. They are part of the same entity. There cannot be a transfer of an asset between two persons under these Acts. Therefore, it is clear that the branch of the same company cannot enter into a....
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....L, Karnataka is the owner of the goods as all goods are procured in the name of CIPL, Karnataka. Though, it could be inferred from all the other business laws, that the ownership is vested in Company as a whole and no ownership is transferred between the branches. Since the applicant states all the goods are purchased in the account of CIPL, Karnataka, as per the provisions of the CGST Act, 2017, the goods are held to be in the account of CIPL, Karnataka as owned assets and in the account of CIPL, Kerala as leased assets, for which CIPL, Kerala is liable to pay consideration for the lease transactions. 15.7 Further, since the two entities are deemed to be distinct persons, and the transfer of goods are effected from CIPL, Karnataka to CIPL, Kerala without any transfer of ownership of such goods, the same amounts to supply of service as per entry no. 1(b) of the Schedule II to the CGST Act which states that "any transfer of right in goods or of undivided share in goods without transfer of title thereof, is a supply of services." Hence only for the purposes of the CGST Act, 2017, the transfer of such goods on lease as per the agreement entered to between CIPL, Karnataka and CIPL, ....
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....of goods of like kind and quality by the recipient to his customer not being a related person: Provided further that where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of the goods or services." 16.4 From the above, it can be seen that the recipient, CIPL, Kerala who is the recipient of the goods is eligible for full input tax credit on the transaction between the applicant and the CIPL, Kerala and hence the value declared in the invoice would be the value of supply of goods or services or both as per the second proviso to Rule 28 and hence would be treated as the value of such supply. 17. The third question is "what documents should accompany the movement of goods from CIPL, Karnataka to CIPL, Kerala". In this regard we invite reference to Section 31 of the CGST Act, 2017. 17.1 The impugned transaction is a supply of services and hence the applicant has to raise a tax invoice for the transaction as per Section 31(2) of the CGST Act, 2017, which reads as under:- "(2) A registered person supplying taxable services shall, before or after the provision of service but within....
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.... (ix) ..................... (2) ....................... (3) Where goods are being transported on a delivery challan on lieu of invoice, the same shall be declared as specified in rule 138. (4) Where the goods being transported for the purpose of supply to the recipient but the tax invoice could not be issued at the time of removal of goods for the purpose of supply, the supplier shall issue a tax invoice after the delivery of goods." 17.5 Further, Rule 138 of the CGST Rules, 2017 reads as under:- "Rule 138: Information to be furnished prior to commencement of movement of goods and generation of e-way bill (1) Every registered person who causes movement of goods of consignment value exceeding fifty thousand rupees- (i) In relation to a supply; or (ii) For reasons other than supply; or (iii) Due to inward supply from an unregistered person, - shall, before commencement of such movement, furnish information relating to the said goods as specified in Part A of FORM GST EWB-01, electronically, on the common portal along with such other information as may be required on the common portal and a unique num....
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....ods to CIPL, Tamil Nadu, then the new contract between CIPL, Karnataka and CIPL, Tamil Nadu entered. CIPL, Kerala, in such a situation, under the instructions of CIPL, Karnataka, arranges / facilitates to transport the goods to CIPL, Tamilnadu, and thus the applicant acts as an agent of CIPL, Karnataka in the said facilitation and not in independent capacity. Once the CIPL, Karnataka issued instructions to CIPL, Kerala, the contract of lease entered between them in respect of the said goods ends and the goods now held by CIPL, Kerala as the bailee of CIPL, Karnataka. Hence CIPL, Kerala would be acting in two capacities, first as an independent entity under the CGST Act for the leased goods while the lease contract of the specific goods is in force and next as a bailee of CIPL, Karnataka. Once the lease contract is over and the goods are no more under the control of CIPL, Kerala. If the goods are to be transferred immediately after the contract of lease is over, the CIPL, Karnataka should enter into the lease transaction with the CIPL, Tamil Nadu and raise a delivery note and e-way bill with ship from address as "CIPL, Kerala" and Ship to address as "CIPL, Tamil Nadu" for those spec....