Determination of ‘Recipient of Service’ and Valuation of Services -AAAR Karnataka
by ReinHeads Team | Aug 27, 2020
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AAAR Karnataka* – Determination of ‘Recipient of Service’ and Valuation of Services
| Facts |
- Ascendas Services (India) Pvt Ltd. (‘the Appellant’) is engaged in operating and maintaining of International Tech Park at Bangalore (‘the Tech Park’). The Appellant also arranges for transport of its employees as well as employees of the corporate client in the Tech Park
- For the transportation facility, the Appellant entered into an agreement with Bangalore Metropolitan Transport Corporation (‘BMTC’) whereby BMTC allots 1 bus to the Appellant for every 50 passes purchased. The Appellant receives non-AC bus and combo bus passes (which can be used for AC and non-AC bus) from BMTC which are distributed to commuters
- The Appellant charged a separate fee of INR 300 per commuter as ‘facilitation fee’ for arranging the transport facility with 18% GST
- Apart from facilitation fee, the Appellant only received the actual amount incurred to obtain the bus passes (on a cost to cost basis)
- The Appellant filed an application before the Karnataka Authority for Advance Rulings (‘the AAR’), wherein it was held that:
- Value of the bus passes distributed by the Appellant to commuters are to be included in the value of the facilitation charges; and
- Supply of services by the Applicant cannot be classified merely a facilitation service between BMTC and commuters
- Aggrieved by the ruling of the AAR, the Appellant filed an appeal before the Karnataka Appellate Authority for Advance Ruling (‘the AAAR’)
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| Issues before the AAAR |
- Whether the supply of services by the Appellant to commuters is a facilitation of transport services by BMTC to the commuters?
- Whether the value of the bus passes distributed by the Appellant to commuters is to be included in the value of the facilitation charges?
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| Discussion and Findings of the AAAR |
The AAAR upheld the Advance Ruling of the AAR and dismissed the appeal filed by the Appellant on the following basis:
- As per Section 2(93) of the Central Goods and Services Act, 2017 (‘the CGST Act’), ‘recipient of supply of goods or services’ is person liable to pay the consideration
- As per the terms of the Agreement between the Appellant and BMTC, the Appellant has the contractual right to receive the services and is also responsible for the payment of services. There is no privity of contract between BMTC and commuters. Accordingly, it is the Appellant who is the recipient of services provided by the BMTC and commuters are only the beneficiaries/ actual users of the service but not the ‘recipient of services’ under the GST Law
- The Appellant is neither an agent nor a broker for BMTC. Hence, services provided by the Appellant is neither in the capacity of an intermediary nor a facilitation services between BMTC and the commuters
- The Appellant has provided the transportation service on his own account and on a principal to principal basis for a consideration
- The bus passes provided by the Appellant to the employees does not qualify as an actionable claim as the bus passes are accepted as consideration/ part consideration while purchasing services from the Appellant
- In light of Section 15 of the CGST Act, value of the bus passes shall form part of the total value of services provided by the Appellant.
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*Appellate Advance Ruling No. KAR/AAAR-14-E/2019-20 dated 14 February 2020 (The Appellate Authority for Advance Ruling, Karnataka) |
