In a recent case, the Odisha State Appellate Authority for Advance Ruling ( AAAR ) for Goods and Service Tax. upheld that the leasing of E-Bikes without an operator is classifiable under the heading 9971, i.e. financial and related services under entre SL No.15 (ii) of Notification No 20/2019- CT(R) dated, 30th September 2019 and at a GST of 18%.
The applicant, M/s True Solar Private Limited, is a company engaged in the supply of goods and services. The applicant raised a question of whether lasing of electronic vehicles (E-bikes/EVs) without an operator can be classified under the heading 9973- “ leasing or rental services without operator as per the amended Notification No 20/2019- CT(R) dated 30th September 2019.
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The applicant’s interest in this matter was because the applicant had executed a vehicle lease agreement under the name of M/s Techsofin Private Limited of Bhubaneshwar for the supply of electric vehicles without an operator on a lease basis.
The applicant contended that their transaction involves the transfer of the rights to use goods, which will satisfy the conditions set up by the Supreme Court in the BSNL case. The appellant asserted that it is SL. No.17 (iii) is not applicable; their case would still qualify under SL.No 17(viia), requiring them to pay tax at the rate appropriate to the supply of similar goods.
The Authority for Advanced Ruling ( AAR ) Odisha examined the applicant’s submissions and considered the rules and amendments. The two AAR members offered two different opinions. The SGST member classified the service under heading 9971, making it fall under financial and related services, with the tax rate matching the supply of similar goods involving title transfer.
On the other hand, the CGST member placed the service under the heading 9971 but under a different sub-entry, asserting an 18% GST rate. Due to these conflicting views, the matter was transmitted to the Appellate Authority of Adnavced Ruling (AAAR) given Section 98(5) of the CGST Act, 2017.
The AAAR observed that it is important to examine the nature of the lease agreement, whether it constituted a financial lease or an operating lease agreement. From all the submissions, it was observed that the applicant had entered into a financial lease agreement with the lessee and engaged in the supply of financial leasing services/ financial and related services. It was observed that the appropriate heading for this would be 9971.
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The two-member bench consisting of Yamini Sarangi ( Member (State Tax) ) and M Sreedhar Reddy ( Member(Central Tax) ) further asserted that the leasing of electric vehicles (E-Bikes) without operator is classifiable under the heading 9971, that is, financial and services under entre SL No. 15 (ii) of Notification No. 20/2019 dated. 30th September 2019, and the tax rate will be the same as applicable on the supply of goods involving the transfer of title in goods.
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