AAR rules that activity of supply and installation of “ESCIM” System qualifies as transfer of right to use goods and hence not a Service

This Tax Alert summarizes a recent ruling1 of Authority for Advance Rulings (AAR), wherein the applicant was engaged in the activity of supply and installation of a set of machines/ equipment as per Excise Supply Chain Information Management System (ESCIM) along with training and maintenance support.

In this regard, AAR observed that the exclusivity required for a transaction to qualify as transfer of right to use goods was being satisfied by the applicant based on various terms of the contract. Thus, AAR ruled that the said activity qualifies as a transfer of right to use goods and is consequently outside the definition of service.

Further, the decision of the Karnataka High Court in the case of Indus Towers Ltd vs Deputy Commissioner of Commercial Taxes [2012 (285) ELT 3 (Kar)], was also referred to by the AAR.