AAAR : No GST Leviable On Lease Of Buses To Public Transport Department

The Andhra Pradesh State Government took up the process of merging APSRTC with the State Government. The State Government, through the PTD, took over the buses, infrastructure and establishment of APSRTC on lease. The APSRTC filed an application before the AAR, raising the query as to whether the transaction of lease and hiring of buses by the PTD was eligible for exemption from GST under Entry 22 of the 2017 Notification issued under the CGST Act, 2017 (Notification No. 12/2017 Central Tax (Rate)). The AAR held that the transaction of lease of buses was eligible for exemption from GST in view of the Notification. The Principal Commissioner of Central Tax filed an appeal before the AAAR against the order.

The Principal Commissioner contended that the transaction between APSRTC, in which the State Government held a majority stake, and the PTD falling under the Government of Andhra Pradesh was a related party transaction which the AAR had not considered. The Principal Commissioner also asserted that the PTD does not fall under the category of a 'State Transport Undertaking' under the Notification, it being purely a Government Department and not an undertaking. The APSRTC asserted that the term 'State Transport Undertaking' covered under the Notification included an undertaking being carried on by the Central or State Government, and therefore the transaction of giving buses on hire to the PTD would be exempt from GST in view of the Notification.

Entry 22 of the 2017 Government Notification, issued under the CGST Act, exempts the intra-state supply of services by way of giving on hire motor vehicle to a state transport undertaking. The Notification provides that the term "state transport undertaking" would have the same meaning as assigned to it under the Motor Vehicles Act, 1988.

The AAAR, rejecting the contention of the Revenue Department, held that in the present case the recipient and provider of transport services were two different legal entities. Additionally, the AAAR ruled that the term 'State Transport Undertaking' covered under the Notification, read with the Motor Vehicles Act, clearly envisaged the possibility of the transport service being run by the Central or State Government.

"The above definition clearly envisages the possibility of this service being run / carried on by the central Government or a state Government. In the instant case, the PTD, the state government department which is running this service shall by definition be termed as the 'state Transport undertaking.'"

Holding that the PTD constituted a 'State Transport Undertaking' falling under the Notification, the AAAR rejected the appeal and upheld the order of the AAR.

Appellant: The Principal Commissioner Central Tax, Guntur CGST Commissionerate.

Order /AAAR/APl04 (GST)/2022

ORDER DATED: 24.01.2022 (ANDHRA PRADESH AAAR)