2021 (6) TMI 522 - AAR - GST

Exemption from GST - service of operating mini AC buses by the applicant for B.E.S.T (Brihan Mumbai Electricity Supply Transport Undertaking) - Classifiable under Tariff Heading 9966 or not - rate of tax at 12% as renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient or 18% as rental service of transport vehicles with or without operators? - benefit of N/N. 12/2017-CT(R) dated 28.06.2017 or not? - HELD THAT - In the instant case, the applicant has an agreement with BEST for operation and maintenance of AC mini buses in Mumbai and suburban areas. The applicants owns buses, provides drivers and also incurs expenses on fuel and maintenance of the buses. For all these services provided by the applicant, BEST is paying them service charges on kilometer basis - As per the agreement, Vehicle Registration Charges, Insurance premium for the Buses and other assets owned by the Operator and Motor Vehicle tax within Municipal Limit of Mumbai area will be paid by applicant whereas passenger tax, stage carriage permit, GST and toll tax will be paid by BEST. Whereas, the ownership of the buses lies with the applicant, BEST shall have the exclusive authority to determine routes and schedules and even the drivers shall be under the administrative control of BEST. There is transfer of right to use the buses to BEST by way of effective possession as well as effective control as is seen from the fact that the buses are plying as per directions and control of BEST and applicant is not free to use the said buses for any purpose other than complete dedication to BEST - In the case of transportation of passengers, the recipient of service would be the passenger whereas in the case of renting of any motor vehicle, the recipient would not be the passenger. In the subject case, the consideration for supply of service is charged from BEST and not the passenger. Therefore in the subject case it is clear that the recipient of service is BEST - the subject activity, amounts to renting of motor vehicle and shall qualify as a taxable activity under the provisions of the GST Laws. Since the subject activity is taxable, the provisions of Notification No. 12/2017-CT (R) dated 28.06.2017 is not applicable in the subject case. Whether the service of operating mini AC buses as in the subject case would be subject to GST @12% under Tariff Heading 9966 i.e. renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient inserted by way of amendment Notification No. 31/2017 dated 13.10.2017? - HELD THAT - In the subject case, there is a supply of rental services of transport vehicle where the operator (driver) is also supplied by the applicant to BEST. Hence such rental services of buses as in the subject case would attract 18% GST - The subject case is clearly covered by Entry Sr. No.10 of Notification No. 11/2017 - CT (Rate) dated 28.06.2017 in as much as there is a Rental services of transport vehicles with or without operators. Therefore for the period up to 13.10.2017 i.e when the said Sr. No. 10 was amended, the applicant s activity would attract GST @ 18%.

Summary

Issues Involved:
1. Exemption from GST for operating mini AC buses under Tariff Heading 9966.
2. Applicability of GST @12% for operating mini AC buses under Tariff Heading 9966.
3. Applicability of GST @18% for operating mini AC buses under Tariff Heading 9966.

Issue-wise Detailed Analysis:

1. Exemption from GST for Operating Mini AC Buses Under Tariff Heading 9966:

The applicant sought clarification on whether the service of operating mini AC buses for BEST would be exempt from GST under Tariff Heading 9966, as per Notification No. 12/2017-CT(R) dated 28.06.2017. The applicant argued that their service involves renting out buses to BEST, which should be exempt under the said notification. However, the authority found that the service provided by the applicant involves renting of buses where effective possession and control are transferred to BEST. The buses are operated under BEST's control, and the applicant is not free to use them for any other purpose. Therefore, the service does not qualify for exemption under the mentioned notification.

2. Applicability of GST @12% for Operating Mini AC Buses Under Tariff Heading 9966:

The applicant contended that their service should be subject to GST @12% under Tariff Heading 9966, as per Notification No. 31/2017 dated 13.10.2017, which amended Notification No. 11/2017-CT(R) dated 28.06.2017. The authority agreed with the applicant's interpretation, stating that the service involves renting of motor vehicles where the cost of fuel is included in the consideration charged from BEST. Therefore, the service is taxable at 12% GST from 13.10.2017 onwards, provided the applicant does not avail input tax credit on goods and services used in supplying the service, except for input service in the same line of business.

3. Applicability of GST @18% for Operating Mini AC Buses Under Tariff Heading 9966:

The applicant also sought clarification on whether their service would be subject to GST @18% under Tariff Heading 9966, as per Notification No. 11/2017-CT(R) dated 28.06.2017. The authority confirmed that the service provided by the applicant falls under the category of rental services of transport vehicles with or without operators. Therefore, the service was subject to GST @18% until the amendment on 13.10.2017. Post-amendment, the applicable GST rate is 12%, as discussed in the previous issue.

Conclusion:

The authority concluded that the service of operating mini AC buses for BEST is not exempt from GST under Notification No. 12/2017-CT(R). The service is subject to GST @18% until 13.10.2017 and @12% thereafter, provided the conditions regarding input tax credit are met. The detailed analysis and findings support the authority's decision, ensuring compliance with the relevant GST notifications and provisions.