TaxTMI 
TaxTMI 
2022 (8) TMI 919
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....(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 shall be selling the vehicle to the end user and will also off....
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....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 operation is entrusted upon the experts. However, in order to maintain the Cost Centre profitability, it is importan....
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.... 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 Limited, wherein it has been ruled that invoice value should be "open market value" where the valuation is determined for transactions between distinct persons, subject to prescribed condit....
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....isdictional 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 over India which are recognized as different cost centers. The manufacturing is done at the Tamilnadu cost center, the applicant and the sale thereafter will take place through the distribution centers located across the country. Th....
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....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 the transaction is leviable to GST in the first place as the same is said to be executed between two distinct entities of the same company. Hence the transaction to be leviable to GST should fall within the ambit of supply and then such supply should be between two distinct entities.....
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....t 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 distinct point to be analysed is if the transfer of such right between the applicant and Karnataka cost centers is a supply. In this connection, it is pertinent to note that for the applicant and the Karnataka Cost Center of the Company are distince persons, with separate GST Registration. Also, it has been established in Para supra that the transfer of right....