Daimler Financial Services India (P.) Ltd, In re [16/AAR/2019]
Ruling by:Â Authority for Advance Ruling, Tamil Nadu
Facts:
M/s. Daimler Financial Services India (P.) Ltd. (‘DFSI’) was engaged in the activities of “Leasing and Finance” which includes operating lease of passenger vehicle and financing of commercial and passenger vehicles to end customers. Mercedes Benz was engaged in sale of cars all over India. Customers who bought car from Mercedes Benz might require financing and, in such scenario, the applicant acted as a financer and provided loan to customers at interest rate lower than alternative providers. The differential interest (market rate less the rate offered to customers) is paid to DFSI by MB India. This amount paid is termed as interest subvention or alternatively interest subsidy.
Issue:
The issue was whether the interest subvention income received by Daimler Financial Services India Private Limited (DFSI) from Mercedes-Benz India Private Limited (MB India) to reduce the effective interest rate to the final customer is chargeable to GST?
Decision:
In the instant case, the agreement titled ‘Mercedes-Benz Financial” between DFSI and the buyer of MB India’s vehicle is for disbursing of loan for purchasing the vehicle from the dealers of MB India where the vehicle is given as collateral at the rate of interest specified in the agreement. There was no obligation on part of the buyer in this agreement to pay any further amount beyond the amount calculated as per the “Rate of Interest per Annum”.
Further, for the supply of credit-granting services by DFSI to the buyer, the buyer had to pay interest only at the rate agreed to in the agreement under “Rate of Interest per Annum” which did not include the interest subsidy from MB India. Hence, the stand of the applicant that the interest subvention amount given by MB India to DFSI was a part of the consideration for the transaction between DFSI and buyer was not correct.
It was held that DFSI agreed to provide vehicle loan to buyers of MB India’s vehicles at a lower interest rate as decided between DFSI and MB India and also to provide better customer luxury experience, structured insurance products offerings with claims processing within minimum turnaround time, tailor made products, quick loan approvals, maintain customer relation etc. as per the MOU between FSI and Mb India. Hence, the supply of service by DFSI to MB India is covered under SAC 999792 as Other miscellaneous Services, agreeing to do an act.
