In re Maha Voyage LLP (GST AAR Kerala)
Introduction: In the case of Maha Voyage LLP seeking an advance ruling from the GST AAR Kerala, the focus is on the taxability of providing passenger buses on rent/lease to Kerala State Road Transport Corporation (KSRTC). The applicant questions whether GST is applicable at 18% under Tariff Heading 9966 or if the services are exempted under Notification No.12/2017-CT(R) dated 28/06/2017.
Detailed Analysis: Maha Voyage LLP, a registered Limited Liability Partnership, entered into an agreement with KSRTC for leasing 10 Multi Axle Air Conditioned buses. The agreement covers various aspects, including the lease period, specifications, maintenance, and trained drivers. The applicant argues that they are liable to pay GST at 18% under Tariff Heading 9966, as they provide buses, drivers, and maintenance services, and the consideration does not include the cost of fuel.
KSRTC, however, claims exemption under Notification No.12/2017-CT(R) dated 28/06/2017, asserting that the services fall under “giving on hire to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers.” The applicant contends that the services fall under the residuary entry of rental services of transport vehicles, attracting an 18% GST rate.
The applicant emphasizes the distinction between renting and hiring, stating that they have transferred the right to use the buses to KSRTC, making it a rental transaction. They refer to legal precedents to support their interpretation, stating that their activity aligns with renting rather than hiring.
The jurisdictional officer acknowledges no pending proceedings against the applicant, and during the personal hearing, the representative reiterates the applicant’s contentions.
Conclusion: After careful consideration, the GST AAR Kerala concludes that the services provided by Maha Voyage LLP to KSRTC, involving the rental/lease of buses meant to carry more than twelve passengers, are exempt from GST under Notification No. 12/2017-CT(R) dated 28/06/2017, specifically at Sl. No. 22.
Ruling Summary:
1. Question 1: Service is not chargeable at 18% under Tariff Heading 9966.
2. Question 2: The service is exempt from GST under Notification No. 12/2017-CT(R) at Sl. No. 22.
3. Question 3: Not relevant based on the exemption granted in Question 2.
This ruling clarifies the tax implications for Maha Voyage LLP and sets a precedent for similar cases involving the leasing of transport vehicles to state transport undertakings. The interpretation of the distinction between renting and hiring provides valuable insights for businesses in the transport services sector.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, KERALA
1. M/s. Maha Voyage LLP, (hereinafter referred to as the ‘Applicant’) is a Limited Liability Partnership duly registered under the Limited Liability Partnership Act, 2008.
2. At the outset it is clarified that the provisions of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as CGST Act) and t2. he Kerala State Goods and Services Tax Act, 2017 (hereinafter referred to as KSGST Act) are same except for certain provisions. Accordingly, a reference herein after to the provisions of the CGST Act, Rules and Notifications issued thereunder shall include a reference to the corresponding provisions of the KSGST Act, Rules and the Notifications issued thereunder.
3. The applicant requested advance ruling on the following:
3.1. Whether the service of providing passenger buses on rent/lease by the applicant to Kerala State Road Transport Corporation (hereinafter referred to as ‘KSRTC’) is chargeable to GST @ 18% under Tariff Heading 9966 i.e., ‘Rental Services of Transport Vehicles’ in terms of Entry No. 10(iii) of Notification No.11/2017-CT (Rate) dated 28.06.2017?
3.2. Whether the service of providing passenger buses on rent/lease by the applicant to KSRTC would be exempt from payment of GST under Tariff Heading 9966.i.e. ‘Services by way of giving on hire to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers’ in terms of Notification 12/2017 — CT (Rate) dated 28.06.2017 or not?
3.3. If the answer to both the above question is negative, then what is the nature of services provided by the Applicant and what is the rate of tax applicable on such services?
4. Contentions of the Applicant:
4.1. The applicant submits that M/s Scania Commercial Vehicle India Private Limited ‘scania’ won the tender invited by KSRTC to lease 25 buses under the condition that the winning bidder has to identify and appoint an operator / who shall lease out the buses to KSRTC. Subsequently the applicant has been identified by scania and intimated KSRTC that the applicant is interested in leasing 10 number of Multi Axle Air Conditioned buses.
4.2. Subsequently KSRTC and the applicant entered into an agreement for hiring Scania buses under wet lease on 15.09.2017. The copy of the agreement is attached as Annexure -B. The Applicant submits that the relevant clauses of the agreement are as follows;
4.2.1. As per Clause 1 of the agreement, the applicant has agreed to give buses on wet lease to KSRTC for a period of 5years, subject to extension on mutual consent of the parties.
4.2.2. Clauses 2 to 11 of the agreement stipulate the specification of the leased buses and the term and conditions with respect to maintenance of the leased buses and Clauses 12 to 22 contain the provisions for providing trained drivers for the operation of the buses.
4.2.3. As per Clause 26 of the agreement the applicant is responsible for operation of the buses in compliance with the routes and timings provided by KSRTC.
4.2.4. In terms of clause 41, 52, and 53 of the Agreement, the fuel cost of the buses shall be borne by KSRTC.
4.2.5. Clause 47 provides for the payment of taxes and levies and Clause 49 of provides the terms for payment of service charges on kilometre basis daily.
4.2.6. As per Clause 51, GST on hiring charges, if applicable and paid by the applicant will be reimbursed by KSRTC on production of proof of payment. Thus, in terms of the above agreement, the applicant raised invoice on KSRTC for service charges along with GST at the rate of 18% under Tariff Heading 9966. The sample copies of the invoices are enclosed as Annexure —C.
4.2.7. Further, in terms of Clause 55 and 56 of the Agreement, the applicant and KSRTC shall after mutual consent provide advertisement options and luggage/ cargo transportation on revenue sharing basis.
4.3. KSRTC has allowed them to carry luggage in the 10 wet lease buses at the rate of Rs. 10,000/- + 18% GST. Subsequently, KSRTC informed the Applicant that they would discontinue paying GST on the invoices issued by the applicant towards ‘renting of bus services’ from April 2019 stating that the services given by the Applicant are exempt under Sl No. 22 of Notification 12/2017 — CT (Rate) dated 28.06.2017. The applicant submits that they have continued to charge and pay GST on the invoices raised to KSRTC, however the GST component had not been reimbursed/paid to the applicant by KSRTC since April 2019.
4.4. The applicant submits that there is a supply of service being provided to KSRTC in terms of section 7 of the CGST Act. The Applicant contended that as there are two parties and there is a consideration for the service. The applicant has rented out its own buses to KSRTC. Consequently, the applicant is of the view that they are liable to pay GST on the said service charges/ amount/ consideration received from KSRTC. The rate of tax applicable on the said supply would be 18% in as much as the applicant is also required to make available the drivers, provide for maintenance and upkeep of the buses and the consideration does not include the cost of fuel. In addition to this, the Agreement also provides for the services of ‘sale of space for Advertisement’ and ‘transportation of Cargo/Luggage’ for separate consideration from such willing customers. However, KSRTC is of the view that the services provided by the Applicant is exempt from payment of GST in terms of Notification 12/2017 — CT (Rate) dated 28.06.2017 being services by way of giving on hire to a state transport undertaking a motor vehicle meant to carry more than twelve passengers. According to KSRTC, they are a state transport undertaking and the applicant has provided services by way of giving on hire motor vehicles. Further, KSRTC is also of the opinion that the applicant can claim the refund of the amount of GST collected and paid by the applicant.
4.5. The applicant states that KSRTC had approached both the Commissioners of Centre and State GST seeking clarification regarding whether the hiring of the buses by KSRTC from the applicant is exempt from GST in terms of Notification 12/2017 — CT (Rate) dated 28.06.2017 and whether the applicant can claim refund of the said GST already paid to the credit of the Government and got positive reply from their side.
4.6. In light of the above, the applicant is seeking the present ruling to know whether understanding of the applicant is correct i.e. whether the service of providing passenger buses on rent/ lease by the applicant to KSRTC is chargeable to GST at the rate of 18% under Tariff Heading 9966 i.e. ‘Rental Services of Transport Vehicles’ in terms of Entry No. 10(iii) of Notification No.11/2017-CT (Rate) dated 28.06.2017?
4.7. The Applicant submits that the services by way of renting of buses and operation and maintenance of such buses is a “supply” in terms of section 7 of the CGST Act, 2017 and consequently, would be liable to GST at 18% in terms of Sl. No. 10(ii) of Notification No.11/2017-CT (Rate) dated 28.06.2017 (being ‘Services by way of giving on hire — (a) to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers;).
4.8. The applicant extracts Sl No. 10 of Notification No.11/2017-CT (Rate) dated 28.06.2017 and Sl No. 22 of Notification 12/2017 — CT (Rate) dated 28.06.2017 as follows;
