Nowadays, the Business houses are entering into sale and lease back transaction of capital assets to meet the working capital provision of the transaction. The Sale and lease back transaction requires to be carefully analysed to deduce the correct tax implications.A humble attempt to list down the GST implication on sale and lease back transaction. In this article, we will discuss on GST on Sale and Leaseback transaction.
GST on Sale and Leaseback transaction
The taxability under GST occur on the event of supply accordingly the sale of capital assets for an appreciation would fall under the ambit of supply and therefore GST shall be levied.
In terms of Section 10(1)(c) of the IGST Act, the place of supply of goods where the supply does not implicate movement of the said goods whether by the supplier or the recipient shall be the locale of such goods at the period of delivery to the recipient . In the case of such sale, there is no physical movement of the asset from the premises of the lessee to the assumptions of the lessor.
The ownership gets substituted in the premise of the lessee and accordingly the place of supply in this case will be same as the location of the supplier. Therefore, the exchange of the asset will be contemplated as an intra-state supply as per Section 8 of the IGST Act and will be subjected to CGST + SGST.
In terms of Rule 138 of CGST rules every registered person who causes movement of goods of consignment value surpassing fifty thousand rupees in relation to a either supply or explanation other than supply or due to inward supply from an unregistered person, shall, before commencement of such movement generate E way on the familiar portal. Additional, in order to generate E waybill PART B is mandatorily necessities to be filled wherein the details of transporter, vehicle number are compelled.
Further Notification by Central Government
Further, in the aforesaid case under study generally the activity of goods does not takes place and because there is no movement practically the Part B cannot be filed and therefore E way bill cannot be considered, Hence, one may take the position not to publish E-way bill. In case department raises a question we desire to rationalize and explain them that the transaction was in the nature of sale & lease back due to which virtually there was no movement of goods. Hence, E Waybill could not be generated.
If you want any other guidance related to GST Registration or GST Return filing, please feel free to talk to our business advisors at 8881-069-069.
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