RULINGS OF ADVANCE RULING AUTHORITIES
1. Input Tax Credit
Facts : Applicant has engaged service providers to provide transportation facility to its employees, in non-air conditioned buses having seating capacity of more than 13 person. He recovers nominal amount from employees for usage of employee bus transportation facility in non-air conditioned bus.
The applicant, seeking an advance ruling in respect of the following questions.
1. Whether input tax credit (ITC) available to Applicant on GST charged by service provider on hiring of bus/motor vehicle having seating capacity of more than thirteen person for transportation of employees to & from workplace?
2. Whether GST is applicable on nominal amount recovered by Applicants from employees for usage of employee bus transportation facility in non-air conditioned bus?
3. If ITC is available as per question no. (1) Above, whether it will be restricted to the extent of cost borne by the Applicant (employer)?
Observations & Findings : In the subject case we find that the applicant is not providing transportation facility to its employees, in fact the applicant is a receiver of such services in the instant case. The applicant’s contentions that they are eligible for exemption from GST under SI. No. 15 (b) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 in respect of nominal amounts of recoveries made from their employees to wards bus transportation service, is not correct. The exemption under the said notification is available only when the supply is taxable in the first place. In the subject case, the transaction between the applicant & their employees, due to “Employer-Employee” relation as stated by the applicant in their submissions, is not a supply under GST Act.
Ruling : Input Tax Credit on GST charged by service provider on hiring of bus/motor vehicle having seating capacity of more than thirteen person for transportation of employees to & from workplace is available only the extent cost bone by the applicant w.e.f., 01-02-2019. Section 17(5)(b)(i) of the CGST Act, 2017 has been amended, w. e.f. 01.02.2019.
[2020 (9) TMI 352 – AAR, Maharashtra – Tata Motors Limited]
2. Tour Operator Service
Facts : The Applicant is engaged in business of providing tour services to the tourists identified by the Main Tour Operator. In transaction which the Applicant intents to undertake, the Applicant is going to provide some of the services i.e.., local transportation services along-with services like elephant ride, lunch/dinner, local sightseeing, guide services.
The applicant sought to know, whether the rate of 5% under heading 9985(i) is applicable on transaction which the Applicant intents to undertake wherein a single invoice is raised in respect of all the services i.e. local transportation services along-with services like sightseeing, tour guide, elephant ride etc., provided by the Applicant to The Main Tour Operator?
Observations & Findings : As per the definition of Tour Operator, in the Notification, the same will include the person who provides services in the nature of planning, scheduling, organizing, arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport. Further, the rate of 5% under the Rate Notification is subject to fulfillment of the conditions mentioned in the said Rate Notification.
Ruling : Since, the applicant is rendering only transportation with some ancillary services and not accommodation, as such does not satisfy the conditions as mentioned under Serial No. 23 (i) (Chapter heading 9985) of Notification No. 11/2017-Central Tax (rate) dated 28-6-2017 (as amended), therefore, rate of GST 5% is not applicable.
[[2020] 119 taxmann.com 121 (AAR- RAJASTHAN) – Crown Tours & Travels]
3. Services to entities providing functions prescribed under clause 243G and 243W of the Constitution of India.
Facts : The applicant is engaged in providing services in auditing, accounting, taxation etc. The applicant has been appointed for its professional service in respect of maintenance of Accounts and allied items of work in Segment III of M/s. Sardar Sarovar Narmada Nigam Ltd (SSNNL).
SSNNL, a company is engaged in the work of providing drinking water, generation of electricity and irrigation facility which is a function entrusted to a Panchayat under Article 243G and Municipalities under Article 243W of the Constitution.
The applicant sought the advance Ruling, whether, the professional service for maintenance of accounts and allied items of work provided to SSNNL by the applicant is a taxable service under Section 9 (1) of The CGST Act, 2017 or exempted vide Sr. No.3 of Not. No. 12/2017-CT (Rate) dated 28.06.2017.
Observations & Findings : They are not providing any technical services/any related services for constructing of Dam, Canal or any other irrigation network of the company; that Service of maintenance of Accounts provided by them is not related to main function of the Company like water providing activity and to prepare the structure of Dam, Canal and other irrigation network of the Company; they do not provide any services which are in relation to the functions prescribed in clause 243G and 243W of the Constitution of India; that Maintenance of Accounts service has no anywhere concern with functions prescribed under clause 243G and 243W of the Constitution of India.
Ruling : The professional service for maintenance of accounts and allied items of work provided to SSNNL by the applicant is a taxable service under Section 9 (1) of The CGST Act, 2017 and are not exempted in terms of Sr. No.3 of Notification No. 12/2017-CT (Rate) dated 28.06.2017, since, the services provided by the applicant to SSNNL is not in relation to work entrusted to a Panchayat under Article 243G of the Constitution; or Municipality under Article 243W of the Constitution.
[2020 (9) TMI 545 – AAR, Gujarat – Dhirubhai Shah & Co. LLP]
4. Valuation
Facts : The Applicant employs a fleet of around 30 helicopters (aircrafts) for providing Rental services with or without operator under the charter hire services entered into by the applicant with various customers, the applicant is responsible for operating and maintaining the aircrafts.
Providing of Aviation Turbine Fuel (ATF) required for flying the Aircrafts would be the responsibility of the Customers. However, at locations where the customer is unable to provide the fuel, in order to ensure continuity of flying, the contract requires the applicant to procure the fuel on behalf of the Customer and subsequently the cost of the fuel is reimbursed by Customer at actual (without charging any mark-up). The applicant, as per his opinion, undertakes the activity of procurement of fuel as a ‘pure agent’.
The applicant has sought advance ruling, “Whether in terms of the valuation provisions under GST legislation, amount recovered as reimbursement (at actual) by the applicant from the customer, for the fuel procured on behalf of the Customer is required to be included in the value of services provided by the Applicant?”
Observations & Findings : In terms of Section 15(1) of the CGST Act, 2017, ‘the value of supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole ‘consideration’ for the supply. In the instant case, where the applicant and the customer are unrelated parties, the price actually paid or payable for the supply of services includes the value of services i.e. “Rental services of aircraft including passenger aircrafts, freight aircraft and the like with or without operator” as well as the amount for the fuel filled in the aircraft by the applicant, which would be the sole consideration for the supply as per the said section.
Ruling : In terms of the valuation provisions under GST legislation, amount recovered as reimbursement (at actual) by the applicant from the customer, for the fuel procured on behalf of the Customer is required to be included in the value of services provided by the Applicant.
[[2020] 119 taxmann.com 268 (AAR – GUJARAT) – Global Vectra Helicorp Ltd.]
5. Valuation
Facts : The Applicant have proposed/ planned for engaging in the business of renting of commercial property on monthly rents and allied business. They intend to enter in to a contractual agreement of renting of immovable property with an Educational Institution in Bangalore. The Contract is on the basis of the reserved monthly rent of ` 1.50 lakhs or Annual Rent of ` 18.00 Lakhs and also refundable caution deposit of ` 500 Lakhs, which shall be returned without interest on the termination of the tenancy.
The applicant sought for advance ruling in respect of the following questions:
i. For the purpose of arriving at the value of rental income, whether the applicant can seek deduction of property taxes and other statutory levies.
ii. For the purposes of arriving at total income from rental, whether notional interest on the security deposit should be taken into consideration.
iii. Whether the applicant is entitled for exemption of tax under the general exemption of ` 20 lakhs.
Observations & Findings : As per Section 15(2) of CGST Act, 2017 any taxes, duties, cesses, fees and charges, levied under any law for the time being in force, shall include in the value of taxable supply. In the instant case the property tax is levied, under the Karnataka Municipalities Act 1964, by the BBMP in Bangalore. Further the only exclusions from the value of the taxable supply are the taxes, duties, cesses, fees and charges levied under the CGST Act 2017.
The security deposit is collected normally equivalent to 6 months or 12 months rent. Also it is a known fact that the higher the security deposit lower the monthly rent amount. In the instant case, an amount of ` 5 Crore is proposed to be collected as security deposit and a monthly rent of ` 1.5 Lacs. Hence, the notional interest on the security deposit shall be taken into consideration, for the purposes of arriving at total income from renting of Immovable Property.
Ruling : The applicant is entitled for exemption of tax under the general exemption of ` 20 lakhs, subject to the condition that their annual turnover, which includes monthly rent and notional interest, if it influences the value of supply, does not exceed the threshold limit. Property tax is not deductable from the value of taxable supply of “Renting of Immovable Property” service.
[2020 (9) TMI 784 – AAR, Karnataka – Midcon Polymers P Ltd.]
ORDERS OF APPELLATE ADVANCE RULING AUTHORITIES
1. Renting of Immovable Property
Facts : The appellant, along with four others have collectively leased out a multi-storied property to a Company engaged in providing hostel facilities. The property was constructed as Hostel building. The appellant sought advance ruling from AAR, Karnataka, on the following issues :
“1. Whether exemption prescribed under entry number 13 of notification no. 9/2017-integrated tax (rate) dated 28th June, 2017 can be sought and the lessors (here Ambrish Vasudeva and 4 others) need not charge GST while issuing the invoice for the lease service to M/s. DTwelve Spaces Pvt ltd.
2. Whether the lease service falls under the Exemption prescribed and can be described as “Services by way of renting of residential swelling for use as residence” as listed in the aforesaid Notification?”
The AAR vide its order dated 23rd March 2020 gave the following ruling :
1. The exemption prescribed under entry no. 13 of Notification No. 9/2017 – Integrated tax (Rate) dated 28th June 2017 cannot be sought and the lessors (as an entity) have to charge GST while issuing the invoice for the lease services to M/s DTwelve Spaces Pvt Ltd, provided they are registered under the GST Act.
2. The lease services does not fall under the exemption “Services by way of renting of residential dwelling for use as residence” as listed in entry 13 of Notification No. 9/2017 – Integrated tax (Rate) dated 28th June 2017.”
Observations & Findings : Can a hostel building be called as a residential dwelling? A common understanding of a hostel is that of an establishment which provides inexpensive accommodation to specific categories of persons such as students, workers, travellers.
The lease services does not fall under the exemption “Services by way of renting of residential dwelling for use as residence” as listed in entry 13 of Notification No. 9/2017 – Integrated tax (Rate) dated 28th June 2017.”
Order : Ruling of AAR, Karnataka in respect of levy of GST on Lease Service by way of renting of residential dwelling for use as residence by persons such as students, workers, travellers, as lease does not fall under exemption listed in the Notification No. 9/2017-Intergated Tax (Rate) dated 28-06-2017 is upheld.
[2020 (9) TMI 354 – Appellate AAR, Karnataka – Sri. Taghar Vasudeva Ambarish]