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TMI Blog2018 (10) TMI 1242X X X X Extracts X X X X X X X X Extracts X X X X ..... GST read with Circular No. 1/ 1/ 2017 - IGST? - Held that:- From the co-joint reading of section 7 and schedule - II applicant's activity of providing crane on hire is nothing but transfer of right in cranes without the transfer of title thereof and is therefore a is supply of services - if we read this provision with activities to be treated as supply even if made without consideration as mentioned in Schedule-I of the GST Act, we find that supply of goods or services or both between related person or distinct person without any consideration, when made in the course or furtherance of business is also supply as contemplated in section 7 of the GST Act - this supply is not exempt from tax under the GST Act and hence is a taxable supply. IGST would be leviable on the interstate movement of both type of cranes from SML HO to SML branch offices registered in another state for further supply on hire charges to customer and thus the circular 21/21/2017-IGST is not applicable to the facts of the present transaction. If GST is payable on the aforesaid transaction, whether the recipient office of SML duty registered under GST receiving such cranes for further supply on hire charges w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e GST registered office to another registered office in case the said movement is considered to be a taxable supply? - Held that:- The transaction between SML HO and SML branch office is supply having regards to Section 25(4) and Schedule I of the GST Act. As per section 25(4) of the GST Act, as mentioned above, the SML HO and SML Branches are distinct persons for the purpose of this Act and as per schedule-I supply even if made without any consideration between two distinct persons as specified in section 25(4) is also supply when made in the course or furtherance of business - In the present transaction of supply we find that value considered by the applicant for levying GST is approximately 95% of the value charged to the customer by the SML. Branch. The determination value of supply as aforesaid by the applicant is as per the first proviso to Rule 28 of the GST Rules. We presume that SML Branches are eligible for full input tax credit. In such situation and as per Second proviso to Rule 28 of the (GST Rules, the value declared in the invoice shall be deemed to be open market value. In view of this we do not find any irregularity in the value of supply considered by the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as the CGST Act and MGST Act ] by Sanghvi Movers Limited, the applicant, seeking an advance ruling in respect of the following questions on: 1. Based on the facts and business model adopted by Sanghvi Movers Limited ( SMV or Applicant or the Company ) under the GST regime as discussed below in detail, whether movement of tyre mounted cranes or crawler cranes from one GST registered office of SML to another registered office of SML for further supply on hire charges to customers would be treated as taxable supply under GST law or whether GST would not be let-liable on the said movement as per the clarification issued by the CBEC vide Circular No. 21/ 21/ 2017 - CGST read with Circular No. 1/ 1/ 2017 - IGST? 2. In the present situation and under the given facts, if GST is payable on the aforesaid transaction, whether the recipient office of SML duty registered under GST receiving such cranes for further supply on hire charges would be eligible to avail input tax credit of GST charged? 3. In case when a lyre-mounted crane or crawler crane is moved fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than 400 cranes ranging from 40 MT to 800 MT lifting capacity. All cranes have been imported from various countries such as USA, Germany, Japan, Singapore, China, etc. 3. SML owns two types of cranes, viz. i) Crawler cranes (they are fitted with crawler tracks/ chain belts, as seen on military tanks). These cranes cannot be plied on normal roads, and therefore, do not require any registration from the Regional Transport Office (RTO). ii) Tyre-mounted hydraulic cranes ply on the road and require RTO registration. 4. The cost of these cranes is significantly high and their average economic life ranges from 25 to 35 years. These cranes are moved/ transported on trailers, from one location to another, in knock down condition. 5. As the movement of cranes involves significant time and cost, SML has set up various branches ( SML branch offices ) across India at strategic locations to minimize transportation time and costs. II. Under GST, SML has obtained registration for 10 locations across India, including its head office ( SML Maharashtra ) located in Pune, Maharashtra. III. Brief facts of Existing business model in applicant's case- 6. SML has mult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in turn raise back-to-back internal work orders on SML Maharashtra. 12. The crane, along with its components, is taken on hire from SML Maharashtra by SML branch offices for further sub-hiring for a term based on the period of underlying final work order received by respective SML branch offices from their customers. 13. On receipt of internal work Order from respective SMI branch offices, SML Maharashtra transports the crane and its components to the customer's location/ project location on the instructions of SML branch offices. 14. For brevity and clarity of facts, an illustration of the transaction flow involved is provided below. 15. For each type of crane given on hire charges, the crane operator maintains a separate monthly log sheet at the customer/ project location, wherein the daily and hourly details of crane usage and idle time are maintained, based on which the monthly service invoice is raised by SML branch offices on respective customers. Further, an invoice from SML Maharashtra is issued to the SML branch office and the value considered for levying GST is approximately 95% of the value charged to the customer by the SML branch, following the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply of crane on lease/ hire charges 20. As per section 12(2) of Integrated Goods and Services Tax Act, 2017 ( IGST Act ), the place of supply of service of leasing/ hire/ renting of crane to a registered person shall be the location of such registered person. Therefore, in the said transaction, as the place of supply falls outside Maharashtra, i.e., the location of registered SML branch offices, SML Maharashtra discharges IGST on the value of hire charges recovered from other SML branch offices treating the same as inter-State supply of service. Input tax credit availed by receiving SML branch offices 21. As per the second proviso to section 16(2) of the CGST Act, the input tax credit availed is required to be reversed in case payment is not made to the vendor within 180 days. 22. Further, as per Rule 37 of the CGST Rules, 2017, in case of supplies made between distinct persons as specified under section 25(4) of the CGST Act, it shall be deemed that the payment has been made and no input tax credit reversal is required to be made for non-payment of consideration. Hence, the recipient SML branch offices can avail credit of IGST charged by SML Maharashtra on the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Central Government vide the aforesaid Circular has clarified that only such movement of goods that would be further supplied by way of sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made would be treated as taxable supply and subjected to GST. 28. Further, the said Circular also clarifies that no GST would be levied in ease such goods are moved for repairs and maintenance activity. However, applicable GST would be leviable on the value of repairs and maintenance carried out. 29. Against the aforesaid background and facts and our understanding of various provisions and clarifications issued by CBEC, we desire to obtain a ruling on questions as stated above, and hereby, submit this application before the Hon'ble Authority of Advance Ruling. 30. The Applicant craves leaves to submit such further facts at or before the hearing of the application as may be relevant. 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission of the Assessing authority as follow - The Applicant hereby seeks to determination in respect of the following questions: Qu. 1). Based on the facts and business model adopted by Sanghvi Mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply under GST. Qu. 2. In the present situation and under the given facts, if GST is payable on the aforesaid transaction, whether the recipient office of SML duly registered under GST receiving such cranes for further supply on hire charges would be eligible to avail input tax credit of GST charged? Answer : - As per section 16(2) of the CGST Act, a registered person shall be entitled to avail credit of any input tax in respect of any supply of goods or services or both to him subject to fulfilment of the following conditions: a. Possession of tax invoice or debit note issued by registered supplier; and b. Receipt of goods or services; and c. Tax charged for such supply is actually paid to the Government; and d. Tax returns have been furnished. Further, as per second proviso to Rule 37 of the CGST Act, input tax credit shall be eligible subject to payment of the total value of supply along with tax amount to the supplier within 180 days from the invoice date. As per my opinion, the input tax credit to SML branch offices will not applicable because in this case supplies made without consideration as specified in CGST Act, Qu. 3. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e GST is applicable. Qu. 5. What should be the value under Section 15 of the Central Goods and Services Tax Act, 2017 (CGST Act) and the rules made thereunder for discharging applicable GST on movement of cranes from one GST registered office to another registered office in case the said movement is considered to be a taxable supply? Answer :- Section 15- The value of a supply of goods or service or both shall be the transaction value, which is the price actually paid or payable for the said supply Of goods or service or both where the supplier and the recipient are not related and the price is the sole consideration for the supply. The value of supply include- any taxes, duties, cases, fees and charges levied under any law for the time. As per my opinion, in such a case of supply of Goods and services between deemed district persons, the value of goods or services determined as open market value, 04. HEARING The case was taken up for preliminary hearing on DT. 10.04.2018, with respect to admission or rejection of the application when Sh. Nitin Vijaivergia, C.A. along with Sh. Vipin Bang and Sh. Abhijit Savarkar, G.M. Taxation appeared and made contentions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easibility, SML HO in Maharashtra (In short SML HO) has modified Its business model by entering into a Memorandum of Understanding (MOU) with all branch offices located all over India. This is nothing but a formal service arrangement between HO and branch offices. As a part of service arrangement, whenever branch offices receive a final work order from their customers for providing cranes on hire, the SML branch office will raise an internal work order on SML HO for providing requested crane on hire. In order to comply with as per the final work order the SML HO transports the crane and its components to the customer's location/ project location on the instruction of SML branch office. This type of transaction constitute core business of the applicant. However, in some cases, the crane is moved from one registered branch office to another registered branch office for temporary unkeepment and maintenance purpose. In any case, however, the ownership and title to the crane vests with HO. Whenever crane moves from SML HO to SML branch office for further supply on hire, the invoice is issued by SML HO to SML branch office and the value considered For levying GST is approximately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-sections (1) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as- (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods. Further, activities or transaction specified in schedule II is relevant for the present purpose in order to ascertain whether the present activity is to be treated as supply of goods or services. The activities or transaction to be treated as supply of goods or services is as below - Schedule - II Activities or Transactions to be treated as supply of goods or supply of services: 1. Transfer (a) any transfer of the title in goods is a supply of goods; (b) any transfer of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of services; (c) any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods. 2. Land and Building (a) any lease, tenancy, easement, licence to occupy land is a supply of services; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tects Act, 1972; (20 of 1972.) or (ii) a chartered engineer registered with the Institution of Engineers (India); or (iii) a licensed surveyor of the respective local body of the city or town or village or development or planning authority; (2) the expression construction includes additions, alterations, replacements or remodelling of any existing civil structure; (c) temporary transfer or permitting the use or enjoyment of any intellectual property right; (d) development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software; (e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; and (f) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. 6. Composite supply The following composite supplies shall be treated as a supply of services, namely:- (a) works contract as defined in clause (119) of section 2; and (b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind that this supply is not exempt from tax under the GST Act and hence is a taxable supply. In this case, undisputedly the supply is between two different taxable territory meaning thereby between two states and as per section 7 (3) the of IGST Act, the supply is in the course of interstate trade or commerce. And as per section 5 (1) of the IGST Act said interstate supply is taxable under the provisions of the IGST in the hand of the applicant. Therefore, we conclude that in the present case supply of cranes, cranes components and trailers on lease/ hire charges by the SML HO to SML branches in TN and other state constitute interstate taxable supply of service between two distinct person and liable to pay tax under the provisions of IGST Act. Further we find that the issue of IGST exemption on interstate movement of various modes of conveyance between two distinct person as specified in Section 25(4) of the GST Act, 2017 for carrying goods or passengers or both; or for repair or maintenance except in cases where such movement is for further supply of the same conveyance was examined by the Board vide circular No. 1/1/2017 DT. 7.7.2017. And it was clarified that such movement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a thing or things of the same kind (often used to express surprise or for emphasis). Adjective: like (of a person or thing) having similar qualities or characteristics to another person or thing. Considering the intent of the circular and meaning of the word 'like' as per dictionary we have no hesitation to conclude that both types of cranes are covered by the expression 'all goods on wheel [like crane] mentioned in the second circular as both types of cranes - Tyre mounted cranes and crawler cranes are used to perform same kind of work i.e. mechanical direction job. As per the said circular interstate movement of cranes except in cases where movement of such good is for further supply of same goods, shall be treated 'neither supply of goods or supply of service. The reliance by the applicant on this circular to claim interstate movement of cranes as exempt from levy of IGST is misplaced as the cranes moves form SML HO Maharashtra to SML branch in another state for further supply of same cranes. For above deliberation we conclude that IGST would be leviable on the interstate movement of both type of cranes from SML HO to SML branch offices regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question No.1 that both types of cranes i.e. tyre mounted cranes and crawler cranes are covered by the expression 'all goods on wheel [like crane] used in the circular No. 21/21/2017-GST and as such GST would be payable on the interstate movement of both types of cranes from SML HO Maharashtra to SML branch office in other state for further supply of such cranes on hire charges. Que: 5 What should be the value under section 15 of the Central Goods and Services Tax Act, 2017 (CGST Act) and the rules made thereunder for discharging applicable GST on movement of cranes from one GST registered office to another registered office in case the said movement is considered to be a taxable supply? We have already stated and held that the transaction between SML HO and SML branch office is supply having regards to Section 25(4) and Schedule I of the GST Act. As per section 25(4) of the GST Act, as mentioned above, the SML HO and SML Branches are distinct persons for the purpose of this Act and as per schedule-I supply even if made without any consideration between two distinct persons as specified in section 25(4) is also supply when made in the course or furtherance of business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provided further that where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of the goods or services. In the present transaction of supply we find that value considered by the applicant for levying GST is approximately 95% of the value charged to the customer by the SML. Branch. The determination value of supply as aforesaid by the applicant is as per the first proviso to Rule 28 of the GST Rules. We also find from the submission made by the applicant and the terms of MOU that the supply of cranes on hire by SML Maharashtra to SML Branches is for further supply of such crane on hire by the SML Branches to customers. As such we presume that SML Branches are eligible for full input tax credit. In such situation and as per Second proviso to Rule 28 of the (GST Rules, the value declared in the invoice shall be deemed to be open market value. In view of this we do not find any irregularity in the value of supply considered by the applicant for levying GST which is approximately 95% of the value charged by SML branches to the Customer of the branches. 06. In view of the deliberations as he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... movement as per circular 21/21/2017-GST would be neither as a supply of goods nor supply of service. However, taxis leviable on repairs and maintenance done for such goods. Question 4. If the transaction stated above in question 1 is liable to tax, whether GST would be payable only on the movement of lyre-mounted cranes being goods on wheels or GST would also be payable on movement of both types of cranes (i.e. tyre-mounted cranes and crawler cranes)? Answer : - GST would be payable on the movement of both type of cranes i.e. tyre mounted cranes and crawler cranes. Question 5 . What should be the value under section 15 of the Central Goods and Services Tax Act, 2017 (CGST ct) and the rules made thereunder for discharging applicable GST on movement of cranes from one GST registered office to another registered office in case the said movement is considered to be a taxable supply? Answer : - The value for the purpose of section 15 where the recipient branch office in other state is eligible for full input tax credit would be the value declared in the invoice as open market value of the services for the purpose of levy of tax and alternatively and amo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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