Chep India Pvt. Ltd. -2021 (54) G.S.T.L. 414 (A.A.R. – GST – Karnataka)

Shared use of re-usable unit between distinct person shall be constitute supply of service

Facts– In the case, the applicant is a private limited company involved in renting of re-usable unit load equipment for shared use and doing transaction with his own branch.

The applicant, filed the instant application, in relation to classification of any goods or services or both, application of a notification issued under the provisions of this Act and determination of value of supply of goods or services or both.

Held– In order of AAR it was held that the CIPL, Karnataka and CIPL, Kerala are to be treated as deemed distinct persons for the purpose of the CGST Act,2017. Hence all supplies made in the course of business from CIPL, Karnataka to CIPL, Kerala would be covered under the scope of supplies under Section 7(1) of the CGST Act as between deemed distinct persons as per Section 25(4) of the CGST Act, 2017. The Schedule II to the CGST Act states that “any transfer of right in goods or of undivided share in goods without transfer of title thereof, is a supply of services.” hence would be a transaction of supply of services and the nature of such services is “lease”

The transaction value which is the price actually paid cannot be treated as the value of supply as the supplies are between the related persons, i.e. the branches of the same company. The provisions of Valuation Rules need to be examined as the recipient, CIPL, Kerala who is the recipient of the goods is eligible for full input tax credit on the transaction between the applicant and the CIPL, Kerala and hence the value declared in the invoice would be the value of supply of goods or services or both as per the second proviso to Rule 28 and hence would be treated as the value of such supply.

The applicant is not supplying goods, but services which involve the movement of such goods given on lease/rent and hence they are liable to issue a delivery note as per Rule 55 at the time of removal of such goods for the purposes of renting. Further, they shall also generate an e-way bill for movement of such goods as per Rule 138(1) based on the details of such delivery note before the movement of such goods and consignment value of the goods shall be the market value of such goods and not the value of supply of services involved in such transaction.


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