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2020 (9) TMI 1104 - AAAR - GSTClassification of services - GTA Services or not (SAC 996791) - sub-contractor - Appellant would be issuing the consignment note to M/s. Posco ISDC Pvt. Ltd.in addition to the consignment note, issued by M/s. Posco ISDC Pvt. Ltd. to their clients - GST under forward charge mechanism - N/N. 0/2017-Central Tax (Rate), dated 22.08.2017 - input tax credit - Procedurally, is it correct to have two GTA Service Providers and two consignment notes for the same movement of goods, one issued by the Appellant as a sub-contractor and the other by M/s. Posco ISDC Pvt. Ltd. as the main contractor? - challenge to AAR decision. HELD THAT - On perusal of the aforementioned meaning of the GTA, it is clearly seen that issuance of the consignment note is an essential condition for any person to act as GTA - On perusal of the CGST Act, 2017, it is revealed that the term consignment note is not defined anywhere in the CGST Act, 2017. However, the mention of the same was made under the explanation to Rule 4B of the Service Tax Rules, 1994. In the subject case, the Appellant is not receiving goods directly from the consignor or consignee of the goods, but from M/s. Posco ISDC Pvt. Ltd., who themselves are acting as GTA, where they are receiving the goods from the consignor/consignee, and issuing the consignment notes in respect thereof The Appellant is merely a Goods Transport operator here and not a GTA - Since, in the subject case, it is M/s. Posco ISDC Pvt. Ltd. who would be generating the E-way bill prior to the movement of goods by road, therefore, M/s. Posco ISDC Pvt. Ltd. would be the actual transporter. Now, once the identity of the transporter is revealed, which in the subject case is M/s. Posco ISDC Pvt. Ltd., the contention of the Appellant that they would also be acting as GTA in the proposed arrangement is not sustainable. In a single transaction of transportation of goods, as consignment note is an evidence of custody of goods taken from owner of the goods and the privity of contract exists between the owner of goods and the GTA, and thus, it is the GTA, which issues the consignment note. The Appellant is simply hiring out their transport vehicles to M/s. Posco ISDC Pvt. Ltd. for a consideration, hence, their services would be classified under the Heading 9966 of Notification No. 11/2017-C.T.(Rate), dated 28.06.2017, bearing the description rental services of transport vehicles . Appellant's contention wherein it has been argued that when the whole work is sub-contracted, the classification of the service cannot change - HELD THAT - It is opined that the Appellant's contention is fallacious as it has been established above that the actual transporter in the subject case is M/s. Posco ISDC Pvt. Ltd, and not the Appellant, therefore, it would not be proper to say that the whole work in the subject case, which is transportation of the goods by road, acquired by M/s. Posco ISDC Pvt. Ltd. from their clients, have been sub-contracted to the Appellant. The Appellant is merely supporting M/s. Posco ISDC Pvt. Ltd. in their activity as the GTA by way of renting out their transport vehicle. Appellant's contention that the Advance Ruling Order has imposed restrictions on them in doing business as the order passed by the Advance Ruling Authority does not permit them to charge 12% GST on the forward charge basis in terms of Notification No.20/2017-C.T.(Rate), dated 22.08.2017 - HELD THAT - It is observed that the ruling, passed by the MAAR, is in the context of the proposed arrangement propounded by the Appellant for the purpose of seeking Advance Ruling in the matter, where the Maharashtra AAR held that the activities carried out by the Appellant in the subject transaction, as discussed above, are not those of GTA. The Advance Ruling order does not debar the Appellant from acting as GTA in other transactions, where they enter into transport contract with the consignor or consignee directly. Order passed by AAR upheld.
Issues Involved:
1. Classification of services rendered by the Appellant as GTA services. 2. Entitlement of the Appellant to charge GST at 12% under the forward charge mechanism. 3. Eligibility of M/s. Posco ISDC Pvt. Ltd. to claim ITC on the GST charged by the Appellant. 4. Procedural correctness of having two GTA service providers and two consignment notes for the same movement of goods. Detailed Analysis: Issue 1: Classification of Services Rendered by the Appellant as GTA Services The Appellant, registered as a Goods Transport Agency (GTA), sought to classify their services under SAC 996791. The Maharashtra Advance Ruling Authority (MAAR) ruled that the services rendered by the Appellant to M/s. Posco ISDC Pvt. Ltd. as a sub-contractor would not be classified as GTA services. The ruling emphasized that the Appellant did not have a transportation contract with the actual consignor/consignee and did not issue consignment notes directly to them. Instead, M/s. Posco ISDC Pvt. Ltd., which had the transportation contract and issued consignment notes, was classified as the actual GTA. The Appellant's role was limited to providing transport vehicles, classifiable under "hiring out of transport vehicles." Issue 2: Entitlement to Charge GST at 12% Under Forward Charge Mechanism MAAR held that since the Appellant could not act as a GTA in the proposed transaction, they were not entitled to charge 12% GST on a forward charge basis as per Notification No. 20/2017-C.T. (Rate), dated 22.08.2017. The Appellant's services were classified as non-GTA transportation services, thus disqualifying them from charging GST at 12%. Issue 3: Eligibility of M/s. Posco ISDC Pvt. Ltd. to Claim ITC MAAR refrained from answering this question, stating that it did not pertain to the Appellant and should be addressed by M/s. Posco ISDC Pvt. Ltd. This decision was based on the provisions of Section 97(2) of the CGST Act, 2017, which limits the scope of questions that can be addressed in an advance ruling. Issue 4: Procedural Correctness of Two GTA Service Providers and Two Consignment Notes MAAR declared that the question of whether it is procedurally correct to have two GTA service providers issuing two consignment notes for the same movement of goods was not covered under Section 97(2) of the CGST Act, 2017. Therefore, they did not have jurisdiction to pass a ruling on this matter. Appellant's Grounds of Appeal: The Appellant argued that the Advance Ruling Authority erred in its interpretation and classification of their services. They contended that the whole work being sub-contracted should not change the classification of the service. The Appellant also claimed that the ruling deprived them of the right to opt for forward charge and claim input tax credit (ITC). They further argued that the issuance of a lorry receipt should be treated as a consignment note and that having two consignment notes for the same transportation of goods is logical and permitted. Respondent's Submission: The Respondent concurred with the Appellant on the classification of services as GTA and the entitlement to opt for the forward charge mechanism. However, they did not comment on the procedural correctness of having two GTA service providers and two consignment notes. Personal Hearing: During the personal hearing, the Appellant reiterated their arguments and submitted case laws from the Rajasthan and Uttarakhand Advance Ruling Authorities to support their contention. The jurisdictional officer reiterated the submissions made before the Advance Ruling Authority. Discussions and Findings: The Appellate Authority examined the meaning of GTA under the CGST Act, 2017, and concluded that issuance of a consignment note is an essential condition for any person to act as a GTA. Since the Appellant did not issue consignment notes directly to the consignor/consignee and did not generate E-way bills, they could not be classified as a GTA. The Appellant's services were classified under "rental services of transport vehicles." Order: The Appellate Authority upheld the Advance Ruling Order No. GST-ARA-39/2019-20/B-24, dated 05.03.2020, passed by the Maharashtra Advance Ruling Authority. The appeal filed by the Appellant was dismissed.
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