2021 (12) TMI 1036 - AAR - GST

Levy of GST - services provided by the applicant to NMMT under the Agreement, by way of supplying, operating and maintaining air-conditioned electrically operated buses - appropriate SAC and rate of GST - eligibility to avail the input tax credit of tax paid on the procurement of input supplies used in supplying services to NMMT under the Agreement - HELD THAT - The facts in the case of IN RE M/S. M.P. ENTERPRISES ASSOCIATES LIMITED 2021 (6) TMI 522 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA and the present case are identical in nature and terms of underlying contracts are also similar. The only difference is, in that case the fuel was diesel and in the present case it is the electricity. The applicant during the course of oral arguments informed that it bears the cost of electricity required for charging of buses. Further the parking charges in respect of the buses are also borne by them. Since the facts of M/s MP Enterprises Associates Limited and the facts of the present case are same, there is no reason for us to deviate from the decision taken in the said case of M/s MP Enterprises Associates Limited. In the case of transportation of passengers, the recipient of service would be the passenger whereas in the case of renting of any motor vehicle, the recipient would not be the passenger. In the subject case, the consideration for supply of service is charged from NMMT and not the passenger. Therefore in the subject case it is clear that the recipient of service is NMMT. Hence, we have no hesitation in holding that the subject activity, amounts to 'renting of motor vehicle' and shall qualify as a taxable activity under the provisions of the GST Laws. Since the subject activity is taxable, the provisions of Notification No. 12/2017-CT (R) dated 28.06.2017 is not applicable in the subject case. The subject case is clearly covered by Entry Sr. No. 10 of Notification No. 11/2017-CT (Rate) dated 28.06.2017 as amended in as much as there is a Rental services of transport vehicles with or without operators and the activities of Renting of any motor vehicle/transport vehicle which is designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient are chargeable to either 2.5% GST or 12% GST depending on availment of Input Tax Credit. The service of operating AC buses by the applicant for NMMT would be subject to GST @12% under Tariff Heading 9966 i.e. 'renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient' inserted by way of Notification No.31/2017 dated 13.10.2017 (Amended Notification No.11/ 2017-CT(R) dated 28.06.2017) wherein the applicant is eligible to claim set off, as discussed, on its outward supplies, as provided in the above notification.

Summary

Issues Involved:
1. Taxability of services provided by the applicant to NMMT under the Agreement.
2. Appropriate SAC (Services Accounting Code) and applicable GST rate for the services.
3. Eligibility of the applicant to avail input tax credit on procurement of input supplies.

Detailed Analysis:

Issue 1: Taxability of Services Provided
The primary question was whether the services rendered by the applicant to NMMT, involving the supply, operation, and maintenance of air-conditioned electrically operated buses, are taxable under GST. The Authority confirmed that these services are taxable. The services provided by the applicant constitute a supply as defined under Section 7 of the CGST Act and are taxable under GST. The applicant transfers the buses (along with necessary personnel) to NMMT for a consideration, qualifying as a supply of service under entry 5(f) of Schedule II of the CGST Act. The services are akin to those described under Entry No. 10(i) of Notification No. 11/2017-C.T.(R), which pertains to "Renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient."

Issue 2: Appropriate SAC and GST Rate
The appropriate SAC for the services provided by the applicant is Tariff Heading 9966, which pertains to "Rental services of transport vehicles with operators." The GST rate applicable is 12% if the applicant opts to avail input tax credit (ITC) or 5% if they do not avail ITC. The Authority noted that the consideration charged by the applicant includes the cost of lithium-ion batteries (used as fuel), thus meeting the condition for Entry 10(i) of the Rate Notification. If the services do not fall under Entry 10(i), they would be covered under the residual Entry 10(iii) and taxable at 18%.

Issue 3: Eligibility to Avail Input Tax Credit
The applicant is eligible to avail ITC on the procurement of input supplies used in supplying services to NMMT if they opt to pay tax at the rate of 12% under Entry 10(i). If the tax is payable under Entry 10(iii) at the rate of 18%, the applicant is also eligible to avail ITC as there is no restriction under this entry. The Authority emphasized that the services are taxable, and the provisions of Notification No. 12/2017-CT (R) are not applicable. The activity amounts to 'renting of motor vehicle' and qualifies as a taxable activity under GST laws.

Conclusion:
1. The services provided by the applicant are taxable under GST.
2. The appropriate SAC for the services is Tariff Heading 9966, with a GST rate of 12% (with ITC) or 5% (without ITC).
3. The applicant is eligible to avail ITC on input supplies if they pay tax at 12% on output service.

Order:
The Authority ruled affirmatively on the taxability of the services, classified the services under SAC 9966, and specified the GST rates as 12% with ITC or 5% without ITC. The applicant is eligible for ITC if they opt for the 12% GST rate.