MUMBAI: The GST-Authority for Advance Rulings (GST-AAR), Maharashtra bench, held that BEST would be liable to pay Goods and Services Tax (GST) at the rate of 12% to the operator of a Mumbai-based company, which had ‘rented’ out its mini-AC buses.
This rate on services came into force from October 13, 2017, the earlier rate of GST on services was 18%.
BEST had invited tenders in August 2019, for operation of 500 mini-AC buses in Mumbai and its suburbs. The tender of MP Enterprises and Associates was accepted.
The company owned the buses, provided drivers and also incurred expenses on fuel and maintenance. For all these services provided by it, BEST paid the company service charges on kilometre-basis.
MP Enterprises raised periodical invoices on BEST along with GST at the rate of 12%. It was of the view that its services of ‘renting’ out the buses constituted a ‘supply’ which is taxable under GST laws. To substantiate that the transaction is ‘renting of buses’, it contended that effective possession and control is with BEST.
The buses are used by BEST and ply as per its directions on the prescribed routes and under its control. All the buses are painted red and have ‘BEST’ logo on all sides. The drivers are also under the administrative control of BEST, which decides the routes. The bus operating company is not free to use these buses for any other purpose.
However, BEST (the service recipient) was of the view that services provided by the bus operating company are exempt from GST in view of a notification dated June 28, 2017. This notification exempted “services by way of giving on hire to a state transport undertaking, a motor vehicle meant to carry more than 12 passengers.” This led to the bus operating company approaching the GST-AAR for a ruling.
The GST-AAR also observed that the payment for supply of services to the bus operating company is made by BEST and not the individual passengers. Thus, it concluded that the transaction was one of renting of motor vehicles, which was a taxable activity under the GST laws.