TaxTMI 
TaxTMI 
2022 (8) TMI 919
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....ed under GST with GSTIN 33AADC03578R1ZS (hereinafter called the Applicant). The applicant has sought Advance Ruling on the following questions: 1. Whether the transaction of transfer of right to do integration testing, install and market software from Tamilnadu cost centre to Karnataka Cost centre shall be leviable to GST given that such transaction is being executed between two cost centers of same entity. 2. If the answer to the above is affirmative then whether such supply be considered as goods or services? The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of Rs.5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has stated that their Company is incorporated in India with its operation and experience centres in various States. Such different premises of the Company are recognized as different Cost Centre. The Company is setting up a factory for manufacture of electric two-wheelers in Tamil Nadu whereas the head office and the additional software development centre is in Bengaluru, Karnataka. The Company shal....
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.... within the ambit of clause 5(e) of Schedule II of the Act. 2.3 The applicant has stated that as per Schedule I of the CGST Act, supply of goods or services or both between related persons or distinct persons would qualify as supply under GST and trigger a levy of GST. They have submitted that when one Cost Centre is transferring the rights over a software to another Cost Centre of the same entity, the same shall not qualify as supply. The above view is based on the fact that both the Cost Centre's are merely registrations of the same legal entity whereby Tamil Nadu Cost Centre is transferring the right to install, test and market a software so as to enable the Karnataka Cost Centre in selling the same to end user. Consideration is being charged by the former from the latter just to allocate proper profits in their books of accounts since each Cost Centre maintains its own profitability. They have also stated that the Karnataka Cost Centre is the software development and maintenance hub of Ola and they have the expertise to implement the performance upgrade software into the vehicles of end user, therefore it only makes sense that the responsibility for carrying out such ope....
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....py of invoice dated 31.01.2022 raised by Tamil Nadu cost centre on Maharashtra Cost Centre for sale of Scooters 39 Nos. • Copy of invoice dated 31.01.2022 raised by Tamil Nadu cost centre on Gujarat Cost Centre for sale of Scooters 39 Nos. • Copy of invoice dated 12.01.2022 raised by Karnataka Cost Centre on Praveen Kumar G for performance upgrade • Copy of invoice dated 12.01.2022 raised by Karnataka Cost Centre on Sanjay Chawla for performance upgrade • The applicant has stated that the software has no value in the market till the time the TN cost centre agrees to integrate the same with the vehicle and allow the Karnataka Cost Centre to sell, upload and maintain the software on the vehicle manufactured by TN Cost Centre. There is no intrinsic value which can be assigned to such granting of right, hence the value is mutually agreed between two cost centres. The applicant has relied on the Advance Ruling issued by Tamil Nadu Advance Ruling Authority in the case of M/s Thirumalai Chemicals Ltd ITN/14/AAR/2020] and the ruling issued by TN Appellate Authority for Advance Ruling in the case of M/s Specsmakers Opticians Private Limite....
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....amount to profit or income recognized in book of accounts. Since, income of one cost centre forms expense of other, the total amount is netted and the same has no impact on financial position of the company. 4. The Centre Jurisdictional Authority, Chennai South Commissionerate, who has administrative control over the applicant was addressed vide this office letter dated 03.02.2022 requiring to furnish comments on the issue raised by the applicant and report whether any proceedings are pending in respect of the applicant. The said authority has not furnished the report in spite of reminders dated 18.02.2022, 23.03.2022 and 09.06.2022. Hence, it is construed that no proceedings are pending in respect of the applicant. 5. The State Jurisdictional Authority has submitted that there are no pending proceedings in the applicant's case in their jurisdiction. 6. We have carefully examined the statement of facts, supporting documents filed by the Applicant along with application, oral submissions made at the time of Virtual hearing, submissions made after hearing. The Company is a manufacturer of electric two-wheelers and they have different operation and experience centers all ....
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.... the vehicles manufactured by the applicant to Karnataka Cost center. It has been stated by the applicant that the software has no value in the market till they agree to integrate the same with the vehicle and allow Karnataka cost center to sell, upload and maintain the software on the vehicle manufactured by them. The applicant is charging a recurring consideration from Karnataka cost center for the transfer of right. The first payment of such recurring consideration has been agreed upon at Rs.1,05,00,00,000/-. However from the invoices submitted, invoice no. OET/CC/001 dt. 30.09.2021, it is seen that the applicant has billed the Karnataka cost center a sum of Rs. 1,02,75,11,617/- on which 18% IGST has been paid under the description 'fee for right to install performance upgrade software on the scooter manufactured by factory'. 7.2 The first question to be answered is whether the transaction of transfer of right to do integration testing, install and market software by the applicant to Karnataka Cost center shall be leviable to GST given that such transaction is being executed between two cost centers of the same Company. To answer this question, it should be seen if th....
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....t made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: As per the above definition, any payment made or to be made/ the monetary value of any act in response to the supply of any goods/services is included as consideration. The invoice raised though for book adjustments established the monetary value for the act of transfer of right by the applicant and hence is definitely a consideration. Thus the criterion for the transaction being a supply is satisfied in as much as the transfer of right is made for a consideration. 7.4 Applicant has contended that the transfer is between two cost centers of the same entity and cannot be construed to be a supply. Now the d....
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....of furtherance of business for a pre-determined consideration & therefore such transfer of right is clearly a supply which is leviable to GST. 8. Now coming to the question of whether the activity carried on by the applicant is supply of goods or services is taken up for discussion. Applicant has submitted that the vehicles are sent to respective distribution centers all over India. Karnataka cost center is the software development and maintenance hub of Ola and they implement the performance upgrade software into the vehicles of the end user. Hence it is seen that the goods namely vehicles are moving from the TN cost center to all distribution centers and the software is the product of Karnataka cost center. On perusal of invoices submitted by the applicant, it is seen that the Performance upgrade software is only sold by the Karnataka cost center to the end user. The details are as under: (i) Invoice no.4400002312 dt. 12.01.2022 has been raised for such Performance upgrade software for Shri. Praveen kumar residing at Bengaluru for a sum of Rs.14,407/. (ii) Invoice no.4400002412 dt. 12.01.2022 has been raised for such Performance upgrade software for Shri. San....