GST is Leviable on Movement of Goods from One Unit to Another in Different State on Lease: AAAR

Case Details: Appellate Authority for Advance Ruling, Maharashtra CHEP India (P.) Ltd., In re - [2023] 151 taxmann.com 390 (AAAR-MAHARASHTRA)

Judiciary and Counsel Details

• • Dr D.K. Srinivas & Rajeev Kumar Mital, Member
  • Sachin Agarwal & Sarvesh Saraogi, CA’s for the Appellant.

Facts of the Case

The appellant was engaged in business of pallets, crates and containers. It filed an application for advance ruling to determine whether movement of equipment from appellant’s Karnataka unit to Tamil Nadu unit on instruction from Maharashtra unit can be stated as mere movement of goods and not supply under section 7 of CGST Act, 2017.

AAAR Held

The Authority for Advance Ruling held that the movement of goods from Karnataka unit to Tamil Nadu unit as per instruction of Maharashtra unit would amount to supply of leasing service and value shall be the amount charged by the recipient branch from the ultimate customers. It filed appeal against the order.

The Appellate Authority for Advance Ruling noted that in the instant case, the Karnataka unit was in possession of goods whereas Maharashtra unit was the owner and Karnataka unit had to give back goods on termination of contract of lease but due to requirement in Tamil Nadu unit, material was transferred to Tamil Nadu unit. Therefore, the Karnataka unit facilitated transport and acted as an agent in respect of said goods.

Therefore, it was held that the movement of goods from Karnataka unit to Tamil Nadu unit as per instruction of Maharashtra unit would amount to supply and shall be treated as supply of leasing service. Moreover, the Rule 28 of CGST Rules, 2017 would be applicable for present transaction as supply was between distinct persons. Thus, the value declared in invoice raised by Maharashtra unit on its unit in other States would be treated as taxable value as per second proviso to Rule 28 when recipient was eligible for full input tax credit.