Fact: Sanghvi Movers Limited (SML) is a public limited company is engaged in the business of providing medium-sized heavy-duty cranes on rental/ lease/ hire basis to its clients without transferring the right to use the cranes. The company has pan-India presence and cranes are deployed across India as per the requirements of customers. The Company operates these cranes on wet lease basis i.e own, operate and maintain, provides the entire operating crew, such as crane operators, riggers, helpers, mechanicals, engineers, etc., whenever a crane is given on rent all cranes have been imported from various countries such as USA, Germany, Japan, Singapore, China, etc. The cost of these cranes are significantly high and their average economic life ranges from 25 to 35 years. These cranes are moved/ transported on trailers, from one location to another, in knock down condition as the movement of cranes involves significant time and cost, to minimize transportation time and costs the company has set up various branches (“SML branch offices”) across India at strategic locations.
Issues Involved: The applicant, seeking an advance ruling before the Maharashtra Authority for Advance Ruling (“the AAR”) in respect of the following questions on:
1. Whether movement of tyre mounted cranes or crawler cranes from one GST registered office of SML to another registered office of SML for further supply on hire charges to customers would be treated as “taxable supply” under GST law or whether GST would not be leviable on the said movement as per the clarification issued by the CBEC vide Circular No. 21/ 21/ 2017 – CGST read with Circular No. 1/1 / 2017 – IGST?
2. Whether the recipient office of SML duly registered under GST receiving such cranes for further supply on hire charges would be eligible to avail input tax credit of GST charged?
3. In case when a tyre-mounted crane or crawler crane is moved from one GST registered office of SML to another registered office of SML only for upkeepment and maintenance purpose, without any further supply to unrelated customers, whether such movement of crane would be treated as “taxable supply” under the GST law or can it be said that it would not tantamount to “supply” as per clarification issued by the CBEC vide Circular No. 21/ 21/ 2017 – CGST read with Circular No. 1/1/2017 – IGST?
4. If the transaction stated above in question 1 is liable to tax, whether GST would be payable only on the movement of tyre-mounted cranes being goods on wheels or GST would also be payable on movement of both types of cranes (i.e. tyre-mounted cranes and crawler cranes)?
5. What should be the value under section 15 of the Central Goods and Services Tax Act, 2017 (CGST Act) and the rules made thereunder for discharging applicable GST on movement of cranes from one GST registered office to another registered office in case the said movement is considered to be a taxable supply?
Held: The Hon’ble AAR of Maharashtra vide Advance Ruling NO.GST-ARA-43/2017-18/B-50 dated June 15, 2018 stated as follows:
1. In Regard to question no 1 it is observed that as per section 7 read with schedule – II applicant’s activity of providing crane on hire is nothing but transfer of right in cranes without the transfer of title thereof and is therefore a is suppIy of service. The next issue raised by the applicant for our consideration is under claim that all the branches located in different state are of single legal person and as such the movement of crane for supply on hire from HO in Maharashtra to branch office in another state would not be leviable to tax under GST as per the clarification issued by CBEC vide Circular NO. 21/21/2017-GST read with Circular No. 01/01/2017. Further as per the said circular interstate movement of cranes except in cases where movement of such goods is for further supply of same goods, shall be treated ‘neither supply of goods or supply of service’. The reliance by the applicant on this circular to claim interstate movement of cranes as exempt from levy of IGST is misplaced as the cranes moves form SML HO Maharashtra to SML branch in another state for further supply of same cranes. For above deliberation we conclude that IGST would be leviable on the interstate movement of both type of cranes from SML HO to SML branch offices registered in another state for further supply on hire charges to customer and thus the circular 21/21/2017-IGST is not applicable to the facts of the present transaction.
2. In regard to question no 2 it is observed that recipient office of SML registered under the GST Act in a taxable territory other than Maharashtra state. Therefore, of the opinion that applicant is not proper person to raise this question and therefore we are not expressing our opinion on this question.
3. In regard to question no 3 it is observed that interstate movement of tyre mounted crane or crawler crane wherein the crane is moved from registered office of the company in the state of Maharashtra to another registered office of the company in other state and the movement is solely for the purpose of upkeepment and maintenance purpose and not for further supply of the crane on hire charges. We find that the situation as mentioned above is squarely covered by the clarification issued by Tax Research Unit vide circular no. 21/21/2017- GST DT. November 22, 2017. As such the interstate movement of cranes is neither a supply of goods nor supply of services and consequently no IGST would be applicable on such movement. However, tax is leviable on repairs and maintenance done for such goods.
4. In regard to question no 4 it is observed that GST would be payable on the movement of both type of cranes i.e. tyre mounted cranes and crawler cranes.
5. In regard to question no 5 it is observed that the value for the purpose of section 15 where the recipient branch office in other state is eligible for full input tax credit would be the value declared in the invoice as open market value of the services for the purpose of levy of tax and alternatively and amount equivalent to 90% of the price charged for the supply of goods of like, kind and quality by the recipient to his customer. In short there is no impropriety in the appellant considering 95% of the value charged by SML branches to the customer of the branches as value of supply include- any taxes, duties, cases, fees and charges levied under any law for the time of discharging GST liability.
Citation: http://insta.instavat.in/PDF/MAHARASHTRA-ADVANCE-RULING-SANGHVI-MOVERS.pdf