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2024 (11) TMI 328 - AAR - GSTClassification of services rendered by the applicant - fall under the chapter 99, heading 9973 and service code 997311 or not? - applicable rate of GST - rate provided in notification no 11/2017-Central Tax Rate dated 28.6.2017 as amended vide notification No 20/2019 Central Tax (Rate) under the Sl no 17 (viii) - HELD THAT - Transfer of right of goods requires transfer of effective control over such goods, which is not present in this case. Prior permission of the applicant has to be obtained regarding the places where the vehicle is being used. The vehicle remains under the overall control of the applicant. Repairs required, if any, are carried out by the applicant. The applicant remains the one responsible to abide by all the laws relating to motor vehicles, including damage to third parties, insurance etc. Thus, it emerges that substantial control remains with the contractor and is not handed over to the user, and therefore it cannot be said to be a transfer of the right to use the vehicle. The contracts in question do not tantamount to transfer of right to use. Accordingly, we find that the service is leasing or rental services, without operator, which falls under Sl. No. 17 (viii) of Notification No 11/2017 Central Tax (Rate) dated 28-06-2017. Such services attract GST at the rate of 18%.
Issues Involved:
1. Classification of the services rendered by the applicant under the appropriate Service Accounting Code (SAC). 2. Determination of the applicable Goods and Services Tax (GST) rate for the services rendered by the applicant. Issue-wise Detailed Analysis: 1. Classification of Services: The primary issue revolves around whether the services provided by the applicant fall under SAC 9966 or 9973. The applicant provides self-drive car rental services without operators. Initially, such services were classified under SAC 9966, which included rental services of transport vehicles with operators. However, post the amendment introduced by Notification No 20/2019 Central Tax (Rate), SAC 9966 was restricted to services with operators. Consequently, the applicant reclassified their services under SAC 9973, which pertains to leasing or rental services with or without operators. The Authority for Advance Ruling (AAR) confirmed that the services rendered by the applicant indeed fall under SAC 9973, specifically under service code 997311, which covers leasing or rental services without operators. 2. Applicable GST Rate: The second issue involves determining the applicable GST rate for the services under consideration. The applicant sought clarification on whether their services fall under Sl. No. 17 (iii) or 17 (viii) of Notification No 11/2017-Central Tax (Rate) as amended. Sl. No. 17 (iii) pertains to the "Transfer of the right to use any goods," which is akin to a sale, whereas Sl. No. 17 (viii) pertains to "Leasing or rental services, without operator," with an 18% tax rate. The AAR analyzed whether the service of renting cars without operators constitutes a "Transfer of the right to use" or merely "leasing or rental" of the cars. The distinction is significant as it affects the applicable tax rate. The AAR referred to the legal precedent set by the Supreme Court in BSNL v. Union of India, which outlined five conditions necessary for a transaction to be considered a "Transfer of the right to use." These conditions include the availability of goods for delivery, consensus on the identity of the goods, legal right to use the goods, exclusivity of possession, and non-transferability of the same rights to others. Upon examining the applicant's service agreement, the AAR found that the applicant retained substantial control over the vehicles. The applicant was responsible for insurance, repairs, and compliance with motor vehicle laws. The vehicles were monitored by the applicant, and the users had limited rights, restricted to personal use. Therefore, the transaction did not satisfy the conditions for a "Transfer of the right to use," as substantial control remained with the applicant. Consequently, the AAR ruled that the services provided by the applicant fall under Sl. No. 17 (viii) of Notification No 11/2017-Central Tax (Rate), attracting a GST rate of 18% (9% CGST and 9% SGST). Conclusion: The AAR concluded that the services rendered by the applicant are classified under SAC 9973, service code 997311, and the applicable GST rate is 18%, as per Sl. No. 17 (viii) of Notification No 11/2017-Central Tax (Rate) as amended. The applicant's services do not constitute a "Transfer of the right to use" but are categorized as "leasing or rental services, without operator."
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