TaxTMI 
TaxTMI 
2022 (1) TMI 797
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....dur Road, Kuthambakkam Village, Tiruvallur-602107 (hereinafter called the 'Applicant' or CIPL) was registered under the GST Vide GSTIN 33AADCC3230A1ZM. They have sought Advance Ruling on the following questions: 1. Whether the pallets, crates and containers (hereinafter referred as equipment") leased by CHEP India Private Limited (CIPL) located and registered in Tamil Nadu to its other GST registrations 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 Tamil Nadu Goods and Services Tax Act, 2017 ("TNGST 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 TNGST Act read with relevant Rules? 3. What are the documents that should accompany the movement of the goods from CIPL, Tamil Nadu to CIPL. Kerala? 4. Whether movement of equipment from CIPL, Kerala to CIPL, Karnataka on the instruction of CIPL, Tamil Nadu can be said to be mere moveme....
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.... 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. e. Also, there are chances that other units of CIPL, (Say CIPL, Karnataka) may require certain equipment from CIPL Tamil Nadu which are available with CIPL, Kerala (under lease from CIPL Tamil Nadu). In such a case, basis instructions from CIPL, Tamil Nadu, CIPL, Kerala would transfer the equipment to CIPL, Karnataka. In such a case, the moment equipment reaches CIPL Karnataka, CIPL, Tamil Nadu would stop charging CIPL, Kerala and start charging CIPL, Karnataka towards lease charges (basis number of days of usage). Further, CIPL, Kerala would charge CIPL, Tamil Nadu a consideration for facilitation and arrangement of movement of equipment to CIPL, Karnataka basis the instruction. The diagrammatic representation is provided below:- 2.2 On interpretation of law, the applicant has referred to various statutory provisions under the CGST Act 2017 and the applicant's view in respect of the questions raised in the Advance Ruling application is as below: • In respect of Q.No 1 the applicant has stated tha....
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....They have stated that joint reading of Section 25 of CGST Act and Schedule I, transactions entered with the third-party customer and transactions entered with GST registrations in other states are kept at par when it comes to determination of taxability under GST. Also, entry in Schedule I or any other provisions in the CGST Act does not restrict the nature of 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 similar to the lease transaction entered with third party customer. Hence, the applicant has viewed that CIPL, Tamil Nadu can enter into lease transaction with CIPL branches in other States registered under the respective State GST legislation across India say for e.g., CIPL, Kerala and such transaction would be taxable under GST as a lease transaction between the two branches which are deemed to be distinct entities for the purpose of GST legislation. • In respect of Q.No.2 The applicant has stated that CIPL, Ta....
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....tween CIPL Tamil Nadu and third-party customers) and not sold or disposed permanently, the provisions of Section 18(6) of the CGST Act would not be applicable. • In respect of Q.No.3 the applicant has stated that 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. In their 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 of such goods. Also, since the lease charges would be billed basis the number of days of usage by service recipient, the equipment would be transferred to the service recipient at the inception under the delivery challan without discharging taxes and the tax would be paid based of service invoice issued periodically. They have also stated that as per Rule 138 of the CGST Rules, the consignor has to issue e-way bill in case the value of goods exceeds INR 50,000. Accordingly. the Applicant would also be issuing e-way bill along with ....
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....GST Act and accordingly would not be taxable under Schedule I of the CGST Act. It is only the provision of equipment on lease by CIPL, Tamil Nadu to CIPL, Karnataka which will constitute as Supply under Section 7 of the CGST Act and attract levy of GST. • The Applicant has also stated that in such a case CIPL, Kerala is supplying the service to CIPL, Tamil Nadu by facilitating / arranging the movement of equipment to CIPL, Karnataka. Accordingly, 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. • In respect of Q.No.5 they have stated that 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. As mentioned above, the movement of equipment between CIPL, Kerala to CIPL, Karnataka 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 generated under GST and the movement would be made under the cover of delivery....
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....reiterated their submissions on the proposed business model and submitted the following additional facts : • The applicant has stated that as the transaction specified in their application is a proposed business model and has not been effectuated till date, they applicant is not in a position to provide required documents such as purchase order, tax invoice or delivery challan. They have submitted a sample agreement with the customer in accordance with the current business model. • They have also stated that no MoU has been executed between the different GSTINs of the company. They have submitted a document containing broad contours of the MoU which is proposed to be entered among different GSTINs of the applicant in the new business model. 4.2 Further, letter was issued to the applicant on 29.10.2021 seeking the following specific details: 1. In para (A2a) of their submissions it is stated that the ownership of all existing equipment in India shall be consolidated in the applicant's GSTIN in Tamil Nadu. On perusal of the ruling issued by AAR, Karnataka, it is seen that under para 4.2.1, it is stated that the applicant would be consolidating th....
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....ncture, it is imperative to take note of the definition of the term "advance ruling" in Section 95(a) which specifies that advance ruling may be obtained in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. In this regard, it must also be noted that since the business model is at a proposal stage, it is not possible to provide documents with respect to the proposed transactions. However, it must be noted that all the aspects of the proposed transactions have been explained to your goodself at the time of hearing and in the subsequent correspondence exchanged. The Company has also submitted a sample agreement which is entered by the Company with the customer under the current operating model. It is also submitted that the Company is engaged in the business of pooling and leasing of pallets and crates to the customers across India. Hence, the proposed consolidation would be with respect to such assets lying in different States of the country. (ii) Response: It must be noted that the goods shall always be owned by CIPL Tamil Nadu. However, the possession of the goods may be with another CIPL registration (CIPL ....
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.... revenue/ cost of the Company. 5.1 The Central Jurisdictional authority reported that there are no pending proceedings on the issue raised by the applicant in their Advance Ruling application. They also furnished comments on the issues raised in the Advance Ruling application. 5.2 The State Jurisdictional authority has submitted that there are no pending proceedings on the issue raised by the applicant in their Advance Ruling application. 6. We have considered the application filed by the applicant and various submissions made by them as well as the comments of the State and Central Tax officers. Applicant have submitted that they are contemplating to consolidate the ownership of their assets in the state of Tamil Nadu under a proposed business model called 'pooling', wherein the ownership is said to rest with the applicant. They propose to rent/lease such equipment to their customers and their units situated in other states. In this scenario, they have applied for ruling on the following issues:- 1. Whether the pallets, crates and containers (hereinafter referred as equipment") leased by CHEP India Private Limited (CIPL) located and registered in Tamil Nadu to its o....
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....ii) They have not finalized as to where they are going to consolidate the assets and they are looking for consolidation in Karnataka or Maharashtra or Tamil Nadu. (iii) They have obtained ruling from Karnataka and they have proceeded to obtain a ruling in all the probable states as they are in the process of contemplating where the consolidation may be done as the business model is still at the proposal stage. (iv) As the business model is at the proposal stage, it is not possible for them to produce documents with respect to the proposed transactions. (v) Their inter-unit transactions are within the same company and the audited financial statements are prepared for the company as a whole. Therefore the transactions get nullified in the audited financial statements and thus do not separately form part of revenue/cost of the company. (v) As the model is a proposed one, no MOU has been executed between the different GSTINs of the company which are considered as distinct person under GST law so far. However to provide a better understanding they had furnished a document containing broad contours of the MOU which is proposed to be executed. It is obs....