9911796707
TMI Blog2022 (8) TMI 919X X X X Extracts X X X X X X X X Extracts X X X X ..... er for the work being carried out by them - the criterion for the transaction being a supply is satisfied in as much as the transfer of right is made for a consideration. The supply of goods or services between both related and distinct person when made in the course of furtherance of business is an activity to be treated as supply. In the case at hand, the cost centers are located at two different states and applicant has admitted that they have two separate registrations for such centers. Hence they are distinct persons and the supply is also found to be in furtherance of business only in as much as the software when installed is charged a specific cost and it is said to optimize certain features of the product - the extension of right by the applicant to the distinct persons as specified in Section 25, is in the course of furtherance of business for a pre-determined consideration therefore such transfer of right is clearly a supply which is leviable to GST. Supply of goods or services? - HELD THAT:- The vehicles move from the applicant to all distribution centers in India namely Gujarat, Maharastra and the Peformance upgrade software is marketed by the Karnataka cost c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmative then whether such supply be considered as goods or services? The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of Rs.5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has stated that their Company is incorporated in India with its operation and experience centres in various States. Such different premises of the Company are recognized as different Cost Centre. The Company is setting up a factory for manufacture of electric two-wheelers in Tamil Nadu whereas the head office and the additional software development centre is in Bengaluru, Karnataka. The Company shall be selling the vehicle to the end user and will also offer a performance upgrade (which is an optional accessory) which will enhance performance i.e. battery performance speed range in the vehicle. The manufacturing of vehicle will be carried out by Tamil Nadu Cost Centre and the sale thereafter will take place through the distribution centres located across the country, wherein the performance upgrade software shall be sold directly by Karnataka Cost Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cost Centre's are merely registrations of the same legal entity whereby Tamil Nadu Cost Centre is transferring the right to install, test and market a software so as to enable the Karnataka Cost Centre in selling the same to end user. Consideration is being charged by the former from the latter just to allocate proper profits in their books of accounts since each Cost Centre maintains its own profitability. They have also stated that the Karnataka Cost Centre is the software development and maintenance hub of Ola and they have the expertise to implement the performance upgrade software into the vehicles of end user, therefore it only makes sense that the responsibility for carrying out such operation is entrusted upon the experts. However, in order to maintain the Cost Centre profitability, it is important to charge each Cost Centre for the work being carried out by them, so that the correct profitability is reflected for Cost Centre. Further, on the basis of Section 25(5) of the CGST Act, the Applicant is of the view that although Tamil Nadu and Karnataka Cost Centres, being two separate GST registrations, qualify as distinct persons under the GST regime but the activity happe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are has no value in the market till the time the TN cost centre agrees to integrate the same with the vehicle and allow the Karnataka Cost Centre to sell, upload and maintain the software on the vehicle manufactured by TN Cost Centre. There is no intrinsic value which can be assigned to such granting of right, hence the value is mutually agreed between two cost centres. The applicant has relied on the Advance Ruling issued by Tamil Nadu Advance Ruling Authority in the case of M/s Thirumalai Chemicals Ltd ITN/14/AAR/2020] and the ruling issued by TN Appellate Authority for Advance Ruling in the case of M/s Specsmakers Opticians Private Limited, wherein it has been ruled that invoice value should be open market value where the valuation is determined for transactions between distinct persons, subject to prescribed conditions. The write up on the software furnished by the applicant is given below: The company offers software to its customers which is aimed at upgrading the performance of the scooter. The installation of such software helps in enhancing the battery performance and speed range of the vehicle, among other things. Through software calibration of the motor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort in spite of reminders dated 18.02.2022, 23.03.2022 and 09.06.2022. Hence, it is construed that no proceedings are pending in respect of the applicant. 5. The State Jurisdictional Authority has submitted that there are no pending proceedings in the applicant's case in their jurisdiction. 6. We have carefully examined the statement of facts, supporting documents filed by the Applicant along with application, oral submissions made at the time of Virtual hearing, submissions made after hearing. The Company is a manufacturer of electric two-wheelers and they have different operation and experience centers all over India which are recognized as different cost centers. The manufacturing is done at the Tamilnadu cost center, the applicant and the sale thereafter will take place through the distribution centers located across the country. The vehicle will be sold to the end user and a performance upgrade, which will enhance performance i.e., battery performance and speed range in the vehicle is offered as an optional facility to the end user at additional cost. The applicant will give a right to Karnataka cost center to carry out integration, testing, installation and marketin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s seen that the applicant has billed the Karnataka cost center a sum of Rs. 1,02,75,11,617/- on which 18% IGST has been paid under the description 'fee for right to install performance upgrade software on the scooter manufactured by factory'. 7.2 The first question to be answered is whether the transaction of transfer of right to do integration testing, install and market software by the applicant to Karnataka Cost center shall be leviable to GST given that such transaction is being executed between two cost centers of the same Company. To answer this question, it should be seen if the transaction is leviable to GST in the first place as the same is said to be executed between two distinct entities of the same company. Hence the transaction to be leviable to GST should fall within the ambit of supply and then such supply should be between two distinct entities. `Supply' has been defined under CGST Act,2017 as follows:- Section 7. Scope of supply.- (1) For the purposes of this Act, the expression - supply includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be made/ the monetary value of any act in response to the supply of any goods/services is included as consideration. The invoice raised though for book adjustments established the monetary value for the act of transfer of right by the applicant and hence is definitely a consideration. Thus the criterion for the transaction being a supply is satisfied in as much as the transfer of right is made for a consideration. 7.4 Applicant has contended that the transfer is between two cost centers of the same entity and cannot be construed to be a supply. Now the distinct point to be analysed is if the transfer of such right between the applicant and Karnataka cost centers is a supply. In this connection, it is pertinent to note that for the applicant and the Karnataka Cost Center of the Company are distince persons, with separate GST Registration. Also, it has been established in Para supra that the transfer of rights has a monetary value which amounts to consideration. Also, as per Schedule-I to the GST Act, specifies those Activities to be treated as Supply even if made without consideration', wherein (2) Supply of goods or services or both between related persons or between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all distribution centers and the software is the product of Karnataka cost center. On perusal of invoices submitted by the applicant, it is seen that the Performance upgrade software is only sold by the Karnataka cost center to the end user. The details are as under: (i) Invoice no.4400002312 dt. 12.01.2022 has been raised for such Performance upgrade software for Shri. Praveen kumar residing at Bengaluru for a sum of Rs.14,407/. (ii) Invoice no.4400002412 dt. 12.01.2022 has been raised for such Performance upgrade software for Shri. Sanjay Chawla residing at Delhi for a sum of Rs.14,407/. Thus it is seen that the vehicles move from the applicant to all distribution centers in India namely Gujarat, Maharastra and the Peformance upgrade software is marketed by the Karnataka cost center, on the applicant agreeing for the same. Hence the applicant is only agreeing to the act of carrying out integration testing, install, and market the software on the vehicles manufactured by them by the Karnataka Cost Centre, at the behest of the end-users. Thus the supply taking place between the applicant and the Karnataka cost center is of the Agreeing the Karnataka Cost Center to car ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
