Valuation under GST- In the instant case, the applicant has sought Advance Ruling on the following question:-

1. Whether the portion of the certain additional services viz., payment of road tax/registration fees, insurance premium, etc., rendered by the applicant in the course of its Leasing of the vehicle/s to the Lessee falls under the category of “services of a pure agent”?

Or

2. Whether the recovery of Motor Vehicle Registration fee, Motor Vehicle life Tax & RTO charges etc., by the applicant from the lessee for the registration of the vehicle in the name of the lessee forms part of the value of supply or the applicant is acting as a pure agent for this purpose and so the above charges do not form part of the taxable supply ?

In the case at hand, the vehicle is given on 'Operating lease', wherein the ownership of the vehicle is held by the applicant and through the terms and conditions for the leasing transactions, the applicant has permitted the lessee to register the vehicle in the name of the lessee. The fact that the vehicle is allowed to be registered in the name of the lessee does not alter the other fact that the applicant is the owner of the vehicle and the lessee is a mere bailee of the goods on account of the applicant. 

Making payment of registration fees, Road Tax, RTO charges and Insurance Premium (On-road components) to the dealer is the responsibility of the applicant and not lessee as the vehicle is owned by the applicant and not the lessee. The applicant is not paying these charges on behalf of the lessee to the dealer but is paying the charges to make the vehicle usable on road following the provisions of Motor Vehicle Act and related statutory provisions etc before leasing such vehicles to the lessee for operations.

In the instant case, the applicant do not have any contractual agreement for separately procuring the 'On-road components'; the supply is leasing of the identified vehicle for operational purposes and the ownership of the vehicle and as owner, it is the responsibility of the applicant to register the Vehicle and to have the Insurance, etc as required under the various statutory provisions. Therefore, the 'On-road components' are procured for the interests of the applicant, as without these, the leased vehicle cannot be used on roads, the very purpose, the lessee leases such vehicles from the applicant. Thus, the applicant has failed to establish themselves as a 'pure agent' and therefore the expenditure or cost incurred by the applicant in respect of the 'On-road components' are incurred by them in the transaction of Purchase of vehicle' for the supply of 'Operational lease' to their recipient. In this connection, it is pertinent to note that Section 15(2) of the GST Act, provides that any tax/duty levied under any other law and any incidental expenses incurred should also form a part of the Transaction Value'. Applying the same to the case at hand, the 'On-road components' are incidental charges incurred by the applicant in purchasing the vehicles for supply under the 'Operational lease' to the Lessee. Therefore, the value of 'On-road component' cannot be considered as additional charges or the applicant can't be held as acting as a Pure agent' in respect of supply of the 'On-road Component'.

Held that- The portion of the certain additional services viz,, payment of road tax/registration fees, insurance premium, etc., rendered by the applicant in the course of its Leasing of the vehicle/s to the Lessee and recovered in monthly instalments do not fall under the category of “services of a pure agent” and therefore it is ruled that they are not an 'Pure Agent' under Explanation to the Rule 33 of CGST/TNGST Rules 2017.

Additional payments made by the Applicant towards Motor Vehicle Registration fee, Motor Vehicle life Tax, RTO charges etc., for getting the vehicle to use on the Road, which are recovered from the Lessee, forms part of the supply of Leasing services and therefore should form part of the taxable supply.