2020 (10) TMI 434 - AAR - GST

Classification of goods - rate of tax - renting of e-bikes(Miracle), bicycles(Move) without operator - to be classified under the SAC 9973, Leasing or rental services without operator or otherwise? - benefit of Sl.No.17 (viia) of Notification No.11/2017 Central Tax (Rate) dated 28th June 2017 as amended - HELD THAT - It is observed, from the applicant s interpretation of law, that the applicant construed the amendment to the rate notification under Notification No. 20/2019-CT(R) dated 30.09.2019 as that of the amendment to the classification, which is incorrect. The classification of the services does not change but the rate of tax can be changed by the rate notification. It is an admitted fact that the applicant is involved in renting of e-bikes (Miracle) bicycles (Move), which are meant for transportation and hence are covered under transport vehicles. The Heading 9966 reads as Rental Services of transport vehicles with or without operators. Heading 9973 reads as Leasing or rental services with or without operator and includes rental or operational leasing of machinery and equipment, personal and household goods, but does not include leasing services of machinery and equipment of personal and household goods on a purely financial service basis. Further sub headings of 9973 pertain to other goods, IPR, etc with no mention of transport goods/vehicle. Thus the applicant s services are squarely covered under SAC 9966. The specific description is preferred to general one as per the Explanatory Notes and hence we conclude that applicant s activity is classifiable under Heading 9966. Applicant s interpretation that post 30th Sept 2019, renting/leasing of all goods without operator should be falling under Heading 9973 is not correct and hence is not tenable under the law, for the reason that the so called amendment, under Notification No. 20/2019-C.T.(R) dated 30.09.2019, is to the rate of GST for the services covered under SAC 9973, but not to the classification of the services. Further the amendment under Notification No. 20/2019-CT (R) dated 30.09.2019 amends entry bearing SI.No.17, covering the services classified under SAC 9973, to substitute Leasing or rental services, without operator, other than (i), (ii), (iii), (iv), (vi) and (viia) above . Therefore the said amendment is irrelevant to the instant case. Thus, Renting of e-bikes/ bicycles without operator cannot be classified under SAC 9973 - Leasing or rental services without operator and Sl.no.17(viia) of Notification no.11/2017 CT(R) dated 28th June 2017 as amended is not applicable to the instant case.

Summary

Issues Involved:
1. Classification of services provided by the applicant.
2. Appropriate rate of GST applicable to the services provided.
3. Interpretation of the amendment to the rate notification under Notification No. 20/2019-CT(R) dated 30.09.2019.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Applicant:
The applicant, engaged in renting e-bikes (Miracle) and bicycles (Move) in Bengaluru, sought clarification on whether their services fall under SAC 9973 - Leasing or rental services without operator. The applicant argued that their services should be reclassified under SAC 9973 due to an amendment effective from 01st October 2019, which distinguishes between rental services with and without operators. However, the Authority clarified that the classification of services did not change with the amendment; only the rate of tax was affected. The services provided by the applicant, involving the rental of transport vehicles, are thus classified under SAC 9966 - Rental services of transport vehicles with or without operators.

2. Appropriate Rate of GST Applicable to the Services Provided:
The applicant was charging GST at 18% under HSN 9966 for their rental services. They argued that post-amendment, the rate of tax should align with the rates applicable to the goods being rented. For e-bikes (Miracle), they proposed a rate of 5%, and for bicycles (Move), a rate of 12%. The Authority, however, concluded that the applicant's services are correctly classified under SAC 9966, and the rate of GST applicable remains 18%, as the classification under SAC 9973 was not applicable.

3. Interpretation of the Amendment to the Rate Notification:
The applicant interpreted the amendment under Notification No. 20/2019-CT(R) dated 30.09.2019 as a change in the classification of their services. The Authority clarified that the amendment pertained only to the rate of GST for services under SAC 9973 and did not alter the classification criteria. The amendment was intended to provide clarity on the GST rates for leasing or rental services without operators but did not impact the classification of transport vehicle rental services under SAC 9966.

Conclusion:
The Authority ruled that renting of e-bikes and bicycles without operators cannot be classified under SAC 9973 and that the amendment to Notification No. 11/2017 CT(R) dated 28th June 2017, as amended, does not apply to the applicant's case. The appropriate classification remains under SAC 9966, with an applicable GST rate of 18%.