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Leasing/ Renting business- GST Implications.
In general, leasing/ renting business of movable property comes under Supply of Services, and the HSN code is 9973 under chapter 99 of The Custom Tariff Act.The ministry fixed the GST rate as 18% on both renting as well as leasing of the goods.
Let us understand other particulars with the help of a case study on renting/ leasing of photocopying machines.
Case Study( M/s Radha Krishnan Ltd.) : A person is engaged in the services of leasing photocopying machines to various clients (recipient) on a rental basis. As per the terms of the contract, the supplier shall charge lease rentals on the basis of per printing price i.e. Say Rupee 1 per page photocopy made. All the consumables relating to running and maintenance of such photocopying machines such as paper, ink, spares and other parts shall be provided by the supplier. Sometimes, the supplier also provides the operator of the machine for making copies. Contract between supplier and recipients enter generally at the corporate or central office but machines are installed across the country at various locations. Machines and consumables regularly move from supplier to recipients.
Let us answer the particulars of the case in question and answer format.
- How would the machines move from supplier to receipent’s various location? Will any documents be maintained? If yes, the details?
Answer– Machines and consumables (required for running and maintenance of the machine) shall be transported from the supplier to the recipient’s location based on the strength of the delivery challan. E-way bill shall be generated by the supplier (principally, but can be generated by the recipient also, depends who causes the movement of goods as per rule 138). A complete set of documents should accompany the goods carrying vehicle such as delivery challan, e-way bill, copy of lease/renting agreement/copy of invoice raised for advance rentals (if any).
- When repairs on machines are done locally, i.e. at a location different from that of supplier will ITC be available on the it?
Answer– ITC of those inward supplies which are directly received at the location where machines are installed shall be available.
- Whether supplier requires to take registration from each anevery place where the machines are installed across the states? Or, the supplier can do inter-state invoicing from the origin state where he is located?
Answer– Requirement of registration and provisions of place of supply (POS) are two different things altogether. POS rules should not be confused with registration requirements. Supplier is located at one place and POS in the specific transaction is the location of the recipient. Therefore, it would not be necessary for the supplier to take registration in respective states wherever the POS falls. The supplier can charge IGST on its invoice with POS as the specific place where the recipient is located. (Considering the supply as inter-state supply).