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TMI Blog2023 (6) TMI 776X X X X Extracts X X X X X X X X Extracts X X X X ..... tra in the case of IN RE: M/S. B.G. SHIRKE CONSTRUCTION TECHNOLOGY PVT. LTD. [ 2021 (9) TMI 949 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA] Wherein it has been held that we agree with the contention of the applicant that they may resort to valuation under Rule 28 of the CGST Rule in respect of transaction with related distinct persons who are eligible for full input tax credit as per the second proviso to Rule 28 of the CGST Rules 2017 - the valuation in the present case will be governed as per the Second proviso to Rule 28 of CGST Rules 2017 read with Section 15 of the CGST and MGST Act 2017. Documents that should be accompanied for the transaction - HELD THAT:- It is found that the question raised by the applicant doesn t fall in any of the categories mentioned under the provisions of Section 97(2) of CGST Act, 2017. Also, the present application has been done under the provisions of Section 97(2)(c) and 97(2)(g) of CGST Act, 2017. The question sought by the applicant doesn t fall in either of the categories and hence cannot be answered. Further, it is on record that no supply of goods or services in the scenario explained by the appellant has been undertaken. Whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heri (West). Mumbai - 400 053. ( hereinafter referred to as Appellant ) against the Advance Ruling No. GST-ARA-82/2020-21/B-111 dated 01.12.2022 , pronounced by the Maharashtra Authority for Advance Ruling (hereinafter referred to as MAAR ). BRIEF FACTS OF THE CASE 3. CHEP India Private Limited (hereinafter referred to as the Appellant , CIPL or the Company ) is a company registered under the provisions of Companies Act, 1956 and has its registered office situated at 3rd Floor, Aver Plaza. Plot - B13, Opposite Citi Mall, New Link Road, Andheri (West), Mumbai - 400 053. The Company is engaged in the business of leasing of pallets, crates and containers and is registered under the GST law-bearing registration number - 27AADCC3230A1ZF. 4. CIPL is contemplating certain changes in its existing business model. The broad business mechanics of the proposed business model would be as follows: a. CIPL would be consolidating the ownership of all the equipment into the state of Maharashtra. Currently, while majority of the procurements / manufacture happen in Maharashtra, some of the procurements are also done from other states. b. As the ownership of equipment w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and Services Tax Act, 2017 ( CGST Act ) and Maharashtra Goods and Services Tax Act, 2017 ( MGST Act )? Question 2 - If the answer to Question I is Yes, what is the value on which GST has to be charged i.e. whether it should be lease charges or the value of equipment in terms of Section 15 of the CGST Act and MGST Act read with relevant Rules? Question 3 - What are the documents that should accompany the movement of the goods from CIPL Maharashtra to CIPL Karnataka? Question 4 - Whether movement of equipment from CIPL Karnataka to CIPL Tamil Nadu on the instruction of CIPL Maharashtra can be said to be mere movement of goods not amounting to a supply in terms of Section 7 of the CGST Act and MGST Act, and thereby not liable to GST? Question 5 - With reference to Question 4 above, what are the documents that should accompany the movement of the goods from CIPL Karnataka to CIPL Tamil Nadu? 6. A preliminary hearing opportunity for the aforesaid application was granted to the Appellant post which it was held that questions 3 and 5 cannot be admitted by the Authorities since the same relate to documentation and is thus, beyond the powers of Adva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which would be derived after taking into consideration the rate which is equal to such rate which is normally charged to customers. 10.2. In this regard, the Appellant humbly wishes to state that the valuation mechanism suggested by the Hon ble Advance Ruling Authorities is based on presumptions and surmises without having due regard to the applicable legal provisions of GST law. The valuation mechanism suggested is not derived according to the relevant valuation rules prescribed under GST and hence, cannot be adopted for valuing the underlying transaction in the present case. 10.3. It is submitted that since the transaction of leasing services in the present case is between different GSTINs of the same entity, the valuation shall be governed as per Rule 28 of the CGST Rules which deals with valuation in case of supply of goods or services between distinct person as specified in sub-section (4) and (5) of section 25 of the CGST Act or related persons. 10.4 According to the said rule 28. the value of supply shall be equal to the following value: (a) be the open market value of such supply. (b) if the open market value is not available be the value of supply of floo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority For Advance Ruling, Tamil Nadu). 10.9. Further, it is submitted that in the Appellant s own case and in similar fact pattern, the Advance Ruling Authority. Karnataka had held that in such scenarios, the invoice value adopted by the Appellant can be considered as the transaction value for the purpose of GST levy. The order is reported in [2021 (7) TMI 973] and is attached as Annexure 4 of this appeal for ease of reference. 10.10. The Appellant also wishes to submit that adoption of the mechanism suggested in the advance ruling may not be commercial!} feasible for the entities due to the business dynamics and operations. 10.11. In view of the above, it is submitted that the ruling rendered by the Advance Ruling Authority is bad in law since it has not considered the applicable legal provisions and the precedents with respect to the said issue. 10.12. Hence, in terms of Section 101 of CGST Act. it is humbly prayed that the impugned order dated 01 December 2022 passed by the advance ruling authority be modified to the above extent for the ruling rendered for Question 2 in the advance ruling application. 11. Submission with respect to non-admission of Ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of moving the equipment to CIPL Tamil Nadu shall be that of CIPL Karnataka and not the Applicant. For facilitating the movement of equipment, CIPL Karnataka may charge a consideration from the Applicant and raise a tax invoice along with GST for recovering the said amount. Once the equipment reaches CIPL Tamil Nadu, the Applicant shall stop invoicing CIPL Karnataka for lease rentals and start invoicing CIPL Tamil Nadu for the lease charges on the basis of the new arrangement with it. b. Appellant s interpretation: The scope of supply under Section 7(1 )(a) of CGST Act includes sale, transfer, exchange, license etc. within its ambit. It must be noted that all forms of supply enumerated therein either involves vesting or divesting of rights or creation of an interest or right in property or a thing. Accordingly, in order to constitute supply, the person transferring the goods would be required to transfer its specified interest/right in property to the recipient of such goods. In the present case, the equipment owned by the Applicant is originally leased to CIPL Karnataka in pursuance of a lease agreement between such registrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that CIPL, Maharashtra and any of the branches of CIPL located outside Maharashtra are having separate GST registrations and are two entities deemed to be distinct persons. Thus, the valuation in such case shall be governed as per sub-section (4) and (5) of section 25 of the CGST Act, 2017 read with second proviso to Rule 28 of the CGST Rules and accordingly the invoice value shall be deemed to be open market value or the transaction value for levy of GST, where the recipient is entitled to full input tax credit. Since, the recipient branch of CIPL would avail input tax credit as per the lease value charged by the supplier branch of CIPL, if the recipient branch charges more value to the ultimate customer at the time of further supply of said equipment, they would pay more tax on said value addition after setting off the input tax credit availed by them at the time of receipt of such supply. Question No. 3 5: (ii) The department stated that the movement of goods in respect of any supply by CIPL, Maharashtra to its branch has to be covered by an Invoice as envisaged under Section 31 of CGST Act. 2017 and e-way bill as per Rule 138 of CGST Rules, 2017. Since, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n relation to movement of goods by Maharashtra to Karnataka and in turn to Tamil Nadu will amount to supply, the same has not been answered. In relation to Question No. 5 for the documentation in relation to scenario of question No. 4, the same has not been admitted. The appellant is contending the ruling passed in respect to Question no. 2 and 4, as well as the no admission of the Question No. 3 and 5. 16. It is clear from the MAAR order that the transfer of such equipment on lease as per the agreement entered to between CIPL, Maharashtra and CIPL, Karnataka would amount to lease or renting of the goods for a consideration and hence would be a transaction of supply of services, as it is for a certain period of time and the same has not be challenged by the appellant also. 17. Since in the Appellant s own case, Karnataka Advance Ruling authority vide order dated 16.07.2021 passed the ruling in their favour, the same is being relied upon to analyse the case in the present scenario. Question No. 2 18. In answer to question no. 2, MAAR held that the value of supply of leasing services by CIPL Maharashtra to other registration should be the value which is charged by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the goods or services. Thus from the above it is clear that the recipient CIPL Karnataka who is recipient of the leasing services is eligible for full input tax credit in the transaction between the applicant and the CIPL Karnataka and hence the value declared in the invoice would be the value of goods or services or both as per the second proviso to Rule 28 and hence would be treated at the value of such supply. The aforesaid observation has been affirmed by AAR Maharashtra in the case of M/s BG Shirke Construction Technology Pvt Ltd [2021 (9) TMI 949 - Authority for Advance Ruling Maharashtra] Wherein it has been held that we agree with the contention of the applicant that they may resort to valuation under Rule 28 of the CGST Rule in respect of transaction with related distinct persons who are eligible for full input tax credit as per the second proviso to Rule 28 of the CGST Rules 2017 Further the applicant has relied upon the rulings of M/s Kansai Nerolac Paints Ltd. [2019 (6) TMI 1108 Authority for advance Ruling Maharashtra] and M/s Specs makers Opticians Private limited (2020 (1) TMI 63 - Appellate Authority For advance Ruling, Tamil Nadu). Wherein similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is on record that no supply of goods or services in the scenario explained by the appellant has been undertaken. Question No. 4 22. The fourth question is Whether movement of equipment from CIPL Karnataka to CIPL Tamil Nadu on the instruction of CIPL Maharashtra can be said to be mere movement of goods not amounting to supply in terms of Section 7 of the CGST Act and MGST Act, and thereby not liable to GST? Thus, the same is related to movement of goods from CIPL. Karnataka to CIPL, Tamil Nadu on the instruction of CIPL, Maharashtra. 23. We notice that though the CIPL. Karnataka is in the possession of the goods, it is CIPL, Maharashtra who is the owner of the goods, The CIPL, Karnataka is a lessee of the goods and they have to give the goods back on the termination of the Contract of lease between CIPL. Karnataka and CIPL. Maharashtra. 24. In case CIPL. Maharashtra instructs CIPL, Karnataka, on termination of contract between them, to transfer the goods to CIPL, Tamil Nadu. CIPL, Karnataka in such a situation, under the instruction of CIPL, Maharashtra arranges I facilitates to transport the goods to CIPL, Tamil Nadu, and thus the CIPL Karnataka acts as an age ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Yes, what is the value on which GST has to be charged i.e. whether it should be lease charges or the value of equipment in terms of Section 15 of the CGST Act and MGST Act read with relevant Rules? Answer: The value declared in the invoice issued by the appellant would be the value on which GST has to be charged in terms of Section 15 of the CGST Act, 2017 read with second proviso to Rule 28 of the CGST Rules. 2017. Question 3 - What are the documents that should accompany the movement of the goods from CIPL Maharashtra to CIPL Karnataka? Answer: The aforesaid question cannot be answered as the same is not covered within the ambit of advance ruling in terms of section 97 of the CGST Act, 2017. Question 4 - Whether movement of equipment from CIPL Karnataka to CIPL Tamil Nadu on the instruction of CIPL Maharashtra can be said to be mere movement of goods not amounting to a supply in terms of Section 7 of the CGST Act and MGST Act. and thereby not liable to GST? Answer : Movement of equipment from CIPL Karnataka to CIPL Tamil Nadu on the instruction of CIPL Maharashtra cannot be said to be mere movement of goods not amounting to a supply in terms of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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