In re Aquarelle India Private Limited (GST AAR Karnataka)
Question 1 Whether disposing off assets (no CENVAT/VAT Credit was taken) fastened to the building on delivering possession to the lesser, on which no consideration will be received, shall fall within the ambit of “Supply” as per Section 7 of Central Goods and Services Tax Act, 2017 and shall be chargeable with GST, as per provisions of Central Goods and Services Tax, 2017 (alternatively “CGST”), the Karnataka Goods and Services Tax, 2017 (alternatively “KGST”) and Integrated Goods and Services Tax, 2017 (alternatively “IGST”) and rules contained therein?
The transfer of assets fastened to the building on delivering possession to the lessor free shall amount to supply within the meaning of ‘supply’ within the section 7 of the Central Goods and Services Tax Act, 2017 and is chargeable to tax under the GST Acts.
Question 2. If the answer to above question is in affirmative, should the value appearing in the books as on the date of disposal may be construed as the “open market value” on which GST is to be discharged as per Rule 27 of the CGST rules 2017?
The value of such supply of goods would be
(a) open market value of such supply,
(b) value of supply of goods of like kind and quality;
(c) 110% of the book value of such goods in the books of accounts,
and if none of the above is possible, it needs to be determined as per the rule 31.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, KARNATAKA
M/s. Aquarelle India Private Limited, (hereinafter called “applicant”) having GSTIN number 29AAGCA1203Q2ZI have filed an application on 19-07-2018 for advance ruling under Section 97 of CGST Act, 2017 & KGST Act 2017 read with Rule 104 of CGST Rules 2017 & RUST Rules 2017, in FORM GST ARA-01, discharging the fee of Rs.5,000/- each under CGST Act & KGST Act.
2. The applicant is registered dealer having registered office at No.570, New No.22, 32nd D Cross, 11th Main, Jayanagar 4th Block, Bengaluru, (Bangalore) Urban Karnataka, 560011 and same is used as its corporate office. Various support department such as Sales, Marketing, IT, Finance etc., operate from aforesaid office. The applicant had taken the said premise on lease with effect from 01.07.2011 till 30.06.2022 with a lock in period of first three years. The applicant wishes to vacate the said premises in the near future and intend to hand over the possession of the premises to the owner along with fixtures to the building.
3. The applicant submitted that these fixtures cannot be dismantled on vacating the premises and these fastened assets would be handed over to the building owner in “as is where is’ condition without any consideration charged for the assets handed over. They provided the list of assets which would be left over during handing over of the possession in an annexure to the application. The applicant states that these assets were capitalized in the books of accounts before the introduction of Goods and Services Tax Act i.e., 1st July 2017 and no credit of CENVAT or VAT was availed in the earlier regimes.
4. In view of the above applicant has sought advance ruling in respect of the following questions:
1. Whether disposing off assets (no CENVAT/ VAT Credit was taken) fastened to the building on delivering possession to the lesser, on which no consideration will be received, shall fall within the ambit of “Supply” as per Section 7 of Central Goods and Services Tax Act, 2017 and shall be chargeable with GST, as per provisions of Central Goods and Services Tax, 2017 (alternatively “CGST”), the Karnataka Goods and Services Tax, 2017 (alternatively “KGST”) and Integrated Goods and Services Tax, 2017 (alternatively “IGST”) and rules contained therein?
2. If the answer to above question is in affirmative, should the value appearing in the books as on the date of disposal may be construed as the “open market value” on which GST is to be discharged as per Rule 27 of the CGST rules 2017?
5. The authorized representative Sri. Rohith Kumar Singh, Charted Accountant appeared for personal hearing proceedings and submitted written arguments inter alia stating as under:
5.1 The registered office of the applicant is situated at No.570, New No.22, 32nd D Cross, 11th Main, Jayanagar 4th Block, Bengaluru – 560011 and the same is used as its corporate office. They operate various support departments such as Sales, marketing, IT, Finance etc. from the aforesaid office. The said premise is taken on lease from 01.07.2011 to 30.06.2022 with a lock in period of first three years.
5.2 The applicant now wishes to vacate the aforesaid premises in near future. The possession of the premises will be handed over to the owner along with fixtures to the building which cannot be dismantled on vacating the premises. The company wishes to vacate the building with the fastened
assets and hand over to the building owner in “as is where is’ condition without any consideration charged for the assets.
5.3 The applicant states that these assets were capitalized in the books of account before the introduction of Goods and Services Tax Act i.e., 1st July 2017 and no credit of CENVAT or VAT was availed in the earlier regime.
6. The applicant, with regard to the first question states that for considering the aforesaid transaction within the ambit of supply as per para 4(a) of Schedule II of the CGST Act, 2017, it is necessary to satisfy below mentioned conditions:
