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2021 (7) TMI 973 - AAR - GSTClassification of supply - supply of services or not - pallets, crates and containers leased by CHEP India Private Limited located and registered in Karnataka to its other GST registration located across India - Valuation for calculation of GST - GST charged on lease charges or the value of equipment in terms of Section 15 of the CGST Act and KGST Act read with relevant Rules - documents that should accompany the movement of goods from CUPL, Karnataka to CIPL, Kerala - movement of equipment from CIPL, Kerala to CIPL, Tamil Nadu on the instruction of CIPL, Karnataka - movement of goods or not. Whether the transfer of assets on lease to his own branches having separate registrations in other States could be termed as Lease and accordingly taxable as supply of services? - HELD THAT - Section 9(1) of the CGST Act, 2017 mandates that the levy of tax on the intra-State transactions of supply and Section 22 and 24 requires all taxable persons who are located in a State to obtain registration in that State. Since GST is a tax within the State and registrations are State-specific, the transactions of interstate nature are brought under the IGST Act and the Centre is liable to collect the tax and apportion the same to the Centre and States based on the destination of such goods or services as GST is a consumption based tax. Therefore all stock transfers from one State to another state are treated as supplies and would be covered under the term transfer . Since the registrations are state-specific, the transactions between the two entities of the same concern would be covered under deemed supplies between two deemed distinct persons. Since the applicant states all the goods are purchased in the account of CIPL, Karnataka, as per the provisions of the CGST Act, 2017, the goods are held to be in the account of CIPL, Karnataka as owned assets and in the account of CIPL, Kerala as leased assets, for which CIPL, Kerala is liable to pay consideration for the lease transactions - Further, since the two entities are deemed to be distinct persons, and the transfer of goods are effected from CIPL, Karnataka to CIPL, Kerala without any transfer of ownership of such goods, the same amounts to supply of service as per entry no. 1(b) of the Schedule II to the CGST Act which states that any transfer of right in goods or of undivided share in goods without transfer of title thereof, is a supply of services. Valuation of supply - HELD THAT - The transaction value which is the price actually paid cannot be treated as the value of supply as the supplies are between the related persons, i.e. the branches of the same company - the recipient, CIPL, Kerala who is the recipient of the goods is eligible for full input tax credit on the transaction between the applicant and the CIPL, Kerala and hence the value declared in the invoice would be the value of supply of goods or services or both as per the second proviso to Rule 28 and hence would be treated as the value of such supply. What documents should accompany the movement of goods from CIPL, Karnataka to CIPL, Kerala? - HELD THAT - In the pertinent case, as the goods are moving out of the State as a consequence of a lease transaction which is a service, the applicant has the option of issuing the tax invoice either before the provision of service or after the provision of service and in case the applicant opts to issue the tax invoice after the provision of service, the time limit in terms of Rule 47 is applicable. This means to say, that there is a possibility that the invoice may not be issued at the time of provision of service. It is seen that the applicant is not supplying goods, but services which involve the movement of such goods given on lease/ rent and hence they are liable to issue a delivery note as per Rule 55 at the time of removal of such goods for the purposes of renting. Further, they shall also generate an e-way bill for movement of such goods as per Section 138(1) based on the details of such delivery note before the movement of such goods and consignment value of the goods shall be the market value of such goods and not the value of supply of services involved in such transaction. Movement of goods from CIPL, Kerala to CIPL, Tamil Nadu on the instruction of CIPL, Karnataka - HELD THAT - CIPL, Kerala would be acting in two capacities, first as an independent entity under the CGST Act for the leased goods while the lease contract of the specific goods is in force and next as a bailee of CIPL, Karnataka. Once the lease contract is over and the goods are no more under the control of CIPL, Kerala. If the goods are to be transferred immediately after the contract of lease is over, the CIPL, Karnataka should enter into the lease transaction with the CIPL, Tamil Nadu and raise a delivery note and e-way bill with ship from address as CIPL, Kerala and Ship to address as CIPL, Tamil Nadu for those specific goods which are given on lease or rent and in effect, it would amount to CIPL, Karnataka picking the goods and sending to CIPL, Tamil Nadu. It cannot be said that the goods are moving not as a result of supply under section 7 of the CGST Act, 2017. It cannot be termed as a mere movement without any involvement of supply and the said transaction of supply of goods on rental or lease basis by CIPL, Karnataka to CIPL, Tamil Nadu and is liable to tax in the hands of CIPL, Karnataka if the transaction is between CIPL, Karnataka and CIPL, Tamil Nadu. Further the services provided by CIPL, Kerala to CIPL, Karnataka in facilitating the transportation of goods to CIPL, Tamilnadu are exigible to GST - from the applicant's point of view, his lease contract with CIPL, Kerala is continuing and the goods leased should ultimately come back to the applicant from CIPL, Kerala and CIPL, Kerala is liable to pay lease rentals to CIPL, Karnataka. Documents needed to be carried - HELD THAT - The documents to be carried for the movement is a delivery note and e-way bill issued by CIPL, Karnataka if the movement is as a result of supply by CIPL, Karnataka or a delivery note and e-way bill issued by CIPL, Kerala is the movement is as a result of supply by CIPL, Kerala.
Issues Involved:
1. Taxability of lease transactions between different GST registrations of the same company. 2. Determination of the value on which GST should be charged. 3. Required documentation for the movement of goods. 4. Tax implications of inter-state movement of goods on instruction. 5. Documentation for inter-state movement of goods. Issue-wise Detailed Analysis: 1. Taxability of Lease Transactions: The applicant sought clarity on whether the lease of pallets, crates, and containers from its Karnataka registration to other GST registrations across India constitutes a taxable supply of services. The judgment clarified that under Section 7(1) of the CGST Act, 2017, such transactions are deemed supplies between distinct persons as per Section 25(4) of the CGST Act. The transfer of goods on lease without transfer of ownership is considered a supply of services under entry no. 1(b) of Schedule II of the CGST Act. 2. Determination of Value for GST: The value on which GST should be charged was examined under Section 15 of the CGST Act. Since the transactions are between related persons, Rule 28 of the CGST Rules applies. The value declared in the invoice, where the recipient is eligible for full input tax credit, is deemed to be the open market value. Thus, the invoice value is considered the transaction value for GST purposes. 3. Required Documentation for Movement of Goods: For the movement of goods from Karnataka to Kerala, the applicant must issue a delivery challan and an e-way bill as per Rule 55 and Rule 138 of the CGST Rules. The tax invoice can be issued either before or after the provision of service within the prescribed time limit. 4. Tax Implications of Inter-state Movement on Instruction: The movement of goods from Kerala to Tamil Nadu on the instruction of Karnataka constitutes a separate supply transaction. If the goods are moved due to a lease agreement between Karnataka and Tamil Nadu, it is a supply by Karnataka. If Kerala sub-leases the goods to Tamil Nadu, it is a supply by Kerala. In both scenarios, the services provided by Kerala to Karnataka in facilitating the movement are taxable. 5. Documentation for Inter-state Movement: The required documents for the movement of goods depend on the nature of the supply: - If the supply is by Karnataka, a delivery note and e-way bill issued by Karnataka are required. - If the supply is by Kerala, a delivery note and e-way bill issued by Kerala are required. Ruling: 1. Lease transactions between different GST registrations of the same company are taxable as supply of services. 2. The value declared in the invoice is the value on which GST should be charged. 3. The movement of goods requires a delivery note and e-way bill. 4. Inter-state movement on instruction constitutes a separate supply transaction, taxable as per the nature of the agreement. 5. The documents required for movement depend on the supply agreement, necessitating a delivery note and e-way bill from the respective supplying entity.
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