2019 (10) TMI 564 - AAR - GST

Classification of supply - supply of goods or services - selling Volvo branded trucks to Volvo Sweden - export of services - zero rated supply or not? - HELD THAT - The applicant is not charging the customer any amount because of a clear commitment from M/s. Volvo Sweden that the amount spent for the parts and services involving the parts are going to be reimbursed by M/s. Volvo Sweden. In case of any parts or services which are provided to the customers which are not part of the warranty services, then such amounts are charged to the customers by the applicant or his dealers. Since the amount is paid M/s. Volvo Sweden, in monetary terms by issuing credit notes, the consideration covers this amount and it is immaterial who makes the payment. Hence there is a supply of parts and services to the customers for consideration and amounts to a supply transaction with the applicant being the supplier and the customer being the recipient of services, but the amount collectable from the customer is being paid by Volvo Sweden. This is clearly proved by the fact that M/s. Volvo Sweden is also issuing credit notes to the dealers of the applicant and not just to the applicant, if such service is provided by the dealers. The transaction is a transaction within the country and is a composite supply of goods or services to the customers by the applicant and hence does not amount to export of services as M/s. Volvo Sweden is not the recipient of services provided by the applicant, but only pays the consideration to the provider of such services. The applicant is providing composite supply of goods and services to the customers where in the principal supply is that of goods or services depending on the nature of individual case - The transaction is an intra-State or inter-State transaction (but not export transaction) depending on the place of supply - Since this transaction is not an export of services, the transaction is not a Zero-rated Supply under the IGST Act.

Summary

Issues Involved:
1. Whether the supplies made by the Applicant to Volvo Sweden constitute a supply of services.
2. Whether the supplies by the Applicant amount to export of services to Volvo Sweden and are hence zero-rated under GST law.

Issue-wise Detailed Analysis:

1. Supply of Services:
- The Applicant, a joint venture between the Volvo Group and Eicher Motors Limited, is involved in selling Volvo branded trucks and buses in India and providing after-sale support services, including warranty services.
- The Applicant sells products with a standard warranty of 1 to 2 years, included in the sale price, and is responsible for servicing warranty claims in India on behalf of Volvo Sweden.
- The Applicant processes warranty claims, performs necessary repairs or replacements, and invoices Volvo Sweden for reimbursement.
- The Applicant argues that the transaction is a composite supply of services, with the principal supply being the warranty service, and the supply of replacement parts being ancillary.

2. Export of Services and Zero-Rating:
- The Applicant contends that the transaction qualifies as an export of services under Section 2(6) of the IGST Act, 2017, which defines export of services based on five conditions:
1. Supplier located in India.
2. Recipient located outside India.
3. Place of supply outside India.
4. Payment received in convertible foreign exchange.
5. Supplier and recipient are distinct entities.
- The Applicant asserts that all these conditions are satisfied, making the transaction zero-rated under Section 16(1) of the IGST Act.

Findings and Discussion:
- The Authority examined the transaction and found that:
- The Applicant sells products inclusive of a standard warranty, which constitutes a supply of goods.
- Warranty services are provided to customers on behalf of Volvo Sweden, with reimbursement from Volvo Sweden.
- The customer interacts only with the Applicant for warranty claims, not with Volvo Sweden.
- The Applicant performs repairs or replacements and invoices Volvo Sweden for reimbursement.
- The transaction involves a supply of goods or services to customers, with the consideration paid by Volvo Sweden.
- The Authority concluded that the transaction is a composite supply of goods and services to customers within India, not an export of services.

Ruling:
1. The Applicant is providing a composite supply of goods and services to customers, with the principal supply depending on the nature of each case.
2. The transaction is an intra-State or inter-State transaction, not an export transaction.
3. Since the transaction is not an export of services, it is not a "Zero-rated Supply" under the IGST Act.