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TMI Blog2025 (1) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... licable laws during the tenure of agreement. The lessee shall keep the EVs insured at all times during the subsistence of this agreement against all risks and bear all the premiums payable to insurance company. In the event of rejection of insurance claim the onus of bearing the repair cost shall be on the lessee. It is also apparent that all the attributes laid down by the Hon'ble Supreme Court are evident in this transaction as per the Vehicle Lease Agreement. The said agreement is very clear that the goods available for delivery are 'e-bikes' which are goods. The said agreement provides legal rights to use e-bikes to the lessee. The lessor, during the continuance of the agreement cannot assign, pledge, mortgage, lend or part with the possession of the EVs and cannot allow the said EVs to be used by anybody else except as per the terms of this agreement. So, in the present transaction, it can be said that effective control and physical possession of the goods have been transferred by the supplier Applicant (lessor) to the recipient of the goods (lessee). While using such e-bikes or during the tenure of agreement, the vehicles continue to be in possession of the lessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r leasing of electric vehicles (E-Bikes/ EVs) without operator can be classified under the heading 9973 - Leasing or rental services without operator vide Sl. No. 17 (viia) or (?) (iii) of the Notification No. 11/2017-CT (R) dated, 28 th June, 2017 as amended vide Notification No. 20/2019 30th September, 2019 . 3.0 The applicant has executed a vehicle lease agreement with a Lessee named M/s. Techsofin Private Limited of Bhubaneswar, Odisha for supply of electric vehicles (E-Bikes) without operator on lease basis . The Applicant in its written submission contended that prior to 1st Oct'19, in the scheme of classification of services by Notification No. 11/2017-Central Tax (Rate) dated 28th June 2017, there were two discrete headings i.e. heading 9966 heading 9973 relating to the nature of supply. After 1st Oct'19, the said headings have been amended and as follows: a. Heading 9966 - Rental services of transport vehicles with operators. b. Heading 9973 - Leasing or rental services without operator. 3.1 The Applicant emphasizes on two entries, that is, Sl. No. 17 (iii) and 17 (viia) of Heading 9973 only . It has been submitted that entry Sl. No. 17 (iii) applies when there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided to the Applicant for representing its case. Sri Jiban Pradhan, Advocate attended the personal hearing as authorized representative of the Applicant, M/s. True Solar Pvt. Ltd. on 07.11.2024. During the personal hearing, he reiterated the submissions made before AAR and prayed for ruling as to leasing of Electric Vehicles without operators can be classified under Heading 9973- Leasing or rental services without operator vide Sl. No. 17 (viia) or (iii) of the Notification No. 11/2017-CT(Rate) dated 28.06.2017 as amended vide Notification No. 20/2019-CT(R) dated 30.09.2019. DISCUSSION FINDINGS 6.0 It is pertinent to examine the nature of lease agreement [(executed between the Applicant (here in after called as 'Lessor') M/s. Techsofin Private Limited (here in after called as 'Lessee')] whether it is a Financial Lease or an Operating lease agreement. Leasing can be of two types - financial lease and operating lease. A financial lease is a lease where the risks and the returns get transferred to the lessee as they decide to lease assets for their businesses. An operating lease, on the other hand, is a lease where the risk and the return stay with the lessor. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y licenses, permissions and consents for the transportation use of the EVs. All taxes and other dues as are required to be paid in respect of the EVS shall be paid by the lessee and if any permit or license to use the said EVs is required to be obtained from any government or any local authority the same shall be obtained by the lessee at his own cost and responsibility. Further, from para 15 of the lease agreement, it is noticed that the lessee has been given an option to purchase the asset he has taken on a lease after expiration of lease. 6.4 In view of the above discussions, it appears that the Applicant has entered into a financial lease agreement with the lessee and engaged in supply of financial leasing services/financial and related services. The appropriate heading for the said service would be 9971. For ease of reference, the relevant entry Sl. No. 15 of Notification No. 11/2017-C.T. (R), dated 28-6-2017 as amended from time to time is reproduced below for clarity: 15 Heading 9971 (Financial and related services) (i)**** **** **** (ii) Transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll legal consequences of such use including any permissions or licenses required, therefore should be available to the transferee; (d) For the period during which the transferee has such legal right, it has to be the exclusion to the transferor; this is the necessary concomitant of the plain language of the statute viz. a transfer of the right to use and not merely a license to use the goods; (e) Having transferred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same rights to others. 6.6 In order to determine whether the instant transaction involves the transfer of the right to use goods , it is imperative to state that all the five attributes are evident. We have gone through the 'Vehicle Lease Agreement' furnished by the Applicant which is an agreement between the Applicant (Lessee) Techsofin (p) ltd. (Lessor). Transfer of right to use also involves transfer of possession and control of the goods to the user/recipient of goods. The right to use the goods in this case is the right to use the vehicles which can be said to have been transferred by the Applicant to the recipient of goods only if the possessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ept as per the terms of this agreement. So, in the present transaction, it can be said that effective control and physical possession of the goods have been transferred by the supplier Applicant (lessor) to the recipient of the goods (lessee). While using such e-bikes or during the tenure of agreement, the vehicles continue to be in possession of the lessee and the transaction involves transfer of right to use such goods. In other words, the lessee has the possession effective control of the goods in all respect. Reliance is also placed on the judgment of Hon'ble Apex Court in Great Eastern Shipping Co. Ltd. v. State of Karnataka, (2020) 3 SCC 354 , wherein the Hon'ble Court while interpreting the expression transfer of right to use the goods' i.e. in respect of use of a vessel, in a VAT matter (which is the extended definition of deemed sale as per Article 366 (29A) (d) of the Constitution of India) had observed that the vessel was available for delivery and in fact, had been delivered; that there was no dispute as to the vessel and charter had a legal right to use the goods, and the contractor had no right to give the vessel for use to anyone else. This decision is fu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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