Registration fee, Motor Vehicle Life Tax, RTO charges etc. for getting the vehicle to use on the Road, forms Part of the Taxable Supply of Leasing Services: AAR [Read Order]

The Tamil Nadu Authority for Advance Ruling has held thatRegistration fee, Motor Vehicle Life Tax, RTO charges etc. for getting the vehicle to use on the road, forms part of the taxable supply of leasing services.

The applicant M/s Sundaram Finance Ltd. is a non-banking financial company also involved in the business of leasing of machineries, commercial vehicles and non-commercial vehicles.

The applicant approached advance ruling authority to clarify that whether the payment of road tax, registration fees, insurance premium etc. rendered by the applicant in course of its leasing of vehicles to lessee falls under the category of ‘service of a pure agent’ and also the recovery of motor vehicle registration fee, motor vehicle life tax and RTO charges etc. by applicant from the lessee for the registration of the vehicle in the name lessee form part of the value of supply or the applicant is acting pure agent for this purpose and so the above charges do not form part of the taxable supply.

The applicant submitted that he is to be considered as ‘pure agent’ in respect of the on road component paid by him, in as much as the vehicle is registered in the name of the lessee as per the terms and condition agreed upon. The applicant further submitted that the on road components whenever required are subjected to GST and therefore when these components form part of the leasing services, it is again taxed.

The Authority observed thatthe applicant purchases the vehicle identified by the lessee and extends the lessee against the monthly rentals based on agreement entered with the lessee. The ‘on-road component’ which includes registration fees, insurance etc. are mandatory charges for the vehicle to be put to use. Though the applicant allows the vehicle to be registered in the name of the lessee with the endorsement of the lessee, the ‘on-road components’ are procured on own account of the applicant, enabling the vehicle to be used on road and subsequent lease. Therefore, the on road component having the nature of incidental expenses in relation to leasing of vehicle cannot be considered as procured in the capacity of ‘pure agent’ by the applicant and are includible in the value of supply, to be considered as Transaction Value for the purpose of Tax and taxable at 28% along with applicable cess.

The Coram of Sri T.G.Venkatesh, I.R.S. and Smt. K. Latha has ruled that“ the portion of the certain additional services such as payment of road tax/registration fees, insurance premium etc. rendered by the applicant in the course of its leasing of the vehicle to the lessee and recovered monthly installments do not fall under the category of service of ‘pure agent’”. Further held that “the 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”.

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