In the case of Ola Electric Technologies Private Limited, Tamil Nadu Authority for Advance Ruling (AAR) has ruled that the transfer between two cost centers of the same entity for monetary value constructs supply and is liable to levy GST.
The applicant stated that their company had a factory for the manufacture of electric two-wheelers in Tamil Nadu where the head office and the additional software development centre are in Bengaluru, Karnataka.
The Manufacturing of the vehicle will be carried out by Tamil Nadu Cost Centre and the sale will take place through the distribution centres located across the country, wherein the performance upgrade software shall be sold directly by Karnataka Cost Centre to the end user.
The applicant stated that one Cost Centre transferring the rights over software to another Cost Centre of the same entity shall not qualify as supply and consideration was charged by the former from the latter just to allocate proper profits in their books of accounts since each Cost Centre maintains its profitability.
It was evident that any transaction is a supply only when it is made for consideration and is a taxable supply. The first payment of recurring consideration has been agreed and the applicant claimed that such an invoice has been raised to set out the books of accounts of cost centres and to charge each cost centre for the work being carried out by them.
It was observed that any payment made or to be made/ the monetary value of any action in response to the supply of any goods/ services was included as consideration. Further viewed that the transfer of right to do integration testing, installation and marketing software from the applicant to Karnataka Cost centre is leviable to GST as the such transaction was executed between two distinct persons i.e., two cost centers of the same entity.
Shri T. G. Venkatesh, I.R.S., Additional Commissioner/ Member Smt K Latha., M.Sc., (Agri), Joint Commissioner (ST)/ Member, concluded that the supply is of services and not of goods and liable to GST.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
