Allowed

AAAR/AP/04(GST)/2022 of The Principal Commissioner Central Tax, Guntur, Cgst Commissionerate

GST AAAR24 Jan 2022AAAR/AP/04(GST)/2022

Case brief

AI extract

What is this about?

The Appellate Authority for Advance Ruling upheld the Authority for Advance Ruling's ruling that hiring/leasing of buses by APSRTC to the Public Transport Division is eligible for GST exemption, interpreting the Division as a 'State Transport undertaking' under the Motor Vehicles Act.

What did the court decide?

Appeal dismissed confirming AAR ruling allowing exemption for hiring/leasing of buses to Public Transport Division.

AAAR/AP/04(GST)/2022 of The Principal Commissioner Central Tax… — Income Tax | GST AAAR (2022)

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BEFORE THE APPELLATE AUTHORITY FOR ADVANCE RULING for the State of Andhra Pradesh (Goods and Service Tax)

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(Office at O/o Chief Commissioner of State Tax, Govt. of A.P., D NO 5-56, Block-B, R.K.Spring Valley Apartment, Bunder Road, Edupugallu, Vijayawada, Andhra Pradesh - 521151)

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Present:

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sri suresh Kishnani (Member) (central Tax) Sri S. Ravi Shankar Narayan (Member)^(State Tax)

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The 24th day of lanuary, 2022 Order /AAAR/APl04 (GST)/2022

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	Nameandaddressofthe appellant	The Principal Commissioner Central Tax, GunturCGSTCommissionerate.
?		37AAGF43527)2ZF
3	DateoffilmgofFormGST	08,11,2021
4	Hearinq⁽Virtua l)	1L122e4
5	AuthorizedRepresentative	ShriG. Rama KrishnaRaju Yadav, lointCommlssionerofCentralTax, GunturCGST Commissionerate
'l	lurisdictionalAuthority-	AssistantCommissioner^(ST) Krishnalanka Circle,Vijayawada-II Division

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(Under Section 1O1 of the Central Goods and Service Tax Act and the Andhra Pradesh Goods and service Tax Act),

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The Principal Commissioner, Central Tax, Guntur CGST Commissionerate (hereinafter referred to as appellant) filed an appeal in case of M/s. Andhra Pradesh State Road Transport Corporation^{(APSRTC),Pandit Nehru} Bus Station, RTC House, 1't Floor, Bhaskar Rao^{Pet, Vijayawadaas per Rule} 106(2) of CGST Rules, 2017 against the Advance Ruling^issuedunder sub-section (6) of section 98 in FORM GST^ARA-03 and^{no fee shall be} payable by the appellant for filing the appeal. The appeal dated: 08.11.2021 is filed contending the Ruling^{passed by the Authorityfor} Advance Ruling, A.P vide Ruling AAR No.2slAPlGSr /2021 dated^20.07.2021.

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Background of the Case:

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1.1 The appellant i.e.,^{Principal CommissionerCentral Tax GunturCGST} Commissionerate filed an^{applicationin Form GST ARA-03on 08-11-2021} before the Appellate Authority^{for Advance Ruling,AndhraPradeshseeking} clarification in case of^{M/sAndhra PradeshState Road TransportCorporation,} .A.P

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1.2 lvl/s Andhra Pradesh State^{Road Transport Corporation,(APSRTC) was} established on 11th January,1958 as^{per The Road Transport Act, 1950by} G.O Ms No.36, Home^(Transport -^{IV) dated06-01-1958.As a consequence} of bifurcation of the^{erstwhile United State of AndhraPradesh intoTelangana} and Andhra Pradesh,^{APSTRC (erstwhile)was bifurcated intoTSRTCand} APSRTC, with some issues still^{pending regardingthe division of assetsand} liabilities between the two corporations.

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f,3 APSRTC, though operating under the^{Public Transport Department(PTD)} of Government of Andhra^{Pradesh,is completelyan independententity with} operational autonomy and operates as an^{independentcorporationwith its} own souTces and application of^{funds. The Central Government owns a stake} of 310/o with Rs.35.62 Crores as^{capitalcontributionand the State} Government of Andhra Pradesh^{(GOAP)owns the balancestake of 69% with} a capital contribution of Rs.79.53^Crores.

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1.4 Of late, the Government of Andhra^{Pradeshvide GO MS NO 50 dt 30-12-} 2019, had taken up the^process of^{mergerof establishmentof APSRTC with} the State Government and^created the^{"PublicTransport Department" under} the administrative control of "Transport^{Roads and BuildingsDepartment"} and declared the 'Public Transport^{Department' as 'Headof the Department'} to exercise financial^powers. Consequently, vide^{GO MS NO 51, dt 31-12-} 2019 the employees of APSRTC^were absorbed^{into GovernmentPayroll'}

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1,5 Subsequently, the State Government^{decidedto take all the buses,} establishment and infrastructure on^{lease so that the total public transport} can be undertaken by Government of^{Andhra Pradeshdirectly, throughthe} Department of PTD.

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1.6 In connection With the above^{backdrop, the applicantapproachedthe} Authority for Advance^{Ruling seeking clarificationon the following issue'}

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Question:^{Whether the transaction} of hirjng/leasing of buses by the APSRTC t0 the Public Transport Division (PTD) of Government of Andhra pradesh is eligible for the exemption under Entry 22 of Notification No 1212017 Central Tax (Rate)?

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The Authority for Advance Ruling Andhra^pradesh in its orders in AAR No.2slAPlGST/ 2021 dated 2O.O7.2O21 hetd:

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. The transaction of hiring/leasing of buses by the APSRTC to the public Transport Division (PTD) of Government of Andhra pradesh is eligible for the exemption under Entry 22 of Notification No 12l2017 Central Tax (Rate).

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2, Grounds of Appeal:

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2.1 The appellant states that M/s. Andhra^pradesh State Road Transport Corporation, (APSRTC) declared their nature of business activities as,Leasing business, service Provision, Recipient Goods or Services, others, works Contract, Office /Sale Office, Supplier of Services and warehouse/Depot,, in the^{'Registration} Certificate', while it is declared as the activity of'undertake to provide the public transport'in ARA-o1 Application in front of the Authority for Advance Ruling.

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2,2 As per Entry No.22 of Notification No. t2/2017 centrat Tax (Rate)^,,state transport undertaking" has the same meaning as assigned to it in clause (42) of Section 2 of the Motor Vehicles Act, 1988 (59 of 1988).

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"Section 2 (42) of Motor Vehicles Act, 1988: 'State Transport undertaking, means any under taking providing road transport service, where such undertaking is carried on by,

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i. The central Government or State Government

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ii. Any Road Transport Corporation established under Section 3 of the Road Transport Corporation Act, 1950 (65 of 1950)

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iii. Any municipality or any corporation or company owned or controlled by the Central Government or one or more State Governments, or by the Central Government and one or more State Governments: iv. (Zilla parsihad or any other similar local authority)

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Explanation: For the purpose of this clause, 'road transport service, means a service of motor vehicles carrying passengers or goods or both by road for hire or reward:

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From the definition, the road transport service provided by any state undertaking carried on by the above authorities mentioned at Sl.no.1 to 4 is exempted vide Entry no.22 of Notification Noo.1212017 central Tax (rate). In

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the instant case the ApSRTC are the^,,provider,, of the transport service i.e. hiring of buses and the^public Transport Department (pTD) of Government of Andhra Pradesh is the "recipient". Both the APSRTC (having 69% capitat contribution by Andhra^pradesh State covernment) and pTD which will operate under the Administrative control of Transport, ioad and Building Department, Government of Andhra pradesh, belong to Andhra pradesh State Government only and thus,'service provider,and the'service recipient,in the instant case are related and no much distinction Found between them. Consequently, the issue gives wide scope for interpretation and the exemption can't merely be extended.

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2.3 The Government of Andhra pradesh through public Transport Department (PTD) has taken over all the buses, establishments and infrastructure on "lease basis. Accordingly, the service extended by the APSRTC to piD is considered to be' leasing of movable and immovable assets,and it does not fall under category of "hiring service or services by way of giving on hire,. Even the Applicant i.e., APSRTC had no clarity on classification of the service and had approached the AAR for ruling declaring their service as "hiring/leasing" of buses. The AAR has not discussed regarding the related party transaction between APSRTC and pTD and the nature & classification of the service extended by APSRTC to^pTD. Therefore, the AAR Ruling appears to be lack of merits and the provisions of Notification No. 12l2017 Central Tax (rate) are not made applicable to this case as the service extended by APSRTC to PTD does not fall under category of'services, as prescribed in the said notification.

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2,4 Whereas, the AAR considered the hire services provided by APSRTC to the 'Public Transport Department' (pTD) which will operate under the Administrative control of Transport, Road and Building Department, Government of Andhra Pradesh as'services' by the way of giving on hire to a State Transport Undertaking'. Further the AAR also considered the public Transport Department (PTD) as'undertaking' meant for the transport carried by the State Government relied upon definition available in Companies Act, 1962.

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2.5 Whereas, the notification prescribes only'state transport undertaking, and the definition of'state transport undertaking' is defined in tyotor Vehicles Act, 1988. When there is a clear definition available, relying upon any other

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definitions will not be tenable. It is pertinent to mention that a taxing statute has to be interpreted in the light of what is clearly expressed. Therefore, the AAR'S ruling that the Public Transport Department as'state undertaking'is not tenable in Law. It is undisputed fact that the Public Transport Department (PTD) is purely a Department which will operate under the administrative control of Transport, Road and Building Department, Government of Andhra Pradesh and it does not fall under ambit of Notification No.1212017 Central Tax (Rate) dated.28.06.2017.

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2.6 The law in respect to interpretation of exemption notification is well settled. In all tax matters one has to interpret the taxation statute strictly. Simply because one class of legal entities is given a benefit which is specifically stated in the notification, does not mean that the benefit can be extended to legal entities not referred to in the notification as there is no equity in matters of taxation. An exemption has got to be construed strictly however fairly. There's no scope of extending the words and expressions utilized in the notification on the premise of analogy or on equitable consideration.

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In view oF the above, it appears that the AAR ruling dt: 20.07.2021^giving exemption under entry no.22 ot notification no.l2/2017 Central tax^(rate) appears to be not correct.

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3. virtual Hearing:

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The proceedings of Hearing were conducted through video conference on 74.12.2027. On behalf of the appellant, the authorized representative, Sri G. Rama Krishna Raju Yadav, Joint Commissioner of Central Tax, Guntur CGST Commissionerate, attended and^presented the additional submissions. On behalf of the tax^payer, CA Siva Prasad A attended and sought two^weeks' time for filing additional submissions and the same were submitted on 28.\2.2021.

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4.Additional submissions filed by the PrinciPal Commissioner of central Tax, Guntur CGST Commissaonerate. Guntur

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4.1 As per the submissions of the APSRTC, the^Government of^Andhra Pradesh^proposes to take all the buses, establishments and^{infrastructureon} iease so that Publlc Transportation can be undertaken directly through its arm

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of Public Transportation^{Division (PTD)underthe administrative controlof} 'Transport, Roads and Buildings^{Department. Both APSRTC and PTD are} separate legal^{entities. And there must be some lease agreement/contract} etc. between them^{stipulating the servicesto be rendered, periodof service'} payments to be made, taxes^{payable, etc.}

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4.2 Whereas, the^{APSRTCand PTD have, so far, not entered into any lease} agreement.ThisfactWasinformedbytheAPSRTCVidetheirletterdated 08.17.2021 addressed^{to the Assistant Commissionerof Central Tax'} Amaravathi CGST^{Division, Vijayawada Thus, there is no lease agreement} between APSTRC and PTD^{in this matter.In the absenceof lease agreement,} theclassificationoftheservice,itstaxliabilityandeligibilityforthe exemption, if any, under^{EnlrY 22 of NotificationNo' 12l2Ol7Central Tax} (rate), can't be done. It appears that^{merely basedon the questionraisedby} the APSRTC, the^{AAR given the ruling vide AAR No.2slAPlGST/2021dated} 20.07.202f without^{going throughthe basic facts in this case. Therefore,it is} not legally tenable and^{needs to be set aside.}

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5. Additional submissions^{filed by M/s APSRTC:}

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5,1 It is contented^by the^{Central GST authorities that the benefit sought to} be extended under the^{notification l2/20f7 is in relationto a StateTransport} Undertaking and when the State^{Government, i.e., Public Transport} Department takes on hire the benefit^{cannotbe extended as the State} government is not an'undertaking'.

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In this regard, it is reiterated by^{M/sAPSRTC,that the term 'state Transport} undertaking' is defined in the^{very same notification 12l2017 itself and in} view of the express definition, it shall be^{mandatorllyapplicable.}

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a. As per definitions^2(zzk) of^{notification N. 12/2O17} state tran kino" has meanino as it in 1988):

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Hence, the meaning of the words^{'State Transport undertaking' shall} necessarily be drawn from the Motor^{vehicles Act,1988.}

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b. Section 2(42) of^{MotorVehicles Act, 1988 defines State Transport} undertaking^"State transport^{undertaking"meansany} undertaking^{providing road} transport^{service, where such} undertaking is carried on bY,-

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(i) the Central Government or a State Government;

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(ii) any Road Transport^{Corporation establt-sl9qunder section 3 of} iie n6ao rranspoi^{corporationsAct, 1950 (64 of 1950);}

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(iii) anY municipality or any^{corporation or companY ownedor} Lontroitea by^{the centralGovernment or one or more state} Governments,^{or by the CentralGovernment and one or more} State Governments

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(iv) Zilla Parishad or anY other^{similarlocal authority'}

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Explanation.-For^{the purposesof this clause," ro.ad transport} service" means a^{service of motor vehicles carrYing passengersor} goods or both by road^{for hire or reward;}

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The above definition^{clearlycontemplates not only the possibillties of the} undertaking being^{run by a 'RoadTransport Corporation established under} section 3 of the^{Road TransportCorporationsAct, 1950 (64 of 1950)"but} also being undertaken^{by StateGovernment or Central Government or a} Municipality or^{Zilla parishad themselves}

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5,2 The applicatlon^{of the above definition clearlymean that if the publicroad} transport service^{is undertakenby Stategovernment itself, then the same is} also covered^{by the definition'State Transportundertaking"}

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It appears that the^{contention of the CGST officeis that an'undertaking'shall} be one with a^{separate legal entity and physical existence and as such State} government cannot be an undertaking.^{In this regard we humblysubmit in} view of the above^{explicit definition of'state road transport' undertakingfor} the limited^purpose of^{motor vehicle act and the provisions of GST Act which} refer to such definition,^{the same alsobe consideredas an undertaking'}

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5.3 Besides the above^{and withprejudice to the aboveargument, it is further} submitted that'undertaking'denotes^{an activity but not any legal entity or a} physical form. There is no such legal requirement'^{The words'unit',} 'undertaking', and 'office'^{derive their meaning from the functional activities} that are^performed, but^{need not indicate any physicalstructure or a legal} identity as such.

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It is flnally^{prayed by the tax payerto extend the due relieF extended by AAR'} 6. Discussion and Findingsr

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we have^gone through the^{records of the appeal, facts of the case, and also} considered the written^{and oral submissions made at length by the appellant} and the^party in dispute,^{M/s. Andhra Pradesh StateRoadTransport} Corporation^{(APSRTC),as well, in light of the ruling pronounced by the AAR'} On^perusal of the^{informationat hand,it is observed that the mainissue of}

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contention is whether the transaction of hiring/leasing of buses by the APSRTC to the Public Transport Division (PTD) of Government of Andhra Pradesh is eligible for the exemption under Entry 22 of Notification No 1,2/20U Cenlral Tax (Rate). The AAR has taken the stance that the activity is eligible for exemption.

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6.1 In^paragraphs 2.1 and 2.2, the appellant contends that APSRTC, the 'provider' of the transporter service and the Public Transport Department (PTD) of Govt. of A.P., the'recipient'of service are related and no much distinction found between them. In instant case the provider and the recipient of the transport service are two different legal entities.

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6.2 In paragraph 2.3, the appellant contended that the classification of services as'leasing of movable and immovable assets'and does not fall under category of 'hiring service oT services the way of giving on hire'. In this context, it is pertinent to discuss the rules of classification of services before arriving to a conclusion.

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The Central Board for Indirect Tax and Customs issued "Explanatory Notes to the Scheme of Classification of Services" on 12th June 2018 wherein it has been specified that -

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"The Scheme of Classification of Services adopted for the purposes of GST is a modified version of the United Nations Central Product Classification. 2. The Explanatory notes for the said Scheme of Classification of Services is based on the explanatory notes to the UNCPC.

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The explanatory notes indicate the scope and coverage of the heading, groups and service codes of the Scheme of Classification of Services. These may be used by the assessee and the tax administration as a guiding tool for classification of services. However, it may be noted that where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description."

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In the instant case, the appellant classifies the transaction as'leasing of movable and immovable assets', which is more of a general description. Whereas, the lower authority classified the same under Heading 9966 or Head ing 9973

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"Services by way of giving on hire -'

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(a) to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers; or

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(b) to a goods transport agency, a means of transport of goods."

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When we peruse the relevance of both the entries, Heading 9966 fits into the most specific descriplon and should naturally be preferred over the general description as suggested by the appellant.

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6'3 In paragraphs 2.4, 2.5 and 2.6 it is contended by the appelant that the benefit extended under the notification No.L2/ 2077 Centrat Tax (Rate) Dated:28.06.2017 is in relation to a 'State Transport undertaking, and when the PTD takes on hire, the benefit cannot be extended as it is a Government Department and not an undertaking.

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In the instant case, the term,state Transport undertaking,is defined in the very same notification t2/2017 itself,' and it is presented as under:

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a. As per definitiions 2(zzk) of notification No. 12/2017 "stafe

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1988): "

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Hence, the meaning of the words'State Transport undertaking, shall mandatorily be drawn from the Motor vehicles Act, 1988.

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"b. Section 2G2) of Motor Vehicles Act, lgBB defines State Transport undertaking

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':?Pt^e- -^{yansegrt undertaking"means any undertaking providing road} transport service, where such undertaking is carried oi by,_

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(i) the Central Government or a State Government;

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(ii) aly Road Transport Corporation established under section 3 of the Road Transport Corporations Act, lgSO (64 of lgSO);

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(iii) any municipality or any corporation or company owned or controlled by the Central Government or one oi more State Governments, or by the Central Government and one or more State Governments

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(iv) Zilla^parishad or any other similar local authority.

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Explanation.-For the purposes of this clause,^,,road transport service" means a service of motor vehicles carrying passengers or goods or both by road for hire or reward;,,

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The above definition clearly envisages the possibility of this service being run / carried on by the centrar Government or a state Government. In the instant case, the PTD, the state government department which is running this service shall by definition be termed as the'state Transport undertaking,.

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In view of the foregoing, we concur with the opinion of the lower authority,

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ORDER

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We confirm and uphold the ruling of the AAR.

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Sd/- Suresh Kish nani Chief Commissioner (Central Tax) !1em ber

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Sdl-Ravi Shankar Narayan Chief Commassioner (State Tax) lvle m ber

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/ /t.c.f .b.o//

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Deputy Commissioner (ST) 0EruIY coMMtssl0NEi (sT) -^{ar. ChiclCrmnirsirnlral Sl.t? Lr.} Y^{G.Yunlrlcnl.l} Vri.y.w.a. ^.1,.

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The Principal Commissioner, Central Tax, Guntur CGST Commissionerate, Guntur (By Registered post)

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M/s. Andhra Pradesh State Road Transport Corporation, pandit Nehru Bus Station, RTC House, l't Floor, Bhaskar Rao pet, Vijayawada520001, Andhra Pradesh (By Registered post)

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Copy to

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The Assistant Commissioner of State Tax, Krishnalanka Circle, Vijayawada-II Division. (By Registered post)

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The Superintendent, Central Tax, CGST Nidadavole Range, Eluru Division. (By Registered^post)

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Copy submitted to

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The Chief Commissioner (State Tax), O/o Chief Commissioner of State Tax, Eedupuga llu, Vijayawada, (A.p)

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The Chief Commissioner of Customs & Central Tax, O/o The Chief Commissioner of Central Tax & Customs, Visakhapatnam Zone, GST Bhavan, Port area, Vtsa khapatna m-530035.A. p. (By Registered Post)

AAAR/AP/04(GST)/2022 of The Principal Commissioner Central Tax, Guntur, Cgst Commissionerate

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AAAR/AP/04(GST)/2022 of The Principal Commissioner Central Tax, Guntur, Cgst Commissionerate

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