TaxTMI 
TaxTMI 
2024 (10) TMI 714
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....under the "GST Act". The issue raised by M/s. RAJASTHAN TOURISM DEVELOPMENT CORPORATION LIMITED, Third Floor, Paryatan Bhawan, Khasha Kothi, Jaipur-302001, Rajasthan (hereinafter "the applicant") is fit to pronounce advance ruling as it falls under the ambit of the Section 97 (2) (a) given as under: (e) Determination of the liability to pay tax on any goods or services or both; A. SUBMISSION OF THE APPLICANT (in brief):- M/s. Rajasthan Tourism Development Corporation Limited (hear in after called as RTDC) is fully owned by Government of Rajasthan had run a Palace on Wheels (hear in after called as POW) a luxury tourist train in collaborated with Indian Railways as per agreement dated 23-11-2021. In the matter, M/s. Rajasthan Tourism Development Corporation Limited (hereinafter referred to as "RTDC"), a wholly Rajasthan government-owned entity operating the Palace on Wheels (POW) luxury tourist train in collaboration with Indian Railways, certain complexities have arisen in relation to the Operation and Maintenance Service Agreement with M/S Cube Construction Engg. LTD in Consortium with M/S Easy Toll Solutions Pvt. Ltd (hereinafter collectively referred to as the ....
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....Expenses 7.3.2 Existing bookings of POW with RTDC/its General Sales Agents (GSAs) shall be transferred to the Operator and the Operator shall be liable to accommodate such booking starting from the first trip/ tour of POW after signing of Agreement between the parties. 7.3,3 Operator shall develop website/ mobile app for online booking of tours. All tours shall be booked online only. Authority shall be given access to website/ mobile app to view the bookings, cancelled bookings, guests travelled on the train, guest details, etc. Operator, upon expiry/prior termination of the Agreement, shall handover the POW booking portal and its title/ownership to RTDC without any fee/charges. 7.3,4 Website/mobile app for POW shall be allowed to set-up a link on RTDC portal through which user can navigate to the separate POW website (operated & managed by Operator). 7.3.5 Operator shall be responsible for bearing business risk related to booking of tours and subsequent travel on POW. Authority shall not be responsible for ensuring the minimum number guaranteed guests on POW." 3) OBLIGATIONS OF THE RAILWAY ADMINISTRATION/RAILWAY ADMINISTRATION(Point no 8 agre....
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....BGT Policy and amendments thereof for operation of the Palace on Wheels (POW). Failure of making such payment within the stipulated timeframe Intimated by the Railway Administration shall constitute Event of Default of the Operator and shall entitle the RTDC to recover such payments by revoking the Performance Security which shall be replenished to its original amount within 30 days of such revocation, 9.2.1 In casa any penalties/damages/interests are imposed by the Railway Administration on RTDC due to non-payment of the Haulage and other Charges by the Operator, the same shall be recovered from the Operator. 9.2.3 In case the Operator does not the clear all outstanding dues to Railway Administration and/or the replenish the Performance Security to its original amount within the stipulated timeframe intimated by the RTDC and/or the Railway Administration then it shall be considered as Event of Default of the Operator and shall entitle the RTDC to initiate termination of the Agreement." 9.3 Statement of Applicable Charges (Point no 9.3 agreement) 9.3.1 A communication received from the Railway Administration with respect to the Applicable Charges for operati....
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....al Tax (Rate) and vide S. No. 5 of the Notification No. 13/2017-Central Tax (Rate), the instant haulage charges shall be liable to GST at the rate of 5% rate under forward charge mechanism. Right to Use (RU) charges (Para 8.5) SAC 997311 As the instant RIJ charges are payable by Service Provider against having possession of rakes/coaches, such charges are essentially in the nature of leasing of wagons/rental charges and thus, is a supply of services and shall be eligible to GST under reverse charge mechanism i.e., Service Provider shall be liable to discharge GST owing to supplier, namely MoR being Central Government. With respect to the GST rate, vide S. No. 17 of the Notification No. 11/2017-Central Tax (Rate), GST rate as applicable on supply of the rakes/coaches being given (18% GST in case of the supply of Chapter 86 goods) shall be applicable. Stabling Charges (Para 8.7) SAC 997311 The instant service which is similar to that of RU charges supply i.e.., supply of services by way of leasing of wagons/rental charges and thus, is a supply of services and shall be liable to GST under reverse charge mechanism at the GST rate as applicable on supply of rakes/coaches. 18....
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....to a clear and comprehensive agreement with operator where in it was provided that: "Point no 9 Operator (through RTDC) shall pay all applicable charges, RU charges for rakes, power car cost, staff cost, etc.) within the given timeframe as communicated by Indian Railways for operation of POW. For the purpose of payment of applicable charges/fee to Indian Railways. RTDC shall act as the liaison only between the operator and the Indian Railways and overall responsibility of making such payments shall lie to the operator only." Therefore, RTDC is working as a pure agent, for these expenses which is be incurred by operator. Separate Disclosure on Invoice: Further, it was proposed that RTDC will clearly indicate the expenses incurred as a pure agent separately on the invoice. The amount paid to the Railway will be shown as reimbursement, and RTDC should not be included in the value of taxable supply. No Mark-up or Profit or Input Tax credit (ITC): On these Charges RTDC will not make any mark-up or profit and did not take the Input Tax credit (ITC) on the expenses incurred on behalf of the operator therefore reimbursement will be a pass-through without any addi....
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.... were recovered from the Operator? Q2. Why not the said charges were come under the scope of the pure agent? Q3. If charges paid to the Railways on behalf of Operator were not come under the scope of the pure agent or liable to be tax then what will be the tax Rate? D. PERSONAL HEARING In the matter, personal hearing was granted to the applicant on 15.03.2024. Mr. Ujjval Sharma C.A., Mr. Raj Kumar Sharma (RTDC AAO) and Mr. Nitin C.A. Authorized Representative appeared for personal hearing. They reiterated the submission already made by them and stated to submit the agreement of Railway and RTDC within 7 days. E. COMMENTS OF THE JURISDICTIONAL OFFICER:- Comments received from the office of the Joint Commissioner, State Tax, Circle-H, Zone-I, Jaipur, Rajasthan vide letter NO. 1156 dated-08.02.2024 are as under: Questions and Answers for which present AAR has been filed:- 1. The application for advance ruling has been filed by M/s. Rajasthan Tourism Development Corporation Limited seeking advance ruling on the following questions: - i. Whether GST was required to be paid on the charged paid to the Railways on behalf of the operator and those charges we....
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....e agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; and (iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account. Explanation. - For the purposes of this rule, the expression "pure agent" means a person who- (a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both; (b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure 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. Illustration. - Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of Company B. Other than its service fees, A also r....
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....mentioned facts, the questions raised by the applicant may be answered as following: Question 1- Whether GST was required to be paid on the charged paid to the Railways on behalf of the operator and those charges were to be recovered from the operator? Answer- Yes, GST was required to be paid on the charges paid to the Railways on behalf of the operator. Question 2- Why not the said charges come under the scope of pure agent? Answer- On the basis of the discussion held in the above mentioned points, it can be ascertained that RTDC doesn't fulfill the mandatory condition of being a pure agent, which is, getting into an agreement with the recipient of the service. Hence, charges that RTDC pays to Indian Railways on behalf of M/s. Cube Constructions Engg. LTD does not come under the scope of pure agent. Question 3- If charges paid to the Railways on behalf of the operator do not come under the scope of pure agent and liable to be taxed, what will be the rate of tax? Answer- The rate of GST shall be in accordance with services provided by RTDC to Indian Railways as clarified by Railway Board in its order dated 29.11.2021. F. ....
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....ght to advertising and branding of the Bharat Gaurav Trains 3.2.5 The right to decide the business model including themes, route, itinerary and other attributes connected with this model subject to operational feasibility to be determined by the Railway Administration. 3.2.6 The right to obtain access to Stations as per Approved Itinerary for boarding and alighting of the Tourist. (c) Baharat Gaurav Trains Operations and Maintenance: 6. Operations/ Maintenance 6.1.1 The Service Provider operate Bharat Gaurav Trains will be uniquely numbered and operated according to the time-table defined in the itinerary and approved by Zonal Railways. The Bharat Gaurav Trains will be at par with the mail/exp trains of Indian Railways for the purpose of train operations and punctuality. Accordingly, the Bharat Gaurav Trains will be controlled through COA, monitored through ICMS. The running of the Bharat Gaurav Trains shall be monitored by Divisional controls of the Railway Administration and its punctuality will be accorded priority accordingly. (d) Applicable charges payable to the Railways administration: The Service provider (RTDC)....
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....sub-contractors and other representatives from and against any and all claims, demands made by any third parties against the Railway Administration, its employees workers, contractors, sub-contractors and workers, contractors, sub-contractors and other agents and representatives for or in relation to, any Third Party Consignment Claims. 5) Further, the applicant (RTDC) in order to get the operation of Palace on Wheels (POW) smoothly, sub-lated this task of right to operate, maintain and manage the POW luxury tourist train, including the carriage of tourists on the Railway administration, rail network in conformity with the provisions of Bharat Gaurav Train policy issued by the railway administration to M/s. Cube Construction Engg. LTD in Consortium with M/s. Easy Toll Solutions Pvt Ltd (hereinafter collectively referred to as the "Operator") and entered an agreement dated 28.06.2023 with operator the details of which are as under- (a) Scope of the Agreement: 3.1.1. Subject to the provisions contained in this Agreement, the Authority hereby grants to the Operator, throughout the duration of this Agreement, a right to operate, maintain and manage the Palace on Wh....
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.... RTDC. j) timely payment of GST, corporate tax and all other applicable taxes as prevailing, laws, rules and regulations including any change/ amendments thereof. (b) Role of Railway Administration in Operation of the POW: 3.2.1. Subject to the provisions contained in the Agreement signed between the RTDC and Railway Administration and in this Agreement, the following services shall be provided by Railway Administration with regards to operation of Palace on Wheels on payment of various charges (RU charges, fixed and variable haulage charges, stabling charges, power car charges, etc.) by the Operator as per BGT Policy and amendments thereof and any other order/ circulars issued by Railway Administration time-to-time for operation POW: a) All the facilities necessary for the operation of the Palace on Wheels (POW) such as use of track, signalling, station premises, locomotives, fuelling of cars for operational requirements during run, telecommunication, maintenance staff, access to and from platforms, halts/stabling facilities at stations, watering, and maintenance facilities. b) Safety, maintenance, and periodical overhauling of the coac....
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....tten request from the Operator, make available, from time to time, all relevant circulars, notifications and like documents to the Operator pertaining to the performance of this Agreement or the rights and obligations of the Parties hereto. g) Upon written request from the Operator, and subject to the Operator complying with Applicable Laws, provide all reasonable support and assistance to the Operator in procuring Applicable Permits required from any Governmental Instrumentality for implementation and operation of the Palace on Wheels (POW); h) Upon written request from the Operator, provide reasonable assistance to the Operator in obtaining access to all necessary infrastructure facilities and utilities, on terms no less favourable to the Operator than those generally available to commercial customers receiving substantially equivalent services; i) not do or omit to do any act, deed or thing which may in any manner be violative of any of the provisions of this Agreement; j) support, cooperate with and facilitate the Operator implementation and operation of the Project in accordance with the provisions of this Agreement; (d) Obligation ....
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....pplicable charges/fee to Railway Administration under the BGT Policy and amendments thereof for operation of the Palace on Wheels (POW). Failure of making such payment within the stipulated timeframe intimated by the Railway Administration shall constitute Event of Default of the Operator and shall entitle the RTDC to recover such payments by revoking the Performance Security which shall be replenished to its original amount within 30 days of such revocation. 9.2.2. In case any penalties/ damages/ interests are imposed by the Railway Administration on RTDC due to non-payment of the Haulage and other Charges by the Operator, the same shall be recovered from the Operator. 9.2.3. In case the Operator does not the clear all outstanding dues to Railway Administration and/or the replenish the Performance Security to its original amount within the stipulated timeframe intimated by the RTDC and/ or the Railway Administration then it shall be A considered as Event of Default of the Operator and shall entitle the RTDC to initiate termination of the Agreement. (f) Revenue share to RTDC: 10.1.1. In lieu of rights provided for operation of Palace of Wheels (P....
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.... to reach at the right conclusion let us examine the definition and legal provisions that are relevant here: Section 7. Scope of supply.- (1) For the purposes of this Act, the expression - "supply" includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration. Explanation .-For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another; (b) import of services for a consideration whether or not in the course or furtherance of busines....
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....cant being recipient of service from the Indian Railways hence required to pay the GST on the charges paid to the Indian Railways and Applicant has sub-late this task to the operator for smooth operation Of Palace On Wheels (POW), operator is supposed to pay the charges to the Applicant and not Indian Railways along with GST as per terms and conditions Of Agreement dated 28.06.2023 entered between them (Rajasthan Tourism Development Corporation Ltd. and the operator) 8) The second question asked by the Applicant is that why not the said charges come under the scope of the pure agent 9) Before proceeding further it is very much essential to discuss the definition of Agent which in term of Section 2 (5) of CGST Rule,2017 is as under- 'agent" means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another; Though the definition of "Pure Agent" is nowhere mentioned but on the basis of details downloaded from GOOGLE, it is as under- A pure agent is a registered taxable p....
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.... supplies on his own account. 10) In the instant case, we find that the Applicant has not entered into a contractual agreement with the recipient of supply i.e. operator to act as his pure agent to incur expenditure or costs in the course of supply of services other than the service provided to the recipient of service on his own account. The Applicant does not receive any additional amount from the Operator for other than the service provided to the operator with regard to operation of POW. Since the Applicant has not procured any additional service, there is no question of holding to the title of service and therefore they cannot use any service for their own interest. 11) Further we find that- (i) The supplier i.e. Applicant has not made any payment to the Indian Railways on authorization by the operator. (ii) The applicant has not separately mentioned in the invoice issued by them the payment made as a pure agent to the recipient of services. (iii) The Applicant has not procured any service for recipient of supply in addition to the supply of service on his own account e.g. right to operate maintain and manage the Palace on Wheel (POW). 12....