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2020 (8) TMI 525 - AAAR - GSTValuation - inclusion of value of bus passes distributed by the applicant to the commuters in the value of facilitation charges as per section 15(2) of the CGST Act, 2017 and KGST Act, 2017 - supply of service in the hands of the applicant - whether classified as merely a supply of facilitation services between BMTC and the commuters? - challenge to AAR decision. HELD THAT - In order to determine who, the recipient of service is, the agreement under which such service has been agreed to be provided, has to be examined. When the Agreement between BMTC and the Appellant is examined, it is plain that the recipient of the service is the Appellant and it is the Appellant that is obliged to pay for the services provided by BMTC. The position does not change merely because the actual users of the transportation service are the commuters. The recipient of the service is determined by the contract between the parties and by reference to (a) who has the contractual right to receive the services; and (b) who is responsible for the payment for the services provided (i.e., the service recipient). This essential difference has been lost sight of by the Appellant. In the present case there is no privity of contract between BMTC and the commuters. Such commuters may be the users of the services provided by BMTC but are not its recipients. The Education Guide provides that a person who arranges or facilitates a provision of a service, but provides the main service on his own account is excluded from the definition of intermediary . The Education Guide specifically recognizes and well explains that all situations of provision of services on a client s behalf, will not qualify as an intermediary . Where the service is provided on the own account of the service provider, the categorization as an intermediary does not arise. The relevant extract of the Education Guide issued by the C.B.E. C. in June 20, 2012 - The clarification fully recognizes an arrangement between a service provider and a service recipient, where customers of the service recipient are dealt with by the service provider, shall not qualify to be an intermediary . This principle well covers the present arrangement. The service is provided by BMTC to the Appellant as recipient but the customers of the Appellant are dealt with by the service provider. This arrangement does not make the Appellant an intermediary. The Appellant is receiving the services from BMTC on principal to principal basis and is also supplying a service to their clients on a principal to principal basis. There is no dispute that there is a supply of service by the Appellant to the employees who use the transport facility. The question is whether such service is an intermediary service or a facilitation service between BMTC and the commuters. Therefore, the decision of the Maharashtra AAR in the case of IN RE M/S. JOTUN INDIA PVT. LTD. 2019 (10) TMI 482 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA has no relevance to the issue before us. The Appellant in this case, as part of its business activity of operating and maintaining the International Tech Park, also undertakes to arrange for the transport for the staff employed with it and by the various corporate clients of the Tech Park. In this connection, the Appellant charges a fee on their clients for whose employees they are providing the transport facility. This is a service provided by the Appellant to their clients employees on their own account on a principal to principal basis as part of their business activity. It is also seen from clause 13 of the Agreement with BMTC that all commuters travelling in the buses engaged by the Appellant shall possess the identification cards and the monthly passes issued by the Appellant. This evidences that the bus passes procured by the Appellant from BMTC are issued by them to the commuters as part of the service provided by them on their own account. If they were merely facilitating the service or acting as an intermediary, as claimed by them, the bus passes would have been issued by BMTC to the commuters - we agree with the ruling given by the lower Authority and hold that the service provided by the Appellant in arranging the transportation of the employees is not rendered in the capacity of an intermediary and is not a facilitation service between BMTC and the commuters. The service of transporting the employees of the corporate clients of the International Tech Park is rendered by the Appellant on his own account on a principal to principal basis for a consideration. Whether in terms of Section 15 of the CGST Act, the cost of the bus passes would form part of the value of the service provided by the Appellant? - HELD THAT - It is amply clear that those instruments which satisfy the conditions of being accepted as consideration/part consideration against purchase of specified goods and the identities of the potential suppliers are indicated in the instruments are to be considered as Vouchers for the purposes of GST. Vouchers are neither money nor actionable claim. It is not a claim to a debt nor does it give a beneficial interest in any movable property to the bearer of the voucher. Similarly, in the instant case, the bus passes are purchased by the commuters on paying a value in money. The commuter produces the bus pass for purchasing the service of transportation. The bus pass only give the commuter the right to travel. If the commuter does not use the bus pass within the duration for which it is valid or loses the bus pass, it becomes invalid and cannot be used to procure the service of transportation. The bus pass is only a contract of carriage. A contract is not property, but only a promise supported by consideration. Thus, the bus pass is not an actionable claim as defined under Transfer of Property Act. It is only an instrument accepted as consideration/part consideration while purchasing the service from the Appellant. It cannot be agreed that the bus pass is an actionable claim not liable to GST. The ruling given by the lower Authority is agreed upon and it is held that by virtue of Section 15 of the CGST Act, the value of the service supplied by the Appellants will include the value of the bus passes as well as the facilitation charges. Decision of AAR upheld.
Issues Involved:
1. Whether the supply of service by the Appellant to the commuters is a facilitation of transport service by BMTC to the commuters. 2. Whether the value of the bus passes distributed by the Appellant to the commuters is to be included in the value of the facilitation charges. Detailed Analysis: Issue 1: Facilitation of Transport Service The Appellant has entered into an agreement with BMTC to provide transportation for employees of the corporate clients in the Tech Park. The agreement stipulates that BMTC will provide buses and bus passes to the Appellant, who in turn distributes these passes to the commuters. The Appellant argued that they merely facilitate the transportation service between BMTC and the commuters, acting as an intermediary. However, the judgment clarifies that there are two distinct transactions: 1. BMTC provides buses and bus passes to the Appellant. 2. The Appellant issues bus passes to the commuters and schedules the bus routes. The recipient of BMTC's service is the Appellant, who pays for the service. The commuters are beneficiaries but not recipients of BMTC's service. The judgment references the case of Verizon Communication India Pvt Ltd, emphasizing that the recipient is determined by the contractual agreement and the party responsible for payment. The Appellant is not an intermediary as they are not acting as an agent or broker for BMTC. Instead, they provide the transportation service on their own account, evidenced by the agreement and the issuance of bus passes by the Appellant. Issue 2: Inclusion of Bus Pass Value in Facilitation Charges The Appellant contended that the bus passes are actionable claims and should not be included in the value of facilitation charges. They argued that the bus pass is an acknowledgment of money received in advance for future services, constituting a debt. The judgment refutes this by explaining that under GST law, actionable claims are defined narrowly and do not include bus passes. The bus pass is considered a contract of carriage, not an actionable claim. The value of the bus passes must be included in the value of the service provided by the Appellant as per Section 15 of the CGST Act. The bus passes are not vouchers but instruments accepted as consideration for transportation services. Therefore, the cost of the bus passes, along with the facilitation charges, forms the total value of the service provided by the Appellant. Conclusion: The Appellate Authority upheld the Advance Ruling, concluding that: 1. The Appellant is not merely facilitating the transport service but is providing it on their own account. 2. The value of the bus passes must be included in the value of the facilitation charges as per Section 15 of the CGST Act. The appeal filed by the Appellant was dismissed on all counts.
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