GST
TRT-2025-
AAR Tamilnadu
Date:-29-07-22
In:-
Issue Favourable to Tax Payer ?:-
Order Date: 29 July 2022
Facts-
- The Applicant, OLA electric technologies pvt. Ltd. company is a manufacturer of electric two-wheelers and they have different operation and experience centers all over India which are recognized as different cost centers.
- The Applicant is setting up a factory for manufacture of electric two-wheelers in Tamil Nadu whereas the head office and the additional software development center is in Karnataka.
- Sale thereafter will take place through the distribution centers located across the country, wherein the performance upgrade software shall be sold directly by Karnataka Cost center.
- Tamil Nadu cost center will give a right to the Karnataka cost center to carry out integration, testing, installation and marketing of the software on vehicles manufactured by Tamil Nadu cost center.
- Such software of performance upgrade is developed by the Karnataka Cost Centre and is under the ownership of the Karnataka Cost Centre. The software has no value in the market till the time Tamil Nadu Cost Centre agrees to integrate the same with the vehicle and allow Karnataka Cost Centre to sell, upload and maintain the software on the vehicle manufactured by the Tamil Nadu Cost Centre.
- Tamil Nadu to charge a recurring consideration from Karnataka Cost Centre for the said transfer of right. First of such recurring consideration has been agreed at INR 1,05,00,00,000/-. Sale of performance upgrade software to the end user directly by Karnataka Cost Centre as per customer requirement.
Issue-
- Whether the transaction of transfer of right to do integration testing, install and market software from Tamil Nadu cost center to Karnataka Cost center shall be leviable to GST and whether such supply be considered as goods or services?
Order-
- The Authorities observed that in the instant case, the supply is that of transfer of right to do integration testing, install and market software from the applicant to Karnataka Cost center and the consideration involved is agreed upon by both centers, wherein it has been stated that the applicant is charging a recurring consideration from Karnataka cost center for the transfer of right. The criterion for the transaction being a supply is satisfied in as much as the transfer of right is made for a consideration
- Further, Tamil Nadu and Karnataka cost centers are distinct persons as specified in Section 25 and the supply is also in furtherance of business & therefore such transfer of right is clearly a supply which is leviable to GST.
- The vehicles move from the applicant to all distribution centers in India and the Performance upgrade software is marketed by the Karnataka cost center, with the applicant agreeing for the same. Hence the applicant is only agreeing to the act of carrying out integration testing, install, and market the software on the vehicles manufactured by them by the Karnataka Cost Centre, at the behest of the end-users.
- Thus, supply taking place between the applicant and the Karnataka cost center is of the Agreeing the Karnataka Cost Center to carry out the installation and marketing of the software. Hence it is clear that the supply involved is the supply of 'Service' and not of goods and is leviable to GST.
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