Integration, testing and installation of software between centres of a same unit is supply between distinct persons

In re Ola Electric Technologies Private Limited (GST AAR Tamilnadu)

Integration, testing and installation of software between centres of a same unit is supply between distinct persons

The AAR, Tamil Nadu in the matter of Ola Electric Technologies Pvt. Ltd. [Order No. 31/AAR/2022 dated July 29, 2022] has held that the transfer of rights to perform integration testing, installation, and marketing of software from an e-vehicle manufacturing unit to a software development centre on behalf of end-users is subject to Goods and Services Tax (“GST”) being a supply between two distinct persons. Further held that, where the supply only involves the transfer of rights, it is considered as a supply of service and not that of goods.

Facts:

Ola Electric Technologies Pvt. Ltd. (“the Applicant”) was setting up an electric two-wheelers manufacturing unit in Tamil Nadu which is to be sold through various distribution centres across the country, whereas the head office and additional software development centre was set-up in Bengaluru, Karnataka (“the Head Office”). Tamil Nadu Centre will give the right to the Head Office to integrate, test, market, and install software for performance upgrades on vehicles manufactured by Tamil Nadu Centre. The software was developed by the Head Office, and is owned by them. However, the software will not have any value in the market until Tamil Nadu Centre agrees to integrate it into their manufactured vehicles and allows the Head Office to sell, upload, and maintain the software on these vehicles. The Tamil Nadu Centre was to charge a recurring consideration from the Head Office for the said transfer of right and the Head Office was to sell the software directly to the end user as per their requirement.

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