Shreyans Logistics Private Limited ., In re

FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, ODISHA

M/s Shreyans Logistics Private Limited (herein after referred to as the `Applicant’) having principal place of business/registered office/corresponding address at 2nd Floor, B/ 1482, Sector 6, C.D.A, Cuttack, Odisha, 753015 bearing GSTIN 21AAKCS7924C1ZJ has filed an application for Advance Ruling under Section 97 of CGST Act, 2017 and Section 97 of the OGST Act, 2017 in FORM GST ARA-01 discharging fee of Rs.5,000/- each under the CGST Act and the SGST Act.

1.0 The Applicant has sought ruling in respect of the following question:

Q.1 What shall be the appropriate HSN /SAC for the services rendered by the Applicant?

Q.2 What shall be the applicable rate of GST on the services rendered by the Applicant, or whether the said services would be exempt from levy of GST?

1.1 At the outset, we would like to make it clear that the provisions of both the CGST Act and the OGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the OGST Act.

2.0 Submission of the Applicant

2.1 M/s Shreyans Logistics Private Limited (hereinafter referred to as “Applicant”) is registered under the GST vide GSTIN: 21AAKCS7924C1ZJ with its principal place of business located at 2nd Floor, B/ 1482, Sector 6,C.D.A, Cuttack, Odisha, 753015. The Applicant has expressed interest to enter into the business of “Vehicle Leasing said services, applicant would either procure or lease the electric or non-electric vehicles with the following business objectives:

(a) To provide integrated, efficient, seamlessly supervised and coordinated leasing of goods transport vehicles / trucks to GTAs looking for managed services in such space.

(b) To manage and supervise the transportation of goods by road undertaken by the GTAs in respect of leasing of goods transport vehicles / trucks and its operations.

2.2 In a nutshell, under the proposed business model, the Applicant aims to provide systematic and seamless goods transport vehicle leasing to GTAs with quality control and support in respect of operations and functional efficiency of such goods transport vehicles / trucks. In the proposed business model, the Applicant would enter into an agreement with GTAs who have received long term transportation and logistics contract from different business houses. The role and responsibility of the Applicant would largely revolve around collaborating in respect of leasing and efficient as well as timely management of goods transport vehicle / trucks. Under the agreement, the Applicant would provide strategic possession of the goods transportation vehicle / trucks to the GTA entity only for the purpose of undertaking transportation of goods by road as per terms set for in the said agreement.

2.3 The Applicant requests the Hon’ble Odisha Authority for Advance Ruling to issue ruling on questions – What shall be the appropriate HSN / SAC for the services rendered by the Applicant and What shall be the applicable rate of GST on the services rendered by the Applicant, or whether the said services would be exempt from levy of GST?

2.4 APPLICANT’S INTERPRETATION

In respect of classification of services rendered by the Applicant: 

As per the Applicant’s understanding, the Applicant is engaged in leasing and logistics management of the vehicle / trucks. The Applicant is of the view that the “Vehicle Leasing and Logistics Management Services” i.e. the services rendered by the Applicant is classifiable under HSN 997319 – the residual entry in respect of leasing or rental services of goods, especially since the Applicant is providing leasing of goods transport vehicle / trucks along with other integrated services.

In respect of applicable rate of GST on services rendered by the Applicant:  Applicant submitted that it is apparent that the rate of GST in respect of services rendered by the them would be determined in terms of Sl. No. 17 (viii) of the Notification No. 11/2017 — CT(R) dated 28 June 2017 i.e. 18%. The Applicant further submitted that all the components of service proposed to be rendered by the applicant are interrelated and incidental to main services of “giving on hire” or leasing / rental services of goods transport vehicles / trucks. The recipient of services / GTA has effective right to ply the vehicles and adequate control over such vehicles for controlling its operations in respect of services of goods transport agency, thus making the applicant’s services to be “giving on hire” entailing exemption from levy of GST under Si. No. 22 of Notification No. 12/2017 — CT(R) dated 28 June 2017.

2.5 Submission of Jurisdictional Tax Authority: 

The Jurisdictional Tax Authority commented that taxpayer is primarily leasing vehicles to the GTAs without operators and cost of fuel is born by the recipient of services, not by the Applicant though refueling of the transport vehicles would be undertaken by the Applicant Taxpayer. The Applicant also provides ether ancillary services like management which includes repair/maintenance and supervision of transportations of goods by the GTAs in respect of the leased vehicles. The question raised in the said Advance Ruling application by the taxpayer company is not pending or decided in any proceedings under any of the provisions of the Act in respect of the State Tax Authorities.

2.5.1 The Applicant is supporting the GTAs in fulfilling their service requirement by way of leasing the vehicles. The applicant aims to provide systematic and seamless goods transport vehicle leasing to GTAs with quality control and support in respect of operations and functional efficient of such vehicles. SAC code 9967 i.e. Supporting Services in Transport and HSN/ SAC Code 996749 i.e Other supporting services in road transport suitably applies to the service provided by the Taxpayer which attracts a Tax rate of 18%.

3.0 The personal hearings were fixed on 23.12.2024, 13.01.2025 & 24.04.2025 under due intimation to the Applicant, the jurisdictional officer of State & Central GST (intimated through their respective Commissionerates along with a copy of the application and the written submission of the Applicant). The Applicant, through its representatives Shri Abhishek Mishra & Shri Anand Kumar Aggarwal, appeared for personal hearings. They re-iterated the submissions already furnished in the application filed for advance ruling and requested to decide the issue accordingly.

Discussion & findings

4.0 We have gone through the advance ruling application, question on which Advance Ruling has been sought and the applicant’s interpretation of law and/or facts, as the case may be, in respect of the question asked. We observe that, the issue before us is squarely covered under Section 97(2) of the CGST Act, 2017 and therefore we admit the application for consideration.

4.1 Applicant has expressed interest to enter into business of “Vehicle Leasing and Logistics Management Services” which involves leasing of Goods transport vehicles / trucks to GTAs and management and supervision of transportation of Goods undertaken by GTAs in respect of the said leasing.

The questions before us to decide are as under;

“What shall be the appropriate HSN /SAC for the services rendered by the applicant and what shall be the applicable rate of GST on the services rendered by the Applicant, or whether the said services would be exempt from levy of GST?”

4.2 The issue has been examined in details. It is observed that Applicant is registered under the GST Act bearing GSTIN-21AAKCS7924C1ZJ w.e.f.11.06.2024. In the present case, the Applicant is primarily leasing vehicles to the GTAs without operators and cost of fuel is born by the recipient of services, not by the Applicant though refueling of the transport vehicles would be undertaken by the Applicant Taxpayer. The Applicant also provides other ancillary services like management which includes repair/maintenance and supervision of transportations of goods by the GTAs in respect of the leased vehicles.

4.3 The Applicant has submitted “Vehicle Leasing and Logistics Management services agreement with M/s Orissa Bengal Transport Company on dated 08.01.2025”. From the said agreement, it is observed that Applicant (Lessor) is in the business of leasing / renting out electric and non- electric vehicles suitable for goods transport purposes to Goods Transport Agencies (GTAs) with a focus on quality control and operational efficiency. The relevant extracts of the agreement dated 08.01.2025 is as below:

(i) The Lessee shall pay the Lessor consideration in lieu of vehicle leasing and logistics management for the Vehicles on monthly basis. The Lessee shall pay the consideration on or before the 5th day of every month until the Lease Term expires or is terminated. The consideration shall cover all costs, including any initial down payments, insurance, periodic maintenance and any other cost incurred in nature incidental to leasing, including applicable taxes. In the event of a delay in payment, the Lessee agrees to pay a late fee calculated at 9% of the overdue amount for each day beyond the due date.

(ii) Both the Parties shall be responsible for ensuring that all leased vehicles are used in accordance with industry standards, local regulations, and safety requirements.

(iii) The Lessor shall lay down the policy for Vehicle upkeep and operations which would be adhered by the Lessee (including the employees / operators / drivers of the Lessee) at all times during the subsistence of this Agreement.

(iv) In case of a breakdown of Vehicles, the Lessee would be required to report / notify the same to the Lessor immediately. In such scenarios, the Lessor would supervise the repair / maintenance and related corrective measures.

(v) The Lessor at all times shall have the right to recall and / or replace the vehicle at any time during the subsistence of this agreement. The Lessor alone would be responsible for ensuring proper repair and maintenance of enhanced and seamless functionality of the vehicles.

(vi) The Lessor shall have to right on its sole discretion, to appoint experienced personnel for undertaking supervision of loading / unloading, weighment and transportation of goods on routes pre-specified by the Lessee. The Lessor, on its sole discretion would have the right to refuse plying of the Vehicles on routes found by it to be unsuitable or having potential to cause detriment to the Vehicle.

(vii) The appointment / hiring of operators / drivers of the Lessee would be done by the Lessee in accordance with the parameters set forth by the Lessor and only post analysis of the credentials and skills of the candidates by the Lessor. The Lessor shall at all times have the right to request for change of operators / drivers in case the operators / drivers are found to be non-compliant with the instruction / policy laid down by the Lessor.

(viii) The cost of fuel or electricity, as the case maybe, would have to be borne by the Lessee, though supervision in respect of timely and adequate refueling / recharging of Vehicles would be undertaken by the Lessor without prior notice.

(ix) The Lessor will ensure that regular maintenance, servicing, and inspections of the vehicles are conducted to ensure their functionality and safety. The Lessee shall promptly inform the Lessor of any significant issues regarding the vehicles’ operation, safety, or condition. In case of vehicle breakdowns or accidents, the Lessee shall immediately inform the Lessor and follow the procedures established for resolving such issues.

(x) The Lessor shall maintain comprehensive insurance coverage for the vehicles, including collision, theft, and third-party liability insurance, and shall provide evidence of such insurance to the Lessee upon request. The Lessee assumes full responsibility for any damages or losses that occur while the vehicles are in the Lessee’s possession, except where the damage is attributable to the Lessor’s negligence.

(xi) The Lessor shall ensure that the Vehicles are free of encumbrances and that the Lessor holds full legal title to the Vehicles, enabling the Lessee to lease the vehicles without restriction.

(xii) Upon termination, the Lessee shall return the Vehicles to the Lessor in good condition, subject to reasonable wear and tear.

4.4 On going through submission of applicant, agreement executed between applicant &M/s Orissa Bengal Transport Company and submission of applicant during the personal hearing, it is observed that the applicant has expressed interest to enter into business of ” vehicle Leasing and Logistics Management Services” which involves leasing of Goods transport vehicles / trucks to GTAs and management and supervision of transportation of Goods by Goods undertaken by GTAs in respect of the said leasing. The merit classification and applicable rate of tax on services rendered/proposed to render by the Applicant is discussed as below.

4.4.1 The Applicant is engaged in leasing and logistics management of the vehicle / trucks not in transportation of goods by road. The term “Goods Transport Agency” is defined under Clause 2(ze) of the Notification No. 11/2017 — CT(R) dated 28 June 2017, as follows:

“goods transport agency” means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called.”

Since, the Applicant does not issue consignment note is respect of transport of goods by road, the services of the Applicant do not qualify as Goods Transport Agency / GTA.

4.4.2 The Applicant is neither providing the operator /driver for operating the goods transport vehicle / truck nor is Applicant’s consideration inclusive of fuel cost. As per the notification no. 20/2019 dated 30/09/2019, SAC code 9966 – Rental Service of transport vehicles with operators, applies only in case of renting a vehicle with an operator which is not applicable in the instant case.

4.4.3 From the agreement and submission of Applicant, it is observed that the Applicant is not entering into an arrangement with direct or implied intention of transferring the ownership of the goods transport vehicle / trucks at the end of the leasing period or post subsistence of the term of the Agreement. Applicant has leased the goods transport vehicle/trucks but not transferred the right to use such vehicles/trucks. The services of the Applicant would not merit classification under HSN / SAC 997114 or 997119.

4.4.4 The Applicant is providing leasing of goods transport vehicle / trucks along with other integrated services like vehicle management which includes repair/maintenance and related corrective measures of the leased vehicles, replacement of goods transport vehicles during the time of need, supervision of loading/ unloading, weighment and transportation of goods on routes pre-specified by the recipient of services, refueling of the goods transport vehicles etc in respect of the leased vehicles. The services of Applicant is not only leasing or rental service without operator but it involves other integrated services also. The appropriate classification of services of applicant i.e. “Vehicle Leasing and Logistics Management Services” should be classified under HSN/ SAC 997319 i.e. the residual entry in respect of leasing or rental services of goods without operator, which attracts a tax rate of 18%.

4.5 In view of the foregoing discussions, we are of the opinion that services of applicant i.e. “Vehicle Leasing and Logistics Management Services” classifiable under Leasing or rental services concerning other machinery and equipment without operator (SAC 997319) are taxable @18% under Sl. No. 17 (viii)of Notification no. 11/2017 CT (Rate) date 28.06.2017. held accordingly.

5.0 In view of the above, we pass the following order:

RULING

Q.1 What shall be the appropriate HSN /SAC for the services of the Applicant?

Ans: The appropriate HSN/SAC for the services of applicant is SAC 997319 i.e. “Leasing or rental services concerning other machinery and equipments without operator”.

Q.2 What shall be the applicable rate of GST on the services rendered by the applicant, or whether the said services would be exempt from levy of GST?

Ans: The applicable rate of GST on the services rendered by the Applicant is 18%. The said services i.e. “Vehicle Leasing and Logistics Management Services” is not exempted from levy of GST.

6.0 The Applicant or jurisdictional officer, if aggrieved by the ruling, may appeal to the Odisha State Appellate Authority for advance ruling under Section 100 of the CGST/OGST Act, 2017 within 30 days from the date of receipt of the Advance Ruling.