Confusion and Controversy Surrounding GST Ruling on Leasing Services for Crates and container: Chep Is Battle for Clarity in Inter-Branch Transaction
CA Heet Shah
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Once upon a time in the leasing industry...
?? CIPL India Pvt Ltd (CiPL), known for leasing crates, containers, and equipment, faced a complex tax dilemma. They provided leasing services and sometimes transported equipment between their branches in different states, such as Karnataka and Tamil Nadu. CIPL levied GST on these inter-branch transactions, considering it a supply of leasing services.
?? Question 1: CIPL sought an advance ruling to confirm if renting equipment on lease constituted a lease transaction. The answer was affirmative, acknowledging it as a lease arrangement.
?? Question 2: Next, CIPL inquired about the value of supply for such lease transactions. Initially, the ruling authority stated that the value should be the same as the open market value under Rule 28 of CGST Rules 2017. However, the appellate authority modified this opinion, stating that the transaction value mentioned on the invoice should suffice. They referred to relevant case laws for support.
???? Question 3: CIPL also sought clarification on the documentation required for transporting equipment between its branches. The ruling authority rejected their query, citing it as outside their jurisdiction under Section 96 of CGST Act, 2017.
?? ♂? Question 4: The ruling authority denied providing a ruling on whether transportation between CIPL Karnataka and Tamil Nadu constituted a mere movement of goods or a facilitation of service. They claimed lack of jurisdiction over the transaction.
? Question 5: Similarly, the ruling authority rejected CIPL's query about documentation for equipment transportation from CIPL Karnataka to CIPL Tamil Nadu, citing it as beyond their purview.
?? Aggrieved by the initial ruling, CIPL Maharashtra filed an appeal with the appellate authority. The appellate authority modified the ruling on the second question, stating that the transaction value mentioned on the invoice would suffice. They referred to relevant case laws, including M/s BG Shirke Construction Technology Pvt. Ltd., M/s Kansai Nerolac Paints Ltd., and M/s Specsmakers Opticians Private Limited.
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?? Unanswered Questions and Doubts:
1?? CIPL Maharashtra's ability to charge any amount for inter-branch supply and transfer ITC at their discretion raised concerns regarding fairness compared to taxpayers following Input Service Distribution (ISD) and Cross Charging provisions.
2?? Determining the transaction value for facilitation services from CIPL Karnataka to CIPL Maharashtra posed a challenge since no consideration was involved.
3?? The uncertainty remained about whether the same opinion applied even after the termination of the lease transaction, regarding the facilitation service provided by CIPL Karnataka.
4?? If CIPL Tamil Nadu handled equipment transportation, acting as the bailee even after termination, what implications would that have?
?? These advance rulings created confusion within the leasing industry, rather than providing clarity. Industry experts called for deeper examination and clarification from the authorities, reducing doubts and potential litigation. The demand for clear guidelines regarding cross charging and ISD persisted among industry players.
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Disclaimer: This narrative is fictional and provided for illustrative purposes only. It does not reflect any professional advice. Consult a Certified Chartered Accountant (CA) for personalized guidance tailored to your specific business needs.
Vijayan Pankajakshan @sachin agarwal