Transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods under Declared services [Section 66E] :

The Apex Court in case of BSNL v. UOI 2006 (2) STR 161 (SC) has laid down the following test to determine whether a transaction involves transfer of right to use goods:-

•  There must be goods available for delivery;
•  There must be a consensus ad idem as to the identity of the goods;
•  The transferee should have legal right to use the goods – consequently all legal consequences of such use including any permissions or licenses required therefore should be available to the transferee;
•  For the period during which the transferee has such legal right, it has to be the exclusion to the transferor – this is the necessary concomitant of the plain language of the statute, viz., a ‘transfer of the right to use‘ and not merely a license to use the goods  Having transferred, the owner cannot again transfer the same right to others.

Whether a transaction amounts to transfer of right or not cannot be determined with reference to a particular word or clause in the agreement. The agreement has to be read as a whole, to determine the nature of the transaction.

Whether the following transactions involve transfer of right to use goods?

S.No.	Nature of transaction	Whether transaction involves transfer of right to use?
1	A car is given in hire by a person to a company along with a driver on payment of charges on per month/mileage basis	Right to use is not transferred as the car owner retains the permissions and licenses relating to the cab. Therefore possession and effective control remains with the owner The service is, therefore covered in the declared list entry.
2	Supply of equipment like excavators, wheel loaders, dump trucks, cranes, etc for use in a particular project where the person to whom such equipment is supplied is subject to such terms and conditions in the contract relating to the manner of use of such equipment, return of such equipment after a specified time, maintenance and upkeep of such equipment.	The transaction will not involve transfer of right to use such equipment as in terms of the agreement the possession and effective control over such equipment has not been transferred even though the custody may have been transferred along with permission to use such equipment. The receiver is not free to use such equipment in any manner as he likes and conditions have been imposed on use and control of such equipment.
3	Hiring of bank lockers	The transaction does not involve the right to use goods as possession of the lockers is not transferred to the hirer even though the contents of the locker would be in the possession of the hirer
4	Hiring out of vehicles where it is the responsibility of the owner to abide by all the laws relating to motor vehicles	No transfer of right to use goods as effective control and possession is not transferred
5	Hiring of audio visual equipment where risk is of the owner	No transfer of right to use goods as effective control and possession is not transferred.
6	Activity of preparation of place for organizing event or function by way of erection/laying of pandal and shamiana	The activity of providing pandal and shamiana along with erection thereof is generally coupled with other incidental activities like supply of crockery, furniture, sound system, lighting arrangements, etc. It is a reasonably specialized job and is carried out by the supplier with the help of his own labour. For a transaction to be regarded as “transfer of right to use goods”, the transfer has to be coupled with effective control and possession [Rashtriya Ispat Nigam Ltd.]. Moreover, if pandal is given to the customers for use only after having been erected, then it is not transfer of right to use goods [Harbans Lal vs. State of Haryana]. Applying the ratio of these judgments and the test formulated by SC in case of BSNL v. UOI [discussed above], CBEC clarified that pandal/shamiana erection activities do not amount to transfer of right to use goods because effective possession and control over the pandal or shamiana remains with the service provider, even after the erection is complete and the specially made–up space for temporary use handed over to the customer. Hence, the activity by way of erection of pandal or shamiana is a declared service, under section 66E(f) [Circular No. 168/3/2013-ST dated 15.04.2013]