2018 (10) TMI 1242 - AAR - GST

Supply or not - inter-state branch transfers - levy of GST - providing medium-sized heavy-duty cranes on rental/lease/ hire basis to its clients without transferring the right to use the cranes - As the movement of cranes involves significant time and cost, SML has set up various branches (SML branch offices) across India at strategic locations to minimize transportation time and costs - with the introduction of GST with effect from 1 July, 2017, all the branches of a single legal person located in different States are treated as distinct person and any supply of taxable goods/ services between distinct persons with or without consideration, is subject to applicable GST. Whether movement of tyre mounted cranes or crawler cranes from one GST registered office of SML to another registered office of SML for further supply on hire charges to customers would be treated as taxable supply under GST law or whether GST would not be let-liable on the said movement as per the clarification issued by the CBEC vide Circular No. 21/ 21/ 2017 - CGST read with Circular No. 1/ 1/ 2017 - IGST? - Held that - From the co-joint reading of section 7 and schedule - II applicant s activity of providing crane on hire is nothing but transfer of right in cranes without the transfer of title thereof and is therefore a is supply of services - if we read this provision with activities to be treated as supply even if made without consideration as mentioned in Schedule-I of the GST Act, we find that supply of goods or services or both between related person or distinct person without any consideration, when made in the course or furtherance of business is also supply as contemplated in section 7 of the GST Act - this supply is not exempt from tax under the GST Act and hence is a taxable supply. IGST would be leviable on the interstate movement of both type of cranes from SML HO to SML branch offices registered in another state for further supply on hire charges to customer and thus the circular 21/21/2017-IGST is not applicable to the facts of the present transaction. If GST is payable on the aforesaid transaction, whether the recipient office of SML duty registered under GST receiving such cranes for further supply on hire charges would be eligible to avail input tax credit of GST charged? - Held that - This question is in respect of recipient office of SML registered under the GST Act in a taxable territory other than Maharashtra State. We are, therefore, of the opinion that applicant is not proper person to raise this question and therefore we are not expressing our opinion on this question. In case when a lyre-mounted crane or crawler crane is moved from one GST registered office of SML to another registered office of SML only for upkeepment and maintenance purpose, without any further supply to unrelated customers, whether such movement of crane would be treated as taxable supply under the GST law or can it be said that it would not tantamount to supply as per clarification issued by the CREC vide Circular No. 21/ 21/ 2017 - CGST read with Circular No. 1/1/2017 - IGST? - Held that - Only that interstate movement of tyre mounted crane or crawler crane wherein the crane is moved from registered office of SML in the state of Maharashtra to another registered office of SML in other state and the movement iss solely for the purpose of upkeepment and maintenance purpose and not for further supply of the crane on hire charges - the situation as mentioned above is squarely covered by the clarification issued by Tax Research Unit vide circular no. 21/21/2017- GST DT. 22nd November, 2017. As such the interstate movement of cranes is neither a supply of goods nor supply of services and consequently no IGST would be applicable on such movement. However, tax is leviable on repairs and maintenance done for such goods. Whether GST would be payable Only on the movement of tyre-mounted cranes being goods on wheels or GST would also be payable on movement of both types of cranes (i.e. tyre-mounted cranes and crawler cranes)? - Held that - Both types of cranes i.e. tyre mounted cranes and crawler cranes are covered by the expression all goods on wheel like crane used in the circular No. 21/21/2017-GST and as such GST would be payable on the interstate movement of both types of cranes from SML HO Maharashtra to SML branch office in other state for further supply of such cranes on hire charges. What should be the value under section 15 of the Central Goods and Services Tax Act, 2017 (CGST Act) and the rules made thereunder for discharging applicable GST on movement of cranes from one GST registered office to another registered office in case the said movement is considered to be a taxable supply? - Held that - The transaction between SML HO and SML branch office is supply having regards to Section 25(4) and Schedule I of the GST Act. As per section 25(4) of the GST Act, as mentioned above, the SML HO and SML Branches are distinct persons for the purpose of this Act and as per schedule-I supply even if made without any consideration between two distinct persons as specified in section 25(4) is also supply when made in the course or furtherance of business - In the present transaction of supply we find that value considered by the applicant for levying GST is approximately 95% of the value charged to the customer by the SML. Branch. The determination value of supply as aforesaid by the applicant is as per the first proviso to Rule 28 of the GST Rules. We presume that SML Branches are eligible for full input tax credit. In such situation and as per Second proviso to Rule 28 of the (GST Rules, the value declared in the invoice shall be deemed to be open market value. In view of this we do not find any irregularity in the value of supply considered by the applicant for levying GST which is approximately 95% of the value charged by SML branches to the Customer of the branches. Ruling - The movement of tyre mounted cranes or crawler cranes from one GST registered office of SML to another registered office of SML for further supply on hire charges to customers would be treated as taxable supply under GST law - Further circular No.2i/21/2017- IGST which exempts from tax interstate movement of rigs, tools, spares, and al goods on wheels like cranes where interstate movement of such goods is not for further supply of same goods is not applicable to the facts of present transaction as in the present case interstate movement of goods from SML HO in Maharashtra to SML branches in other states is for further supply of goods on hire. The question whether the recipient office of SML duty registered under GST receiving such cranes for further supply on hire charges would be eligible to avail input tax credit of GST charged, is not answered by this authority as the applicant is not the proper person to raise this question. In case when a tyre-mounted crane or crawler crane is moved from one GST registered office of SML to another registered office of SML only for upkeepment and maintenance purpose, without any further supply to unrelated customers, such movement of crane would not be treated as taxable supply under the GST law - The impugned movement as per circular 21/21/2017-GST would be neither as a supply of goods nor supply of service. However, taxis leviable on repairs and maintenance done for such goods. GST would be payable on the movement of both type of cranes i.e. tyre mounted cranes and crawler cranes. The value for the purpose of section 15 where the recipient branch office in other state is eligible for full input tax credit would be the value declared in the invoice as open market value of the services for the purpose of levy of tax and alternatively and amount equivalent to 90% of the price charged for the supply of goods of like, kind and quality by the recipient to his customer.

Summary

Issues Involved:
1. Taxability of movement of cranes between GST registered offices of the same entity for further supply on hire charges.
2. Eligibility of input tax credit for recipient office receiving cranes for further supply on hire charges.
3. Taxability of movement of cranes for upkeepment and maintenance purposes.
4. Applicability of GST on the movement of both types of cranes (tyre-mounted and crawler cranes).
5. Determination of value under Section 15 of the CGST Act for discharging GST on the movement of cranes.

Detailed Analysis:

Issue 1: Taxability of movement of cranes between GST registered offices for further supply on hire charges
The movement of tyre-mounted cranes or crawler cranes from one GST registered office of SML to another for further supply on hire charges is treated as a "taxable supply" under GST law. This is based on Section 25(4) of the CGST Act, which treats each registration as a distinct person, and Schedule I, which considers supplies between distinct persons as taxable even without consideration. The Circular No. 21/21/2017-CGST, which exempts certain inter-State movements, does not apply here since the movement is for further supply on hire charges.

Issue 2: Eligibility of input tax credit for recipient office
The question of whether the recipient office of SML receiving cranes for further supply on hire charges can avail input tax credit is not answered by the authority. The applicant is not considered the proper person to raise this question, as it pertains to the recipient office situated in another state.

Issue 3: Taxability of movement of cranes for upkeepment and maintenance purposes
When cranes are moved from one GST registered office of SML to another solely for upkeepment and maintenance, without further supply to unrelated customers, such movement is not treated as a "taxable supply" under GST law. This is in line with Circular No. 21/21/2017-CGST, which states that such movements are neither a supply of goods nor a supply of services. However, GST is applicable on the actual repairs and maintenance services performed.

Issue 4: Applicability of GST on movement of both types of cranes
GST is payable on the movement of both types of cranes (tyre-mounted and crawler cranes) from one GST registered office to another for further supply on hire charges. Both types of cranes are covered under the expression "all goods on wheels [like cranes]" as per Circular No. 21/21/2017-GST.

Issue 5: Determination of value under Section 15 of the CGST Act
For the purpose of discharging GST on the movement of cranes, the value under Section 15 of the CGST Act should be the transaction value. In this case, SML Maharashtra charges approximately 95% of the value charged by SML branches to their customers. This valuation method is consistent with the first proviso to Rule 28 of the CGST Rules, which allows for 90% of the price charged by the recipient to the customer to be considered as the value of supply. The value declared in the invoice is deemed to be the open market value if the recipient branch office is eligible for full input tax credit.

Conclusion:
1. Movement of cranes for further supply on hire charges is a taxable supply.
2. The question of input tax credit eligibility for the recipient office is not addressed.
3. Movement of cranes for upkeepment and maintenance is not taxable, but repairs and maintenance services are.
4. GST applies to the movement of both tyre-mounted and crawler cranes.
5. The value for GST purposes is 95% of the value charged by SML branches to their customers, consistent with Rule 28 of the CGST Rules.