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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 ..... me provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the "GST Act". 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- we, M/s. SST SUSTAINABLE TRANSPORT SOLUTIONS INDIA PRIVATE LIMITED, a private limited company having its Registered office at Plot 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The agreement was executed on18th Aug.2017. (A) Relevant clauses of the Agreement: a) Relevant obligations of service provider: 1. Providing Bus with Driver, (clause 2.5.2 a & clause 4.1.w) 2. Providing Fuel for Buses,(clause 4.1 c) 3. Repair & maintenance of the Buses, 4. The service provider shall operate and maintain the Bus provided for AC Green Buses Service in accordance 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bus was to be run for Corporation as per the agreement and directions of an officer. The transaction is a "sale" within the extended meaning of the word. Providing of driver by the owner notwithstanding there was a transfer of the right to use bus for consideration, and effective control and possession of the 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 decidende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned Bus and the entry for tax rate is specifically for 'other than air conditioned stage carriage'. Secondly the entry is for supply transaction for 'Transport of passengers' not for leasing or hiring transaction. The nature of transaction between the service provider and the 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable to tax @ 9%. Which reads as "Passenger transport service other than (i), (ii), (iii), (iv), (v)and (vi) liable to tax @ 9% SGST. (4) Your applicant desires to know whether the transaction would be classifiable under sub-clause (f) of 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 EN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... belief that the transaction would cover under this entry, however it is not clear as to whether the transaction would fall to cover as rental services or leasing of vehicle. 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 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgued on behalf of the assessee that for the purposes of the above Entry, the word "hire" and the word "lease" should be read as equivalent. 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 Mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicant we find that the issue is pertaining to buses which are hired 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 appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eipt of invoice shall verify 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: 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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