2022 (1) TMI 797 - AAR - GST

Classification of supply - supply of ggods or supply of services - lease transaction or not - pallets, crates and containers (equipment) leased by CHEP India Private Limited (CIPL) located and registered in Tamil Nadu to its other GST registrations located across India - value on which GST has to be charged - lease charges or the value of equipment - Section 15 of the CGST Act and TNGST Act read with relevant Rules? - documents that should accompany the movement of the goods from CIPL, Tamil Nadu to CIPL. Kerala - mere movement of goods not amounting to a supply or not in terms of Section 7 of the CGST Act and TNGST Act - HELD THAT - The business model proposed is in the stage of contemplation and has not attained finality with respect to merger, disposition of the assets and the following supply, in as much as the applicant could not provide any finalized document such as MOU for the proposed transactions, list of assets proposed to be vested with the applicant for such supply requiring the ruling. When they were addressed to furnish the list of assets proposed to be consolidated, they had submitted that the proposal is still in proposal stage only and they are unable to furnish any documents to that effect also - the MOU submitted by them cannot be relied upon to understand the terms on which the different units of the applicant agree upon. The accounting part of the transactions also will not be reflected in their accounts as the entries are said to be nullified as the audited financial statement will be for the whole company. Thus the applicant has not furnished any clear terms on which the proposed business model will be operational. The proposed business model appears to be a mere plan which may or may not fructify with the assets at the disposal of the applicant for further supply. Hence the merger and consolidation of assets are merely planned and has not reached the stage with clear roadmap of how the proposal will take effect - Without knowing if assets will be consolidated in Tamil Nadu or not, facilitating the further supply of such assets, the questions on the value to be adopted for such supply, etc are pre mature and this authority is constrained to examine the issue without any substantiating legal documents. Lack of requisite details - HELD THAT - As per Section 95 of the GST Act, Advance Ruling can be sought in respect of the proposed supplies - In the case at hand, the ruling sought on the classification of the supply, method of valuation and determination of tax liability etc, can be decided only based on the nature, features, intended purposes of the proposed business model - Without any concrete proposal, the applicant is building castles in the air. This forum is constrained to examine the issue further without even a road map of the proposed business model, essential details about the assets to be consolidated, the place where such consolidation is proposed to take place and the terms of transactions proposed to be effected within the different GSTNs of the applicant. Without all these details and substantiating documentary evidences, this authority finds the application for ruling not answerable. Application disposed off.

Issues Involved:
1. Taxability of lease transactions under GST.
2. Valuation of lease transactions for GST purposes.
3. Documentation required for movement of goods.
4. Taxability of inter-state movement of goods under GST.
5. Documentation for inter-state movement of goods.

Issue-Wise Detailed Analysis:

1. Taxability of Lease Transactions under GST:
The applicant sought clarification on whether the leasing of pallets, crates, and containers by CHEP India Private Limited (CIPL) in Tamil Nadu to its other GST registrations across India would be considered a lease transaction and taxable as a supply of services under Section 7 of the CGST and TNGST Acts. The applicant argued that the definition of supply is broad enough to include leases, referencing Section 25 of the CGST Act, which treats different registrations of the same company as distinct persons. Therefore, lease transactions between these registrations should be taxable under GST. However, the Authority for Advance Ruling (AAR) did not provide a ruling on this issue due to the lack of substantiating documents.

2. Valuation of Lease Transactions for GST Purposes:
The applicant inquired about the value on which GST should be charged for lease transactions, whether it should be based on lease charges or the value of the equipment. They referenced Rule 28 of the CGST Rules and Section 15 of the CGST Act, suggesting that the invoice value should be deemed as the transaction value if the recipient is eligible for full input tax credit. The applicant also mentioned that Section 18(6) of the CGST Act, which deals with the supply of capital goods, would not apply as the transaction is a lease, not a sale. The AAR did not answer this question due to insufficient documentation.

3. Documentation Required for Movement of Goods:
The applicant asked about the necessary documents for moving goods from CIPL, Tamil Nadu to CIPL, Kerala. They suggested that a delivery challan should accompany the goods, as per Rule 55 of the CGST Rules, since the movement is not a supply of goods but a supply of services. Additionally, an e-way bill should be issued if the value exceeds INR 50,000, as per Rule 138 of the CGST Rules. The AAR did not address this procedural question as it falls outside the scope of Section 97(2) of the GST Act.

4. Taxability of Inter-State Movement of Goods under GST:
The applicant sought clarification on whether the movement of equipment from CIPL, Kerala to CIPL, Karnataka on the instruction of CIPL, Tamil Nadu would be considered a mere movement of goods, not amounting to a supply under Section 7 of the CGST Act, and thereby not liable to GST. They argued that since there is no transfer of interest in goods between CIPL, Kerala and CIPL, Karnataka, the movement should not constitute a supply. The AAR did not provide a ruling on this issue due to the lack of concrete details and substantiating documents.

5. Documentation for Inter-State Movement of Goods:
The applicant asked about the necessary documents for moving goods from CIPL, Kerala to CIPL, Karnataka. They suggested that a delivery challan should accompany the goods, as per Rule 55 of the CGST Rules, since the movement is not a supply of goods but a supply of services. Additionally, an e-way bill should be issued if the value exceeds INR 50,000, as per Rule 138 of the CGST Rules. The AAR did not address this procedural question as it falls outside the scope of Section 97(2) of the GST Act.

Conclusion:
The AAR did not provide a ruling on the substantive issues (Questions 1, 2, and 4) due to the lack of substantiating documents and concrete details about the proposed business model. The procedural questions (Questions 3 and 5) were not admitted as they fall outside the scope of Section 97(2) of the GST Act. The applicant's proposed business model was deemed too speculative and lacking in finalized documentation to warrant a definitive ruling.

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