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TMI Blog2018 (12) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... which are provided to NMC. Also the Bus Routes are decided by NMC as also the Bus Fares, which are collected from the passengers. Hence it is crystal clear that in the subject case the transaction would be of the nature of transfer of right to use any goods and the amounts received by them on kilometer basis would be considered as hiring charges. As per sub-clause (0 of clause 5 of Schedule II appended to both, the CGST Act, 2017 and the MGST Act, 2017 “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: would be considered as Supply of Services - In the subject case the applicant vide Service Provider Agreement entered into by them with NMC have transferred of right to use the goods i.e. AC Buses belonging to them. The said rights as per the agreement have been transferred to NMC for a period of 15 years from the commercial operations date (COD). COD in the agreement has been defined as the date on which period of 6 months are completed from the date of execution of the agreement. In the subject case there is transfer of the right to use any goods (Buses) for any purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t NO. C-49, Hingna Road, MIDC, Nagpur-440028 had entered into an agreement i.e. Service Provider Agreement dated 18/08/2017 with Nagpur Municipal Corporation (NMC) for Operation and maintenance of AC Green Buses Running on Bio Ethanol Fuel for Nagpur Urban Region . As per the agreement we are providing the Services of Running AC Green City Buses for Transport of General Public and for the same NMC is paying us the Service Charges calculated as per agreement on the Total Run effective kilometers and NMC collects the fare from the passengers. We are providing following services relating to the transportation of passengers 1. Providing Bus with Driver. 2. Providing Fuel for the Buses 3. Repair maintenance of the buses, 4. We have established own workshop and service station for maintenance of the buses 5. The NMC is paying us the Service Charges on the basis of per Effective Run kilometres. 6. The rout of the Buses the applicable fare is decided and collected by the NMC. AS per the above it is clear that we are providing Services to NMC by providing the Busses along with Driver, Fuel Maintenance for use of General Public at Large. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordance with the basic requirements of the Scope of work and requirements for operation schedules on trips/ routes in area as prescribed/ directed by NMC (clause 4.8 a) 5. Service provider has right to receive payment of hiring charges from NMC (clause 5.1.a) (b) The main obligations of the NMC are 1. The NMC is required to pay Service Charges on the basis of per Effective Run Kilometers. As per clause 3.1,3.2, 3.3 of the agreement, 2. NMC would provide certain premises for set up the parking yard and facilities to operate and maintenance of buses as per clause 4.2 of the agreement. 3. NMC would provide the space for fuel filling stations, 4. NMC shall have complete and full right for collection of fare for the Bus Service and to determine and implement methodology for the same. (clause 7.1 h) (c) Joint responsibilities: Clause 3.3.1 provides for joint responsibility to pay taxes and statutory charges related to Bus Services would be divided between the NMC and the service provider however the clause is Silent about payment of SGST-CGST/IGST. Thus as per the provisions of Goods and Services Tax statute the legitimate taxes would be colle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bus vested in the Corporation. The case is identical to the facts of the present issue. The High Court in the case of G.S. Lamba, supra, has lead down the parameters of transactions for transfer of right to use goods, the relevant essential requirements are reproduced here (iv) the effective or general control does not mean always physical control and even if the manner, method, modification modalities and time of use of goods; and(v) the approvals, concessions, licences or permit in relation to goods would also available to the user of the goods even if such licences or permits are in the name Of the owner(transferor) of the goods, and (vi) during the period of Contract exclusive right to use goods along with permits, licences, etc vests in the lessee. It is also pertinent to mentioned here that logo of NMC is pasted on the vehicle provided to NMC thus the ratio decidendee of GS Lambas case is squarely applicable to the present issue. In light of the position of law there is a possibility that the transaction is of the nature of transfer of right to use any goods for any purpose cannot be denied. 2. Whether Hiring charges: The applicant is engaged in the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Corporation is of the nature of leasing/renting supply and not of charging fair to the passengers. The Green Bus Contract Agreement dated 18th August 2017 (hereinafter called as the Agreement ) [the copy of the Agreement is annexed hereto and marked as Exhibit -V] provides NMC to collect fare from the commuters as per clause 7.1.h. Thus the entry referred by the Corporation does not cover the transaction between the service provider and the Corporation. It was informed to the Corporation that the transaction would cover under sr. No 8 (vii) of the Notification No.11/2017-State Tax (Rate) dated 29th June, 2017 [the copy of Notification is annexed hereto and marked as Exhibit -VI] which read as Passenger transport service other than (i), (ii), (iii), (iv),(v) and (vi) above - rate of CGST -9%) The Corporation did not agree with the said rate and stickup to its earlier stand, this has been communicated by the Corporation through its letter dated 21/06/ 2018 [the copy Of the letter is annexed hereto and marked as exhibit -VII] (D) SUBMISSION: Your applicant, to know the correct rate of tax on the transaction of supply between the service provider and NMC and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause 5 of Schedule II appended to the MSGST Act, 2017 [copy of schedule II is annexed hereto and mark as exhibit-VIII] which reads as (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. If the transaction is of the nature of transfer of the right to use any goods for any purpose, your applicant desires advance ruling whether it is classifiable under Sl. No. 15(ii) of the Notification No. 11/2017-State Tax (Rate) dated 29th June 2017. (5) Your applicant desires advance ruling whether the transaction would be classifiable under Sl. No. 22 (a) of the notification No. 12/2017- State Tax (Rate) dated 29th June, 2017. Which reads as Service by way of giving on hire- (a) to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers; or liable to tax at Nil rate. (6) NOTE ON INTERPRETATION ON NOTIFICATION ENTRIES FOR RATE OF TAX in respect of the contract between SST Sustainable Transport Solutions and NMC NOTIFICATION NO 11/2017 DATED 29/06/2017 No 8 (ii) transport of passengers with or without accompanied belongings by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sl. No. 15(ii) of the Notification No 11/2017-State Tax (Rate) dated 29th June 2017 read with schedule II appended to MGST Act 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. The rate of tax would be the same rate of MGST for supply of like goods involved in transfer of title in goods. Your applicant is engaged in supplying AC Green Bus to Nagpur Municipal Corporation, on the basis of operation, repairs maintenance, providing drivers, etc in accordance with the basic requirements of the scope of work, and requirements for operation schedules on trips/ routs in area as prescribed/ directed by NMC. Prima facie it seems that the transaction would be of the nature of transfer of right to use any goods for any purpose. Such interpretation could be derived on the lines of judgement in case Tripura Syndicate Bus 122 STC 175 = 2001 (1) TMI 946 - GAUHATI HIGH COURT , and in the case of Godavari Finance co (2008) SCC 0107 S.C.= 2008 (4) TMI 766 - SUPREME COURT it is observed that though the drivers were the employee of the owner of the vehicle they have to follow t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alent. We do not find any merit in this argument. From the conjoint reading of the agreement it seems that the agreement is not for hiring of AC Green buses. Considering this aspect possibly the transaction may not fall to cover under entry Sl.No. 22 (a) Which reads as Service by way of giving on hire- (a) to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers; or covered under notification NO 12 of 2017 state Tax (rate ) dated 29/06/2017 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- In the present case, the applicant, M/s. SST Sustainable Transport Solutions India Pvt., Ltd., MIDC, Hingna Nagpur, has represented before the authority for advance ruling regarding classification of their services. In their application, M/s. SST Sustainable Transport Solutions India Pvt. Ltd., MIDC, Hingna Nagpur has informed that they have entered into a contract with Nagpur Municipal Corporation (Body constituted under Govt. of Maharashtra) for operation and Maintenance of AC Green Buses run on Bio Ethanol Fuel for Nagpur Urban Region and are providing services relating to trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the NMC from the applicant. The facts are that the applicant has entered into an agreement with NMC and as per the agreement, they are providing the Services of Running AC Green City Buses for Transport of General Public, for which NMC is paying them Service Charges calculated on the Total Run effective kilometers and the fare from the passengers is collected by NMC. The applicant has submitted that they are providing the Buses along with Driver, Fuel Maintenance for use of General Public at Large which can be seen from the following :- 1. They are providing Bus with Driver to NMC for transportation of passengers. 2. They are also providing fuel for the Buses 3. Repair maintenance of the buses are also undertaken by the applicant for which they have their own workshop and service station. 4. NMC is paying to the applicant, Service Charges on the basis of per Effective Run kilometres. 5. The route of the Buses the applicable fare is decided and collected by the NMC from the passengers. From the above it is clearly seen that NMC is providing transportation services to the passengers and the applicant, for such transportation, is supplying to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the same and make payments. iii. NMC has given a guarantee that the Buses so provided to them would travel a number of kilometers not less than 68,000 kilometers per Bus per year. iv. There is an annual assured payment to be made by NMC to the applicant if the minimum number of kilometers are not travelled. v. There is also a clause for payment for excess kilometers travelled by the said Buses and finally vi. There is also a clause for revision of kilometer charges. In view of the terms of the agreement it is very clear that in the subject case there is transfer of the right to use any goods (Buses) for any purpose i.e for transportation purpose and for a specified period of 15 years for cash. Thus as per sub-clause (f) of clause 5 of Schedule II appended to both, the CGST Act, 2017 and the MGST Act, 2017 the subject activity of the applicant would be considered as Supply of Services. Now we shall arrive at the rate of tax that the applicant would have to discharge on amounts received by them for such services rendered by them. The relevant clause of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 is reproduced below: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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