1. Maintenance Repair Contracts

Facts : The applicant is the local branch of a Russian business entity by the same name, which entered into a Maintenance and Repair Contract with Bharat Coking Coal Ltd (BCCL) with respect to the machinery and equipment it had supplied. The applicant wants to know whether the Maintenance and Repair Contract makes the supplier liable to pay GST. More specifically, the applicant wants to know whether the recipient is not liable to pay tax on reverse charge basis in terms of Notification No. 10/2017 – Integrated Tax (Rate) dated
28-6-2017.

Observations & Findings : The Maintenance and Repair Contract is between the Maintenance and Repair Contract Holder and BCCL. Although clause 9 of the Maintenance and Repair Contract, dealing with ‘Taxes & Duties’, distinguishes between a foreign Maintenance and Repair Contract Holder and a domestic Maintenance and Repair Contract Holder, nowhere else in the Maintenance and Repair Contract two such entities exist separately. The contract speaks of the rights, duties, and obligations of the Maintenance and Repair Contract Holder only without any distinction between a foreign Maintenance and Repair Contract Holder and a domestic Maintenance and Repair Contract Holder. The distinction, therefore, is relevant only in the context of any statutory provision requiring the Maintenance and Repair Contract Holder to be located in India.

The Maintenance and Repair Contract Holder, therefore, supplies the service at the sites from fixed establishments as defined under section 2 (7) of the IGST Act. The location of the supplier should, therefore, be in India in terms of section 2 (15) of the IGST Act. Supply of the Maintenance and Repair Contract Holder to BCCL is not, therefore import of service within the meaning of section 2(11) of the IGST Act. The Maintenance and Repair Contract Holder should be treated as a supplier located in India triggering clause 9.2.2 of the Maintenance and Repair Contract, and made liable to pay GST, the place of supply being determined in terms of section 12(2)(a) of the IGST Act. The applicant, being the registered branch of the Foreign Company, should be treated as the domestic Maintenance and Repair Contract Holder in terms of clause 9.2.2 of the Maintenance and Repair Contract and be liable to pay tax accordingly.

Ruling : Supply of service to BCCL in terms of the Maintenance and Repair Contract is not import of service. The recipient is not, therefore, liable to pay GST on reverse charge basis in terms of Notification No. 10/2017 – Integrated Tax (Rate) dated 28-6-2017. The applicant, being the domestic Maintenance and Repair Contract Holder, is liable to pay tax as applicable in terms of clause 9.2.2 of the Maintenance and Repair Contract.

[2020] 117 taxmann.com 418 (AAR-WEST BENGAL) – IZ-Kartex named after P.G. Korobkov Ltd.]

  1. Input Tax Credit on Lifts

Facts : The applicant established a Company with an object to undertake construction of Hotel. The Company started construction of Hotel and completed a major part of its work. This applicant sought advance ruling for input credit on Lift used in hotel. The contention of the applicant is that Input credit on Purchase of Lift would be available to Hotel as it has been used in the course or for the furtherance of business.

Observations & Findings : The applicant mentions that the said Lift is being capitalized in the books of the company and depreciation as per the provisions of Income Tax Act, 1961 is charged on the cost of lift less eligible credit of GST. Hence no depreciation is being applied on the GST portion credit of which is eligible in accordance with the provisions of section 16 of CGST Act 2017 without controverting the provisions of section 16(3) of CGST Act 2017. It is therefore pleaded that the lift in question be termed as “Plant & Machinery” and hence out of purview of blocked credit in terms of Section 17(5)(d) in as much as ‘Plant & Machinery’ has been excluded from the definition of immovable property.

The lift becomes part of the building and is not a separate thing per se. A lift does not have an identity when removed from the Building. Therefore, the lift cannot be said to be separate from a Building. Also, it has to be borne in mind that a lift is not an item that is purchased and sold. It is a customized mechanism for transportation, designed to suit a specific building. Upon piece by piece installation, it becomes an integral part of the building.

In the explanation relating to Plant and Machinery, beneath sub-section (6) of Section 17, while providing the meaning of the term plant and machinery, it has been clearly stated that Buildings and Civil Structures shall not be covered under the term Plant.

Ruling : We hold that the input tax credit of tax paid on Lifts procured and installed in hotel building shall not be available to the applicant as the same is blocked in terms of Section 17(5)(d) of the CGST Act 2017, become an integral part of the building.

[2020 (7) TMI 476 – AAR, Madhya Pradesh – Jabalpur Hotels P Ltd.]

  1. Goods Transport Agency Service – RCM

Facts : The applicant, M/s. Uttarakhand Forest Development Corporation, is registered with the GSTN seeking advance ruling on the following questions in terms of Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017:

  1. Whether a person, unregistered with GST, providing road transport services by his own truck as GTA for RCM under GST;

  2. Will issuance of E-way bill, Form 2.1 & 3.3 by or to road transporter who is unregistered with GST, providing road transport services by his own truck, be treated as consignment note for GST-RCM purposes;

  3. Whether a person, unregistered with GST providing road transport services by hiring trucks from third party, to applicant, will be treated as GTA for RCM under GST;

  4. Will issuance of E-way bill, Form 2.1 & 3.3 by or to road transporter who is unregistered with GST providing road transport services by hiring trucks from third party be treated as consignment note for GST-RCM purposes.

Observations & Findings : The applicant is sole agency for removal and sale of forest produce from the entire forest area in Uttarakhand. The applicant after felling trees gets timber transported to its sale depots. For this purpose the applicant hire truck transporter from open market accordingly as per availability of vehicles and get transported to its sales depot from road head. Due to unique nature of goods, the applicant itself fills Form 2.1 for transportation of goods which is called “Ravana”. Form 2.1 is printed format of applicant to transport timber from one place to another. The said form carries details of material, vehicle no., name of driver & signature & other details

We find that a list of goods on which GST is payable under section 9(3) of the Act is given in the Notification No. 4/2017-Central Tax (Rate) dated 28.06.2017 and the category of services on which tax is payable is enumerated in the Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017. On perusal of Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017, we find that the services rendered by the ‘Goods Transport Agency” in short (GTA) falls under ‘Reverse Charge Mechanism’ (in short RCM). Further we find that services provided by “GTA” in respect of transport of goods by road is a taxable event. As per Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, “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.

We hold that Form 2.1 may be treated as consignment note, thus the condition of GTA is fulfilled and thus the services procured from unregistered person for transportation of goods full under the definition of GTA and the applicant is liable to pay GST on the same under ROM.

Ruling : 1. Services received from the unregistered transporters ‘by the applicant falls under the definition of “GTA’ services in terms of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and the same are covered under ‘RCM’ in terms of Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017.

  1. Form 2.1 issued by the applicant can be considered as a consignment note.

[2020 (6) TMI 520 – AAR, Uttarakhand – Uttarakhand Forest Development Corporation]

  1. Renting of immovable property

Facts : The applicant is having Petrol bunk and engaged in supply of petroleum oils and lubricants in Andhra Pradesh. Further, the applicant is the absolute and sole owner of a building located in Telangana. The applicant has entered into a lease agreement dt: 31-7-2019 with D-Twelve Spaces Private Limited is inter alia engaged in the business of running, managing and operating the day to day affairs of residential premises and sub-lease of such residential premises to individuals (including students) for the purpose of long stay accommodation. As per the terms of the Lease agreement, in consideration of grant of lease to use and possess the aforesaid property, the lessee is required to pay to the applicant a monthly rent of ₹ 7,20,000 and all operational costs such as electricity, telecom and water charges as per the actual meter reading or based on the invoice or the bill issued by the relevant authorities.

The applicant seeks advance ruling on whether it is eligible for the exemption from payment of GST on the monthly rent received on lease of residential building at Telangana to D-Twelve Spaces Private Limited, as per SI.No.13 of the Notification No. 9/2017 Dt:28-6-2017.

Observations & Findings : Though the applicant claims that it has rented out residential dwelling for use as residence, it appears that the premise is a non-residential property. Considering the number of rooms and amenities provided in it, boarding and hospitality services extended to the inmates and all the clauses of the agreements, it appears that the building was constructed for the purpose of running a lodge house. It is clear that the lessee is engaged in commercial activity of renting of rooms in the dwelling and providing boarding and hospitality services to the inmates.

Therefore, it is clear that the lessor has rented out dwelling for commercial activity, and supply of such services, in the facts and circumstances of the case, are classifiable as “Rental or leasing services involving own or leased non-residential property” under Service Code (Tariff) 997212. It is taxable in the hands of the lessor and is liable for IGST at the rate of 18 percent.

Ruling : The classification of service provided by the applicant, is covered under SAC 997212 and hence under entry number 16 of Notification No.8/2017 (Integrated Tax)(Rate), Dt:28-6-2017, liable to IGST @ 18%. The entry No.13 of Notification No.9/2017 (Integrated Tax) (Rate) Dated 28-6-2017 – “services by way of renting of residential dwelling for use as residence” is not applicable to the present case on hand.

[2020 (7) TMI 390 – AAR, Andhra Pradesh – Lakshmi Tulasi Quality Fuels]

  1. Aggregate Turnover

Facts : The applicant has submitted that, he is an individual having not engaged in any business. His receipts are only from savings, personal loans and advances and deposits, which are reflected in the Income Tax Returns.

  1. The applicant has further submitted that his estimated receipts for the F.Y. 2018-19 is likely to be totally ₹ 20,12,000, which includes,(i) Rent receipts: ₹ 9,84,000, (ii) Bank interest: ₹ 3,000, (iii) Interest on PPF deposit:
    ₹ 2,76,000 and (iv) Interest on Personal Loans and Advances: ₹ 7,49,000.

  2. The applicant further submitted that their interpretation of law is that if interest is received on loans and advances, deposits and savings Bank account by an individual person, who is not engaged in any such business and who is not a money lender, then such Interest Receipts is not a Supply and does not attracts GST, as the same is neither “In the course of Business” nor “In the furtherance of Business”.

  3. The applicant further submitted that he relies on the definition of “Scope of Supply” given under Section 7 of the CGST Act, 2017, which clearly states that the receipts should be “In the course or furtherance of Business”.

  4. The applicant further submitted that the receipts from personal loans and advances, deposits and Bank Interest are not covered under “Business” as per the definition of “Business” given under Section 2(17) of the CGST Act, 2017.

  5. In view of the above, the applicant further submitted that for the purpose of calculating the threshold limit of ₹ 20.00 Lakh for obtaining registration under GST law, such interest receipts are not required to be aggregated.

  6. In light of the above backdrops, the applicant is seeking an advance ruling in respect of the following questions:-

    1. Whether Interest received in form of PPF would be considered for the purpose of calculating the threshold limit of ₹ 20.00 Lakh for registration under GST Law?

    2. Whether Interest received on Personal Loans and Advanced to family/friends would be considered for the purpose of calculating the threshold limit of ₹ 20.00 Lakh for registration under GST Law?

    3. Whether Interest received on Saving Bank Account would be considered for the purpose of calculating the threshold limit of ₹ 20.00 Lakh for registration under GST Law?

Observations & Findings : “Aggregate Turnover” is relevant to a person to determine the threshold limit to obtain registration under the Act (supply of Services) or (goods and services both): ₹ 20 Lakh ( ₹ 10 Lakh in case of supplies effected from special category states).

The different kinds of supplies covered under the “aggregate turnover” are:-

(i) Taxable Supplies;

(ii) Supplies that have a NIL rate of tax;

(iii) Supplies that are wholly exempted from SGST, UTGST, IGST or Cess; and

(iv) Supplies that are not taxable under the Act (alcoholic liquor for human consumption and articles listed in section 9(2) and in Schedule III);

(v) Export of goods or services or both, including zero-rated supplies.

It is revealed that the applicant is an individual with an annual turnover of more than ₹ 20 Lakh. Since this income is interest-related, the turnover is exempt from GST. However, the Applicant also supplies services of “Renting of immovable property” along with activity of providing services by way of extending deposits, loans or advances where the consideration is represented by way of interest. His turnover from the rent income is ₹ 9.84 Lakh and we know that this transaction (“Renting of immovable property”) is chargeable to GST. However, his taxable turnover is only ₹ 9.84 Lakh. Going by the definition of “aggregate turnover”, the Applicant is required to consider the value of both the taxable supply i.e. “Renting of immovable property” and exempted supply of service provided by way of extending deposits, loans or advances for which they earned interest income, to arrive at “Aggregate Turnover” to determine the threshold limit for the purpose of obtaining registration under the GST Act.

Ruling : The Interest received in form of PPF should be considered for the purpose of calculating the threshold limit of ₹ 20.00 Lakh for registration under GST Law. Interest received on Personal Loans and Advanced to family/friends should be considered for the purpose of calculating the threshold limit of ₹ 20.00 Lakh for registration under GST Law. Interest received on Saving Bank Account should be considered for the purpose of calculating the threshold limit of ₹ 20.00 Lakh for registration under GST Law.

[2020 (6) TMI 449 – AAR, Gujarat – Shree Sawai Manoharlal Rathi]

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