In re Ascendas Services (India) Pvt. Ltd. (GST AAAR Karnataka)
Term ‘actionable claim’ has got two limbs. One is that it is a claim to any unsecured debt. The second limb is about claim to beneficial interest in movable properties not in actual or constructive possession of the claimant which shall be recognized as affording ground for relief by a civil court. These two categories of claims can be existent, future, contingent or conditional. However, every claim is not an actionable claim. It must be a claim either to a debt or to a beneficial interest in movable property. The beneficial interest is not the movable property itself, and may be existent, accruing, conditional or contingent. The movable property in which such beneficial interest is claimed, must not be in the possession of the claimant. An actionable claim is therefore an intangible right. The Appellant has likened the bus passes to recharge vouchers and have relied on the West Bengal Tax Tribunal decision in the case of Bharti Airtel Ltd vs AGST [2010 (34) VST 202] wherein it is held that recharge vouchers are acknowledgment of receipt of money in advance for rendering telecom services in future and as the money has been received in advance, it constitutes a debt to the service provider. At the outset we state that the case of Bharti Airtel Ltd was rendered by the West Bengal Tax Tribunal in the context of Sale of Goods Act wherein the definition of ‘goods’ under the said Act excluded actionable claims. Under GST law however, ‘Goods” have been defined to include actionable claims. Further, under GST, ‘voucher’ is specifically defined in Section 2(118) to mean “an instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services or both and where the goods or services or both to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instrument”. It is further observed that the definition of ‘Voucher’ has been added to the CGST Act after discussion in the GST Council, while approving the draft Acts.
Those instruments which satisfy the conditions of being accepted as consideration/part consideration against purchase of specified goods and the identities of the potential suppliers are indicated in the instruments are to be considered as ‘Vouchers’ for the purposes of GST. Vouchers are neither money nor actionable claim. It is not a claim to a debt nor does it give a beneficial interest in any movable property to the bearer of the voucher. Similarly, in the instant case, the bus passes are purchased by the commuters on paying a value in money. The commuter produces the bus pass for purchasing the service of transportation. The bus pass only give the commuter the right to travel. If the commuter does not use the bus pass within the duration for which it is valid or loses the bus pass, it becomes invalid and cannot be used to procure the service of transportation. The bus pass is only a contract of carriage. A contract is not property, but only a promise supported by consideration. Thus, the bus pass is not an actionable claim as defined under Transfer of Property Act. It is only an instrument accepted as consideration/part consideration while purchasing the service from the Appellant. Therefore, we do not agree with the claim of the Appellant that the bus pass is an actionable claim not liable to GST. We agree with the ruling given by the lower Authority and hold that by virtue of Section 15 of the CGST Act, the value of the service supplied by the Appellants will include the value of the bus passes as well as the facilitation charges.
FULL TEXT OF ORDER OF APPELLATE AUTHORITY OF ADVANCE RULING, KARNATAKA
PROCEEDINGS
(Under Section 101 of the CGST Act 2017 and the KGST Act. 2017)
1. At the outset we would like to make it clear that the provisions of CGST, Act 2017 and SGST, Act 2017 are in pari-materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the KGST Act.
2. The present appeal has been filed under section 100 of the Central Goods and Service Tax Act 2017 and Karnataka Goods and Service Tax Act 2017 (herein after referred to as CGST Act, 2017 and SGST Act, 2017) by M/s Ascendas Services (India) Pvt. Ltd., 3rd Floor, Discoverer Building, International Tech Park Bangalore, Whitefield Road, Bengaluru 560066 (herein after referred to as Appellant) against the advance Ruling No. KAR/ADRG 114/2019 dated: 30th Sept 2019.
Brief Facts of the case:
3. The Appellant is engaged in the business of operation and maintenance of International Tech Park, Bangalore which includes operation and maintenance of electrical systems at common areas, building and civil repairs, maintenance of lifts etc. In addition, the appellant also arranges for the transport of its staff and employees of the corporate clients in the Tech Park who are the tenants of the business park (herein after referred to as ‘commuters’).
4. For the purpose of arranging the transport facility, the Appellant has entered into a contract with Bangalore Metropolitan Transport Corporation (hereinafter referred to as ‘BMTC’) whereby BMTC allots 1 bus to the Appellant for every 50 passes purchased. The Appellant receives the following types of bus passes from BMTC for distribution:-
– Non AC regular BMTC bus pass; and
– Combo bus pass which can be used for Non-AC and AC buses
BMTC does not charge GST for the non-AC bus passes since the same is exempt from GST vide Entry No.15 of Notification No. 12/2017-CT(R) dated June 28,2017. However, for Combo bus pass (i.e. which can be used for non-AC and AC buses), BMTC charges GST at 5% as per Entry No. 8(ii) of Notification No. 8/2017- IT (R) dated June 28, 2017.
5. The Appellant charges a separate fee of Rs 300 per commuter as ‘facilitation fee’ for arranging the transport facility for the said commuters. In this connection the Appellant sought an advance ruling in respect of the following question:-
a) Whether the value of bus passes distributed by the applicant to the commuters is to be included in the value of facilitation charges as per section 15(2) of the CGST Act, 2017 and KGST Act, 2017?
b) Whether the supply of service in the hands of the applicant could be classified as merely a supply of facilitation services between BMTC and the commuters?
6. The Karnataka Authority for Advance Ruling vide ruling No KAR ADRG NO 114/2019 dated 30-09-2019 held as follows:-
1. The value of the bus passes distributed by the applicant to the commuters and the facilitation charges is to be included in the value of services provided by the applicant.
2. Regarding the second question of “whether the supply of service in the hands of the applicant could be classified merely a supply of facilitation service between BMTC and the commuters “, the answer is in the “negative.
7. Aggrieved by the said ruling, the appellant has filed this appeal on the following grounds.
7.1 The Appellant submits that they are merely providing the service of facilitation of transportation service by obtaining bus passes from BMTC and providing the same to the commuters; that the employees of the tenants of the Appellant are the service recipients who receive the following two services,-
– Transportation service provided by BMTC, and
– Facilitation service provided by the Appellant by making available the bus pass to the commuters at their respective workplaces.
They submitted that the benefit of the service is accrued by the commuters irrespective of the fact that payment is made by the Appellant. In this regard, they placed reliance on the case of Verizon Communication India Pvt Ltd vs Asst Commr ST Delhi III reported in 2018 (8) GSTL 32 (Del) which held that recipient of service is one who benefits from the service.
7.2. They submitted that it would be almost impossible for BMTC to get into a contract with each of the individual passengers and therefore, the contract is between the Appellant and BMTC; that the Appellant is merely facilitating transportation service between BMTC and the commuters; that owing to the practical difficulty of raising invoices in the name of each individual passenger i.e in the name of each employee of the tenant who are the ultimate beneficiary of the transportation service, BMTC raises a consolidated invoice in the name of the Appellant; that the Appellant issues a separate invoice for such facilitation and charges a facilitation fee of Rs 300 and applicable GST at 18% as “Support services in transport”. They submitted that apart from the facilitation charges, they receive the actual amount incurred to obtain such bus passes for distribution and therefore the Appellant cannot be held to be the service recipient of transportation service since the said services are primarily rendered to the commuters who are the ultimate beneficiary of transportation service provided by BMTC.
7.3. They further submitted that they act as a pass-through by mediating the transportation service provided by BMTC to the occupants of ITPB; that they are an intermediary with respect to the supply of bus passes in as much as they arrange the service of transportation by providing the bus passes to the occupants and do not provide the transportation service on its own account; that the Appellant is incapable of providing transportation services owing to a lack of a government permit to do so; that they are providing a service which is merely in the nature of facilitation to enable the commuters to avail the transportation facility provided by BMTC; that as per the definitions of “Contract carriage” and “Stage carriage” as given in the Motor Vehicles Act, permits are to be obtained for operating stage carriage and contract carriage; that the Appellant has not applied for or obtained such permits and it is not providing any service of transportation of passengers through contract or stage carriage.
7.4. They relied on the definition of intermediary services under the erstwhile indirect regime as well and drew reference to the Education Guide issued by Central Board of Excise & Customs with regard to Taxation of services, which provides the factors for determining a person as an intermediary. The relevant extract is as follows:-
“In order to determine whether a person is acting as an intermediary or not, the following factors need to be considered:-
Nature and value: An intermediary cannot alter the nature or value of the service, the supply of which he facilitates on behalf of his principal, although the principal may authorize the intermediary to negotiate a different price. Also, the principal must know the exact value at which the service is supplied (or obtained) on his behalf and any discounts that the intermediary obtains must be passed back to the principal.
Separation of value: The value of an intermediary’s service is invariably identifiable from the main supply of service that he is arranging, It can be based on an agreed percentage of the sale or purchase price. Generally, the amount charged by an agent from his principal is referred to as “commission “.
Identity and title: The service provided by the intermediary on behalf of the principal is clearly identifiable. “
7.5. On the basis of the above, they stated that they satisfy the factors as stated below:-
Nature and Value: The Appellant in the instant case, does not alter the nature of service provided by BMTC. The Applicant merely recovers the cost of the bus pass from the commuters and the same is paid to BMTC. Essentially, BMTC provides transportation service by issuing bus passes, a service which is consumed by the commuters utilizing the bus passes.
Separation of vaIue: Being an intermediary the Applicant is receiving consideration in the form facilitation fee for arranging the transportation service by making the bus passes available to the commuters. The value of this service is clearly identifiable and recovered separately from the service recipients. This is also evidenced from the invoice.
Identity and Title: BMTC is responsible for providing the buses and carrying out the transportation service. The responsibility of the Applicant is towards facilitation of the same. The same can be substantiated by the agreement between BMTC and the Applicant.
7.6. They relied on the decision of the Maharashtra AAR in M/s Jotun India Pvt Ltd reported in 2019 (10) TMI 482 which held on a similar arrangement between the applicant, its employees and an insurance company that the applicant is not rendering any service of health insurance to the employees’ parent and hence there is no supply of services in the instant case of transaction between employer and employee. They stated that the principles upheld in the above case will squarely apply to their case also and the recovery of bus pass amount cannot be treated as an activity in the course of business or for the furtherance of business
7.7. They submitted that the arrangement as per the Agreement between the Appellant and BMTC provides for arranging transportation service; that as per the agreement, the Appellant has merely agreed to facilitate the transportation service and assist the commuters to obtain the passes. Relevant extract of the agreement is as follows:-
“the second party is desirous of arranging for transport for the staff employed with it and by the various corporate clients of the International Tech Park Bangalore (ITPB) (staff of the tenants of the Park) from different parts of Bangalore city as mentioned in the Schedules, to and from ITPB, located at Whitefield Road, Bangalore 560066. The First party has agreed to arrange the transport facility to the staff of tenants of the Park (the said purpose) subject to the terms and conditions “
7.8. The Appellant submitted that bus passes are issued by BMTC only on the request, of the Appellant (depending on the demands raised by the commuters). Further, the unused passes are returned by the Appellant to BMTC, thereafter, BMTC issues invoices only for the actual passes utilized. This fact is also substantiated by clause 12 of the agreement which is reproduced as under:-
“12. Monthly passes shall be provided as per request of the Second Party. The Second Party shall ensure that all unused passes for the month are returned to the First Party on or before the 10th of each month. The First Party shall prepare bills after taking into account all the returned passes and only for the actual number of passes utilized by the Second Party. “
In terms of the aforesaid clause, the Appellant has therefore, agreed to facilitate or arrange transport facility and is merely delivering the bus passes to the commuters to avail the same.
7.9. The appellant submitted the following illustration of the process involved in the transaction done by them:
