AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (12) TMI 512
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.... 7 of the CGST Act and MGST 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 MGST Act read with relevant Rules? 3. What are the documents that should accompany the movement of the goods from CIPL, Maharashtra to CIPL, Karnataka? 4. Whether movement of leased equipment from CIPL, Karnataka to CIPL, Tamil Nadu on the instruction of CIPL, Maharashtra can be said to be mere movement of goods not amounting to a supply in terms of Section 7 of the CGST Act and MGST Act, and thereby not liable to GST? 5. With reference to Question 4 above, what are the documents that should accompany the movement of the goods from CIPL, Karnataka to CIPL, Tamil Nadu? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this A....
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....lease from CIPL Maharashtra). In such a case, basis instructions from CIPL, Maharashtra, CIPL, Karnataka would transfer the equipment to CIPL, Tamil Nadu. In such a case, the moment equipment reaches CIPL Tamil Nadu, CIPL, Maharashtra would stop charging CIPL, Karnataka and start charging CIPL, Tamil Nadu towards lease charges (basis number of days of usage). Further, CIPL, Karnataka would charge CIPL, Maharashtra a consideration for facilitation / arrangement of movement of equipment to CIPL, Tamil Nadu basis the instruction. The diagrammatic representation is provided below- 3. In light of the above background, the Applicant would like to seek advance ruling with regard to the following - Question 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 Maharashtra to its other GST registrations located across India (say CIPL Karnataka), would be considered as lease transaction and accordingly taxable as supply of services in terms of Section 7 of the CGST Act and MGST Act? Question 2 - If the answer to Question 1 is Yes, what is....
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....course or furtherance of business" Section 25 (4) of the CGST mentions that "A person who has obtained or is required to obtain more than one registration, whether in one State or more than one State, shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act" As per Section 15 of the CGST Act, the value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. As per Rule 28 of the CGST Rules which deals with valuation, in case of supply of goods or services between distinct person as specified in sub-section (4) and (5) of section 25 of the CGST Act or related persons, the value shall be,- (a) be the open market value of such supply; (b) if the open market value is not available, be the value of supply of goods or services of like kind and quality; (c) if the value is not determinable under clause (a) or (b), be the value as determined by the application of rule 30 or rule 31, in that order: Provi....
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....AS) 116 which provides for principles for the recognition, measurement, presentation and disclosure of leases in the books of account. As per the Ind AS, lease is defined as "A contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration". Also, Tease' is defined in Section 105 of the Transfer of Property Act, 1882 in relation to immovable property as under - "A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms." 3. Accordingly, any lease transaction is deemed as supply of services as per Schedule II since it involves transfer of right to use any goods for consideration. 4. In the current case, CIPL, Maharashtra also transfers the right to use the equipment for a period of time to third party customers in Maharashtra and other CIPL registrations across India for ....
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....ending on number of days of usage of equipment. Invoice in this regard would be raised by CIPL, Maharashtra periodically on the other CIPL branches for the equipment taken on lease by them. 13. As per Rule 28 of CGST Rules read with Section 15 of the CGST Act mentioned in the legal background above, in case of transaction between distinct person, invoice value can be deemed as transaction value in case the recipient is eligible to take full input tax credit. Similar position has been taken by advance ruling authorities in other cases such as M/s. Specsmakers Opticians Private Limited (2020 (1) TMI 63 - Appellate Authority For Advance Ruling, Tamil Nadu) 14. In the current case, since CIPL, Karnataka is eligible to take entire input tax credit, the invoice value should be deemed to the transaction value for the purpose of levy of GST. 15. Also, since CIPL, Maharashtra is supplying goods to CIPL, Karnataka pursuant to a lease arrangement and not as a result of transfer of equipment, the lease charges charged by CIPL, Maharashtra should be the transaction value / deemed transaction value chargeable to GST. 16. The Applicant also wishes to highlight the provisions of Section 18(6) ....
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....to a supply in terms of Section 7 of the CGST Act, and thereby not liable to GST? 20. As discussed above, levy of GST is on supply and the scope of supply is discussed in Section 7 of the CGST Act. Accordingly, it is necessary to determine whether the movement of equipment between CIPL Offices will qualify as supply under Section 7(1) of the CGST Act. Here, it is relevant to understand the meaning of the modes of transfer which have been enumerated in Section 7(1 )(a) of the: a) Sale is defined in in Section 54 of the Transfer of Property Act, 1882 in the following manner: "a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised." Further, the Hon'ble Supreme Court in the case of Joint Commercial Tax Officer, Harbour Division, II, Madras v. Young Men's Indian Association (Regd.), Madras (1970) 1 SCC 462 held that "Where general property in goods belonging to a person is under a contract transferred to another for a price paid or promised, the transaction is a sale". b) The term 'transfer' has been defined in the Advanced law Lexicon to mean an act or transaction by which property of one person as by him vested in a....
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....he Applicant would like to state that all forms of supply enumerated under Section 7(1)(a) of the CGST Act involves either vesting or divesting of rights or creation of an interest or right in property or a thing. Accordingly, in order to constitute supply, the person transferring the goods would be required to transfer its specified interest/right in property to the recipient of such goods. 22. In the present case, the Equipment is owned by CIPL, Maharashtra and will be leased to CIPL Karnataka in furtherance of a lease agreement between such registrations. In case CIPL, Karnataka does not require the equipment, the same would be transferred to CIPL, Tamil Nadu on the basis of instructions received from CIPL, Maharashtra. Such movement to CIPL, Tamil Nadu is in incidence of the obligation as a lessee under the lease agreement entered between CIPL, Maharashtra and CIPL, Karnataka. Further, CIPL, Maharashtra raises an invoice on CIPL, Karnataka for the number of days the equipment remained with it. In such a situation, since there is no transfer of interest of any kind in goods between CIPL, Karnataka and CIPL, Tamil Nadu in respect of the equipment, such a transfer of equipment wo....
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....e participants within industrial and retail sector throughout the supply chain, under a business model known as "pooling ". It must be noted that equipment are only leased out to the customers for use but the ownership rests with CIPL at all times. A.2. A new business model is being proposed by the Company with the following modalities - * The ownership of all existing equipment in India shall be consolidated to the Applicant's GSTIN in Maharashtra. As the ownership of equipment would be with the Applicant, it would be entering into agreement with customers for leasing the equipment to them at the agreed lease charges. * The Applicant would also lease the equipment to other CIPL units based on their requirements. For instance, the Applicant would be sending the equipment to CIPL Karnataka under the cover of the delivery challan for lease. * The Applicant would be raising periodical invoices for lease charges (based on number of days of usage) on CIPL Karnataka. * CIPL Karnataka would thereafter, be issuing the equipment to its customers who would be using it for movement of their goods through the supply chain. CIPL Karnataka would be charging lease charges from its cu....
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....ges or the value of equipment in terms of Section 15 of the CGST Act and MGST Act read with relevant Rules? * Under the proposed model, the leasing charges to be recovered by the Applicant to CIPL Karnataka would be at an agreed rate and invoice in this regard would be raised periodically on the basis of the number of days of use. * As per Rule 28 of CGST Rules read with Section 15 of the CGST Act the value of supply in case of transaction between distinct person can be deemed to be the invoice value in case the recipient is eligible to take full input tax credit - Said position upheld by AAAR, Tamil Nadu in the case of M/s. Specsmakers Opticians Private Limited (2020 (1) TMI 63 -Appellate Authority for Advance Ruling, Tamil Nadu). * Therefore, since in the current case, CIPL Karnataka is eligible to take entire input tax credit, the invoice value should be deemed to the transaction value for the purpose of levy of GST. * Also, since the Applicant is supplying equipment to CIPL Karnataka pursuant to a lease arrangement and not as a result of transfer of equipment, the lease charges charged by the Applicant should be the transaction value chargeable to GST. * It is to be h....
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....e for recovery of lease charges from CIPL Karnataka. (iii) It may so happen that the Company's registration in another State (say, CIPL Tamil Nadu) requires the equipment which are lying with CIPL Karnataka. In such a scenario the Applicant i.e. CIPL Maharashtra shall enter into a lease arrangement with CIPL Tamil Nadu for the said equipment and instruct CIPL Karnataka to send the goods to CIPL Tamil Nadu. (iv) It must be noted that the responsibility with respect to generating delivery challan, e-waybill etc. For the purpose of moving the equipment to CIPL Tamil Nadu shall be that of CIPL Karnataka and not the Applicant. For facilitating the movement of equipment, CIPL Karnataka may charge a consideration from the Applicant and raise a tax invoice along with GST for recovering the said amount. (v) Once the equipment reaches CIPL Tamil Nadu, the Applicant shall stop invoicing CIPL Karnataka for lease rentals and start invoicing CIPL Tamil Nadu for the lease charges on the basis of the new arrangement with it. Application of GST law: * The scope of supply under Section 7(1)(a) of CGST Act includes sale, transfer, exchange, license etc. Within its ambit. It must be noted....
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....th respect to the advance ruling application filed by the Company under Section 97 of Central Goods & Services tax Act, 2017 ("CGST Act"), the Company had filed on the GST portal on 17 March 2021 bearing ARN no. AD2703210325636. 1.3 During the personal hearing, a detailed explanation was provided with respect to the proposed business model of the Company, specific transactions to be undertaken under the new model and the Company's interpretation of the questions raised in the advance ruling application. In regard to the same, your goodself had requested the Company to submit inter-unit Memorandum of Understanding (MoU), if any entered within the Company for the leasing transaction between CIPL Maharashtra and other GSTINs. 1.4 In this regard, the Company hereby submits a document containing broad contours of the MoU which is proposed to be entered among different GSTINs of the Company in the new business model (Annexure 2). It must however be noted that since it is still a proposed model, no MoU has actually been executed between the different GSTINs of the Company till now. 1.5 With the aforesaid submissions, the Company believes that all documents required for rendering a ....
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.... Transfer of Property act, 1882, in this respect. Accordingly, any lease transaction is deemed as supply of services as per Schedule II, since it involves transfer of right to use the goods for a consideration. In the current case, CIPL, Maharashtra transfers the right to use the equipment for a period of time to third party customers in Maharashtra and other CIPL registrations across India for periodical considerations. In respect of the customers in Maharashtra, the Applicant is considering the transaction as leasing. CIPL, Maharashtra is discharging GST on the invoice amount which is computed on the basis of period of usage of equipment (as per pleadings made by the applicant). But the question asked is if such lease transaction can be entered into between different registrations of the same Company, whether it is covered by the scope of supply. In this regard, the Applicant has rightly stated that the Section 25 of the CGST Act has created a deeming provision whereby two registrations of the same Company are considered as distinct person under GST. Accordingly, as per the entry in Schedule I of the CGST Act, there can be supply of goods or services between such registrations ev....
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.... any actual facts and figures to answer this question. This question becomes more like hypothetical question. However, one fact is clear that applicant would be entering into the arrangement with the customer and all the other Cl PL units (located in other States) for leasing the equipment to them at the agreed leasing or hiring charges. So naturally, the rates to be applied for leasing to equipment to the other customers and to the branches of applicant would be same or similar. If such rates (for leasing of equipment) are by and large same or similar there would not be any problems as such. Since in leasing transactions the equipment is returned back to the original person who leased the equipment (after completion of lease period), the rate of leasing is normally fixed by such lessor at such a price which would cover the cost plus other overheads and profit. So, whatever rates are fixed for normal customer, if applied to branch, would not cause any serious problem. Hence, looking at the peculiar nature of business of present applicant, answer to the question asked is that, the value on which GST has to be charged would be the lease charges which would be charged by the other br....
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....clear that it is an origin based provision, requiring the registration to be taken in that State. After conjoint reading of the above provisions mentioned above, it appears that if the situs of supply is determined on the basis of movement of goods and delivery of goods. In the present case apparently the applicant is having GSTN number in all other States. The applicant has also obtained the Advance Ruling order in Karnataka State in similar matter. Further, it is also important to go through the provision of section 96 of the Central Goods and Service Tax Act 2017 which states that the Authority for advance ruling constituted under the provisions of a State Goods and Services Tax Act or Union Territory Goods and Services Tax Act shall be deemed to be the Authority for advance ruling in respect of that State or Union territory. We now refer to the decision passed by the Rajasthan Advance Ruling Authority vide its order RAJ/AAR/2018-19/29 dated 09.01.2019 in the case of M/s K. M. Trans Logistics (P) Ltd., wherein the issue raised was whether having vacant lands on lease for parking of trailers/trucks at various cities for operational purpose required registration in various cities ....