TaxTMI 
TaxTMI 
2022 (4) TMI 1139
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....ACS4944A2ZT. The applicant is a Non-Banking Financial Company having its registered and head office at Chennai and among its other finance services, is also involved in the business of leasing. The Leasing business involves leasing of machineries, commercial vehicles, and non- commercial vehicles. The Applicant has separate GST registrations for its leasing business in eleven States. They have sought Advance Ruling on the following question:- 1. Whether the portion of the certain additional services viz., payment of road tax/registration fees, insurance premium, etc., rendered by the applicant in the course of its Leasing of the vehicle/s to the Lessee falls under the category of "services of a pure agent"? Or 2. Whether the recovery of Motor Vehicle Registration fee, Motor Vehicle life Tax & RTO charges etc., by the applicant from the lessee for the registration of the vehicle in the name of the lessee forms part of the value of supply or the applicant is acting as a pure agent for this purpose and so the above charges do not form part of the taxable supply ? The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy ....
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..... Though leasing is termed as a "Service" as per the GST law, the GST rate applied on the lease rentals is that of the rate that is applicable on the supply of Goods which forms part of the lease, and the GST is accordingly being remitted by them. 2.2 On their interpretation of Law, it is stated that for the purpose of CGST Act, 2017 and TNGST Act, 2017 and the transactions for which advance ruling is sought, the parties are described hereunder: i. Vehicle dealer - Third Party/Supplying Dealer ii. Applicant/Lessor facility - Lessor/Supplier of Leasing iii. Customer/Lessee facility - Lessee/Recipient of Leasing The Vehicle dealer (third party) raises a Tax invoice for the vehicle on the applicant (Lessor/supplier of leasing facility) which includes the unit price for the vehicle after discount, if any, CGST @14%, SGST @14% plus compensation cess as may be applicable. A separate debit note is also raised by the Vehicle dealer (Third Party) on the applicant (Lessor/supplier of leasing facility) for the registration & Motor vehicle life tax & RTO charges, accessories, fastag, TCS etc. As of now, they calculate the monthly lease rentals based on....
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.... be excluded from the value of supply transaction (leasing) done by the applicant iii. In the event of the Authority is not convinced that these additional payments don't fall within the ambit of "Pure agent", whether such payments can be treated as separate services by allowing the applicant to apply GST at the rate applicable to general services, viz. @18% instead of applying the higher rate applicable to the goods forming part of the lease 3.1 Due to the prevailing PANDEMIC situation and in order not to delay the proceedings, the applicant was addressed through the Email Address mentioned in the application to seek their willingness to participate in a virtual Personal Hearing in Digital media. The applicant vide their e-mail dated 13.12.2021 communicated that they preferred to be heard physically and not virtually. The hearing was held on 28.12.2021. The Authorised representatives Shri. R. Sridharan, Sr. Gen. Manager & Head-Indirect Taxation and Shri. U. Somanathan, Assistant Gen. Manager -Taxation attended the hearing and reiterated their submissions. They submitted additional submissions in writing. They submitted that they are a Non - banking financial compan....
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....f the recipient of supply are in addition to the services he supplies on his own account. Ans: The principal/main supply is the vehicle, and the Lessee will be the actual user of the vehicle and at whose request the vehicle has been purchased by the applicant/Lessor for the purpose of providing it on lease. These supplies are in addition to the supply of vehicle by the Lessor to the Lessee and are statutory requirements for plying the vehicle on road. Hence to be excluded and treated as supplies made as a "Pure Agent". (II) Does the registration & Motor Vehicle life tax & RTO charges Insurance premium etc., paid by the applicant and thereafter reimbursed by the lessee shall be excluded from the value of supply transaction (leasing) done by the applicant.- (a) These additional payments are statutory requirements, receipted and issued in the name of the Lessee/recipient, including the GST portion, if any, applicable in any of these payments. (b) Since the above said charges are intended to be passed on to the lessee (recipient) by the applicant (lessor/supplier) as such, these expenditure or costs incurred by the Applicant (Lessor/ supplier) on beh....
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....see-Sample Inv No. L133212205000071 dated 01.05.2021 o Sale of Leased Vehicle after agreement closure-Sale Invoice No. LS33212208000005 dated 24.08.2021 • Flow Chart of EMI working and supporting documents for lease contract No. BB2015CN,- o Copy of the Supplementary Lease Agreement o Copy of Purchase Invoice No. GST/HTN/00688 dated 29.05.2018 o Copy of Debit Note No. DN/ANR/0743 dated 31.05.2018 o Copy of Lease Monthly Rental Invoice raised to the Lessee-Sample Inv No. L133212204000013 dated 01.04.2021 o Sale of Leased Vehicle after agreement closure-Sale Invoice No. LS33212205000004 dated 29.05.2021 • Flow Chart of EMI working and supporting documents for lease contract No. BB2015CR,- o Copy of the Supplementary Lease Agreement o Copy of Purchase Invoice No. GH201800307 dated 29.07.2018 o Copy of Lease Monthly Rental Invoice raised to the Lessee-Sample Inv No. L133212204000013 dated 01.04.2021 o Sale of Leased Vehicle after agreement closure-Sale Invoice No. LS33212207000011 dated 27.07.2021 • Flow Chart of EMI working and supporting documents for lease....
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....aler/supplier. However, since the Lessee is the actual user of the vehicle and the person who will be in control and possession of the same, to comply with the provisions of the Motor Vehicles Act, the vehicle is allowed to be registered in the name of the Lessee with an endorsement marking the Lessor's/SFL's interest over the vehicle in the registration certificate. To deliver the vehicle after proper registration, the supplying vehicle dealer demands additional payments towards Motor Vehicle Tax, RTO fee, insurance premium, fastag etc., which are also released to the supplying dealer by the applicant at the request of the Lessee. • The Lease rentals are accordingly calculated, and rental repayment schedule is drawn up, which forms part of the Lease Agreement. Thus, in a lease, the applicant being the owner of the leased asset, retains the ownership and transfers the right of usage of the asset alone to the Lessee. At the end of the lease period or early foreclosure, the vehicle will be sold by the applicant to a third party other than the Lessee. Generally, the executives who were using the car till then offers to buy the assets as a third party. The applican....
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....tion fees of Motor Vehicles, Motor Vehicle Life Tax, RTO Charges and Insurance are the payments which are necessarily to be made before releasing of the vehicles. Without those payments, the vehicles would not be allowed to run on the roads. 2. Though the payments are being paid in the name of lessee, the lessor Tvl. Sundaram Finance Limited, being the co-owner of the leased vehicles until the period of lease, may not, suomoto, relieved from any of the consequences in case of default if any on the payment of those payments. 3. Owing to the above reasons, I am of the opinion that the lessor Tvl. Sundaram Finance Limited, may not be treated as "pure Agent" in respect of the said payment of registration fees of Motor Vehicles, Motor Vehicle Life Tax, RTO Charges and Insurance and not entitled for exemption from levy of tax under the provisions of GST Act 2017. 5.2 The Center Jurisdictional authority has not furnished any comments/remarks on the questions raised by the applicant. Hence, it is construed that there are no pending proceedings, on the questions raised by the applicant. 6.1 We have gone through the facts of the case, oral and written submissions made....
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....be applicable. A separate debit note is also raised by the vehicle dealer (third party) on the applicant (Lessor/Supplier of leasing facility) for the payment of registration fee and Motor vehicle life tax and RTO charges, accessories, fastag, TCS etc., As of now they calculate the monthly lease rentals based on the aggregate amounts released by them to the vehicle dealer as per the terms and conditions with the Lessee (recipient) on which they remit GST in the leasing transaction at the appropriate rates. They have stated that the registration and motor vehicle life tax and RTO charges, insurance premium etc., are actuals paid by them to the vehicle dealer (third party) to enable the vehicle to get registered for use by the lessee. The contention of the applicant is that since the Lessee is the actual user of the vehicle and at whose request the vehicle has been purchased by them for the purpose of providing it on lease, they should be treated as a "Pure Agent" in terms of Rule-33 of CGST Rules in respect of payments made by them towards such additional services viz., registration and motor vehicle life tax & RTO charges, insurance premium etc., and thereafter get it reimbursed fr....
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..../improvements/attachments made by the Lessee to the equipment or any of them whether with or without such consent shall form an integral part thereof and be the property of the Lessor subject to the terms and conditions herein contained. Clause 23: If the Equipment requires registration under the Motor Vehicles Act, 1939, then the Lessor permits the Lessee to have such registration in its, (Lessee's) name for the benefit of the Lessor and expressly subject to the absolute ownership rights of the Lessor thereon and the Lessee undertakes to have the said registration transferred in the name of the Lessor on the termination of the Lease or on the Lessor retaking and resuming possession thereof for whatsoever reason at any time during the lease period or whenever required to do so. 7.3 From a conjoint reading of the above clauses of the agreement and the various submissions such as Tax Invoices, Debit Notes raised by the Vehicle Dealer on them and the Tax Invoice raised by the applicant on the lessee for the EMI, we find that,- • the activity of applicant is leasing vehicles under 'Operational Lease' to the lessee; • applicant is the ow....
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....rvices Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier; (b) Any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services both; (c) Incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services; (d) Interest or late fee or penalty for delayed payment of any consideration for any supply; and (e) Subsidies directly linked to the price excluding subsidies provided by the Central and State Governments. 8.2 As per Section 15 above, the value of a supply, where the supplier and the recipient are not related and the price is the sole consideration, is the transaction value, which is the price actually paid or payable for the said supply. In the case at hand, the applicant purcha....
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....agent of the recipient of supply; (c) does not use for his own interest such goods or services so procured; and (d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account. 8.4 As per the above Rule 33, the cost incurred by a supplier as a 'Pure agent' can be excluded, when,- • Such payment is made to the third party on authorization by such recipient; • Such payment is indicated separately in the invoice raised by the recipient; • The supplies received as pure agent is in addition to the supply procured by the supplier for his own account supplies. Payment of On-road components such as registration fees, Insurance fees etc., are mandatory for the vehicle to be able to be used on road, as per the provisions of Motor Vehicles Act. Section 39 of The Motor Vehicles Act, 1988 provides as under:- 39. Necessity for registration.- No person shall drive any motor vehicle and no owner of a motor vehicle shall cause or permit the vehicle to be driven in any public place or in any other place unless the vehicle is regis....
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....cant to register the Vehicle and to have the Insurance, etc as required under the various statutory provisions. Therefore, the 'On-road components' are procured for the interests of the applicant, as without these, the leased vehicle cannot be used on roads, the very purpose, the lessee leases such vehicles from the applicant. Thus, the applicant has failed to establish themselves as a 'pure agent' and therefore the expenditure or cost incurred by the applicant in respect of the 'On-road components' are incurred by them in the transaction of Purchase of vehicle' for the supply of 'Operational lease' to their recipient. In this connection, it is pertinent to note that section 15(2) of the GST Act, provides that any tax/duty levied under any other law and any incidental expenses incurred should also form a part of the Transaction Value'. Applying the same to the case at hand, the 'On-road components' are incidental charges incurred by the applicant in purchasing the vehicles for supply under the 'Operational lease' to the Lessee. Therefore, the value of 'On-road component' cannot be considered as additional charges or th....