GST Liability On Owner Of Oil Tanker Leased To Petrolium Company

Summary: The key issue at hand is the GST liability on charges collected by the owner of an oil tanker leased to petroleum companies. The central question is whether the owner or the petroleum company is liable to pay GST on the hire charges. Under Notification 12/2017, specifically Entry 22(b) of the Services Exemption Notification, services provided by leasing a goods transport vehicle (GTV) to a goods transport agency (GTA) are exempt from GST. In a clarification issued by the CBIC, it was confirmed that when a corporate body hires a motor vehicle, GST under Reverse Charge Mechanism (RCM) applies to the body corporate, not the owner. Additionally, an advance ruling in the case of M/s Prahallad Ray Rekhraj Agarwal confirmed that when a GTV is hired by a GTA, the service is exempt from GST. According to the definition of GTA, the issue of consignment notes is crucial for determining the taxability of the service. As the owner of the oil tanker does not issue consignment notes, the service does not qualify as a GTA service and is exempt from GST. Consequently, the petroleum companies (HPCL, BPCL, IOCL) are liable to pay GST on the transport service under RCM, and the oil tanker owners are not required to discharge any GST on the hiring charges.

The debatable issue is that the tax liability on charges collected by the owner, towards hiring of oil tanker from petroleum companies under GST Act. The main doubt is that, whether the owner of oil tanker has to pay tax or by the petroleum company, who received services from the owner of Oil tanker.

As per the notification 12/2017 at Serial No 22 with SAC No Heading 9966, Services by way of giving goods transport vehicle on hire to a goods transport agency, (GTA) a means of transportation of goods, is NIL rated

In support of this one clarification by CBIC-190354/176/2022-TRU – Circular No 177/09/2022 Dt 03/08/2022, at Point No 15. Situations in which corporate recipients are liable to pay GST on renting of motor vehicles designed to carry passengers. It was clarified at point No

15.6 Accordingly, as recommended by the GST Council, it is clarified that where the body corporate hires the motor vehicle (for transport of employees etc.) for a period of time, during which the motor vehicle shall be at the disposal of the body corporate, the service would fall under Heading 9966, and the body corporate shall be liable to pay GST on the same under RCM. It may be seen that reverse charge thus would apply on act of renting of vehicles by body corporate and in such a case, it is for the body corporate to use in the manner as it likes subject to agreement with the person providing vehicle on rent.

And in an Advance Ruling M/s Prahallad Ray Rekhraj Agarwal, Chhattisgarh, No. STC/AAR/04/2020/39, held as:

As per the definition of ‘GTA’ in clause 2(ze) of the Services Exemption Notification, it is confirmed that the Applicant is a GTA as they will be issuing consignment notes while providing the service of transportation of goods.

Held that, as per the Entry No. 22 (b) of the Services Exemption Notification, the service by way of giving on hire a means of transportation of goods to the Applicant is eligible to Nil rate of GST.

And further As per the FAQ ON GTA released by the CBIC at

Question 2: I own a single truck and I rent it to a major player, who provides GTA service; should I take a registration? Does my monthly rental/lease income attract GST

Answer: Registration is not required since services by way of giving on hire, a means of transportation of goods to a GTA are exempt from tax vide entry no. 22 of Notification number 12/2017-Central Tax (Rate) dated 28th June, 2017.

So, the Services by way of giving goods transport vehicle on hire to a goods transport agency, (GTA) a means of transportation of goods, is NIL RATED TAX. as per the notification 12/2017 at Serial No 22 (b) with SAC No Heading 9966, Hence No liability to pay tax under GST act on hiring charges received from Oil Companies.

GOODS TRANSPORT AGENCY ::

GST Notification 12/2017 under (2) Definitions ::

(ze) “goods transport agency” means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called;

And a goods transport agency” (GTA) a person should fulfil two conditions, namely, he should provide service in relation to transport of goods by road and issue consignment note. Unless a consignment note is issued, the ingredients of goods transport agency services are not satisfied and therefore the demand under the said category cannot survive. It is not the transportation of goods by road that is subject to tax but the services rendered by a goods transport agency in relation to the transportation of goods by road and road transport agency tasked with responsibilities that others connected with road transport are not, with consignment note being the point of difference.

CONSIGNMENT NOTE IS A DECIDING FACTOR FOR GTA SERVICES ::

The Consignment Note is not defined under GST Act. But the Explanation to Rule 4B of Service Tax Rules, 1994. In terms of the said rule, consignment note means a document, issued by a goods transport agency against the receipt of goods for the purpose of transport of goods by road in a goods carriage. A consignment note creates binding responsibility for each consignment. In the absence of any evidence of such responsibility having devolved and the issue of monthly bills does not, ipso facto, creates such liability. And a consignment note, on the other hand, carries with it a certain legal burden, The issuing of a consignment note is a contractual undertaking made to the entity that handed over the goods to the agency of responsibility for safe delivery at the stipulated destination.

Therefore, it cannot be construe that the payment slip issued by the owner of the goods transport vehicle is a consignment note. Hence transportation of goods other than GTA are not liable to pay any tax either under RCM or under FCM. So the liability to pay Tax would be with the goods transport agency (GTA) only, that is  HPCL, BPCL or IOCL only.

And the CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL NEW DELHI PRINCIPAL BENCH – COURT NO. III, in the case of Mr. Sitaram Jaggnath Prasad Sihotia Vs Commissioner (Appeals), Customs, Central. Service Tax Appeal No. 54963 of 2023, at point No 4.adjudged that ::

The sum and substance of the contention raised by the appellant is that the services are taxable in the hands of the service receiver under Notification No. 30/2012-ST dated 20.06.2012 and ST/54963/2023 in terms thereof the service receiver, i.e. M/s BPCL has already discharged the service tax liability under RCM for which they have issued the certificate. The learned counsel also submitted that the appellant is owner of the truck which is used for transportation of diesel/petrol, they fall under the negative list and are exempted from levy of service tax.

 Point No 10. From the facts of the present case, I find that the appellant apart from running the petrol pump outlet is also providing the transportation of petroleum pump on behalf of M/s BPCL, the service receiver and M/s BPCL has issued a certificate mentioning that service tax has been discharged by them on monthly basis being the person liable to pay tax on services received under Goods Transport Agency as per the provisions of the Finance Act. Therefore, the service tax liability has been discharged by the service receiver and consequently the appellant is not liable to discharge the same once again.

And at Point No 12. In the present case, I find that it is an undisputed position that the appellant had not issued any consignment notes by whatever name and hence in view of the law laid down by the series of decisions, no service tax liability can be imposed.

OUR OPINION :

The hiring charges collected by the owner of oil tanker from the oil companies like HPCL, BPCL and IOCL are exempted under GST Act with SAC No Heading 9966 under notification 12/2017 at Serial No 22 (b).

Disclaimer: Views and Opinions expressed in this article are the personal views of the authors. This article, the view and opinions expressed therein do not construe any suggestion or a professional or legal advice.

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Authors:

S.V.S. Raghavendra Rao, Advocate & Tax Consultant, Nellore, Andhra Pradesh, Phone: 9440275175, Email: [email protected]

S.V.S.N. Sasidhar Rao, Chartered Accountant, Nellore, Andhra Pradesh, Phone: 9490087873, Email: [email protected].