Order date – 01 December 2022

Facts –

• The Applicant, M/s Chep India Pvt.Ltd, an Indian company and a wholly owned subsidiary of Brambles Limited, a company listed on the Australian Securities Exchange (ASX) and has its headquarters in Sydney, Australia. 
• The Applicant is part of this global organization and its business is primarily renting of re-usable unit-load equipment for shared use by multiple participants within industrial and retail sector throughout the supply chain, under a business model known as "pooling".
• Ownership of the equipment rests with CIPL at all times. CIPL enhances performance for customers by helping them transport goods through their supply chains more efficiently, sustainably and safely.

Issue –

• Whether the pallets, crates and containers ("equipment") leased by CHEP India Private Limited (CIPL) located and registered in Maharashtra to its other GST registrations located across India (CIPL Karnataka), would be considered as lease transaction and accordingly taxable as supply of services in terms of Section 7 of the CGST Act and MGST Act?

Order –

• The AAR observed that the Applicant has rightly stated that Section 25 of the CGST Act has created a deeming provision whereby two registrations of the same Company are considered as distinct person under GST. Accordingly, as per the entry in Schedule I of the CGST Act, there can be supply of goods or services between such registrations even in case no consideration is involved.
• Accordingly, in the current case, CIPL, Maharashtra can enter into lease transaction with CIPL branches in other States registered under the respective State GST legislation across India say for e.g., CIPL, Karnataka and such transaction would be taxable under GST as a lease transaction between the two branches which are deemed to be distinct entities for the purpose of GST legislation." Hence hold that it as supply.
• It also finds that the value on which GST has to be charged would be the lease charges which would be charged by the other branch to the ultimate customer in other state in terms of Section 15 of the CGST Act and MGST Act read with relevant Rules, or such other normal value which would be derived after taking into consideration the rate which is equal to such lease rate which is normally charged to customers.
• When the movement (from Maharashtra to other state) happens because of order by customer at the other state branch, the value as offered by the ultimate customer for providing lease services is available and that may be considered for adopting value of supply for branch transfer.