2022 (2) TMI 608 - AAAR - GST

Exemption from GST or not - transaction of hiring/leasing of buses by the APSRTC to the Public Transport Division (PTD) of Government of Andhra Pradesh - Entry 22 of Notification No 12/2017-Central Tax (Rate) - HELD THAT - In the instant case, the appellant classifies the transaction as 'leasing of movable and immovable assets', which is more of a general description. Whereas, the lower authority classified the same under Heading 9966 or Heading 9973 - On perusal of relevance of both the entries, Heading 9966 fits into the most specific description and should naturally be preferred over the general description as suggested by the appellant. Section 2 (42) of Motor Vehicles Act, 1988 defines State Transport undertaking, clearly envisages the possibility of this service being run / carried on by the Central Government or a State Government. In the instant case, the PTD, the state government department which is running this service shall by definition be termed as the 'State Transport undertaking'. The ruling of the AAR upheld.

Summary

Issues Involved:
1. Eligibility for exemption under Entry 22 of Notification No 12/2017-Central Tax (Rate) for the transaction of hiring/leasing of buses by APSRTC to the Public Transport Division (PTD) of Government of Andhra Pradesh.
2. Classification of the transaction as 'leasing of movable and immovable assets' versus 'hiring service or services by way of giving on hire'.
3. Interpretation of 'State Transport Undertaking' under the Motor Vehicles Act, 1988, and its applicability to PTD.

Detailed Analysis:

1. Eligibility for Exemption:
The primary issue was whether the transaction of hiring/leasing of buses by APSRTC to PTD is eligible for exemption under Entry 22 of Notification No 12/2017-Central Tax (Rate). The Authority for Advance Ruling (AAR) had ruled that the transaction is eligible for exemption. The appellant argued that APSRTC and PTD are related entities and thus, the exemption should not be extended. However, the appellate authority upheld the AAR's ruling, stating, "the activity is eligible for exemption."

2. Classification of the Transaction:
The appellant classified the transaction as 'leasing of movable and immovable assets,' which they argued does not fall under 'hiring service or services by way of giving on hire.' The appellate authority referred to the "Explanatory Notes to the Scheme of Classification of Services" issued by the Central Board for Indirect Tax and Customs, which suggests that "the most specific description shall be preferred over a more general description." The authority concluded that Heading 9966, which pertains to "Services by way of giving on hire," is the most specific description and should be preferred. Thus, the classification by the lower authority under Heading 9966 or Heading 9973 was upheld.

3. Interpretation of 'State Transport Undertaking':
The appellant contended that PTD, being a government department, does not qualify as a 'State Transport Undertaking' under the Motor Vehicles Act, 1988. However, the appellate authority noted that the term 'State Transport Undertaking' is defined in Notification No 12/2017 itself, which aligns with the definition in the Motor Vehicles Act, 1988. According to Section 2(42) of the Motor Vehicles Act, 1988, a 'State Transport Undertaking' includes any undertaking providing road transport service carried on by the Central Government, State Government, or any corporation or company owned or controlled by them. The appellate authority concluded that PTD, being a state government department running the service, qualifies as a 'State Transport Undertaking.' Therefore, the exemption under Entry 22 of Notification No 12/2017-Central Tax (Rate) is applicable.

Conclusion:
The appellate authority confirmed and upheld the ruling of the AAR, stating that the transaction of hiring/leasing of buses by APSRTC to PTD is eligible for exemption under Entry 22 of Notification No 12/2017-Central Tax (Rate). The classification of the transaction was affirmed under Heading 9966 as "Services by way of giving on hire," and PTD was recognized as a 'State Transport Undertaking' under the Motor Vehicles Act, 1988.