Is GST liable to be paid on leasing of tank containers taken form a supplier i e., lessor who is located outside India and the tank containers do not reach India? As it is finance lease, it is supply of goods and tank containers do not reach the Indian Territory.
Background
With the introduction of GST on July’17 there has been a lot related to import of services and for this the GST council expressly provided in the Schedule II to Section 7 of CGST Act 2017 that activities or transactions to be treated as Supply of Goods or Supply of Services.
Facts of the Case
M/s Deccan Transcon Leasing Pvt. Ltd. is a Non-vessel owner container carriers/operators fromIndia leases containers from outside India from M/s Tank span Leasing limited in bulk and recognizes the containers in books of account as assets from the inception of lease and there is a certainty that the same be purchased at a later date.
Therefore the applicant is of the opinion that this transaction is outside the purview of GST and no GST shall be applicable on it.
Issue
The transaction under consideration i.e., GST to be paid on leasing of tank containers taken form a supplier i e., lessor who is located outside India and the tank containers do not reach India?
Assessee contends that by virtue of Entry 1(c) of Schedule II to Section 7 of CGST act 2017 which is abstracted here “Any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods” the containers shall not be treated as goods liable to GST.
Assessee also averred that it is financial lease and after the lease period the asset is purchased and the consideration paid in form of lease shall be deducted/adjusted against the purchase price.
Decision
The AAR held after referring the catena of cases that the word “shall” mentioned in the paragraph 1(c) of Schedule II to section 7 raises a presumption that a particular provision is imperative.
For a transaction to fall under the ambit of this paragraph, the law mandates that the agreement should have a clause which stipulates that the goods will pass at a future date.
In other words, purchase of goods at a later date cannot be optional at the will of purchaser.
It thus concluded that the impugned transaction will be supply of service during the lease period.
Key Takeaways
The leasing of containers from outside India is import of service and it shall be covered by definition of goods and supply.
The IGST shall be payable on import of service and it shall be payable through an Electronic cash ledger under reverse charge.
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