GST Update | Recent Advance Rulings

Back office support services to overseas companies treated as Intermediary Services.

Back office support services to overseas companies treated as Intermediary Services.

Authority for Advance Ruling Maharashtra

Applicant- Vserv Global (P.) Ltd (Order No.GST-ARA-03/2018-19/B-59)

The Authority for Advance Ruling –Maharashtra passed an order where it was held that, back office administrative and accounting support services such as pay-roll processing and maintenance of employee records, rendered by applicant to the overseas client an registered person under GST does not constitute ‘export of service’. The applicant arranges / facilitates supply of goods or services or both between overseas client and customers of overseas client, therefore applicant is clearly covered and falls in ‘intermediary’ definition as contained under section 2(13) of IGST Act, 2017.

Place of supply in case of services provided by applicant being intermediary would be the location of supplier of services in terms of section 13(8) of IGST Act, 2017 i.e. Maharashtra, therefore services proposed to be rendered by the applicant do not qualify as ‘export of service’ as defined under section 2(6) and thus not a ‘zero rated supply’ as per section 16(1) of the IGST Act, 2017

Remark: The ruling would have serious impact for Indian exporters and MNC subsidiaries engaged in export of services and functioning as backend service providers. This verdict may lead to litigation as tax investigators may go after many companies which export of services.

Canteen Services provided under B2B and B2C model classified as canteen services

Authority for Advance Ruling Maharashtra

Applicant-Ismail Ahamad Soofi (Order No.GST-ARA-05/2018-19/B-61)

The applicant is entered into contract with industries and corporates to provide catering services which are of two types, namely Business to Business (B2B) model in which food and beverages are served directly to employees of companies in cafeteria designated within companies premises for which consideration is paid by companies directly to the applicant Or Business to Customer (B2C) model in which applicant provide catering services to employees of companies and amount of consideration is paid by employees directly to the applicant, activity undertaken by applicant in subject case would be classified as canteen services under Entry No.7(i) or (iv) of Notification No.11/2017 dt.28-06-17 depending on whether their canteen had facility of air-conditioning or central air-heating in any part of establishment, at any time during year as amended by Notification No.46/2017 Central (Rate) dt.14-11-17 and is liable to GST at rate of 5%.

IGST is payable on testing services provided on goods made available by foreign companies

Authority for Advance Ruling Maharashtra

Applicant- Behr-Hella Thermocontrol India (P.) Ltd.(Order No.GST-ARA/12/2018-19/B-116)

The applicant has entered into service agreement for providing testing services in relation to the prototype goods supplied by their overseas clients. The tests are directly carried out on the prototype goods provided by the overseas group entities and based on the same, the applicant prepares the testing report and send across the said report to their overseas clients by way of emails. They are contending that the place of supply is outside of India and therefore, such services have been exported by them so as to qualify as ‘Zero rated supply’ under the provisions of section 16 of the IGST Act, 2017

It was held that, the prototypes are made physically available by the recipient of services (the overseas clients) to the supplier of services (the applicant). Service of testing is over once on the basis of examination and verification of prototype, the test report is generated and sent via email as stated by the applicant and therefore provision of testing services is over and the service is completed and is clearly provided in India as per section 13(3) of IGST Act, 2017 and therefore it can be inferred that the said services of the testing of the prototypes, which are physically made available by the service receiver to the service provider, are provided in India and therefore, liable to IGST and cannot be treated as ‘zero rated supply’ as per section 16(1) of the IGST Act, 2017

Gujarat High Court ordered to the Competent GST Authority to file reply against appeal filed for rectification of GST TRAN-1

Jay Chemical Industries Ltd. Vs. Union of India (Special Civil application No.10828/2018)

The assesse filed writ petition seeking direction to respondents to allow rectification of GST TRAN-1 either by reopening of GSTN portal or to allow it to be filed manually, respondents were ordered to file reply.

As per section 140 of the CGST Act, 2017 read with rule 117 of the CGST Rules, 2017 asseess had filed TRAN-1, however due to some inadvertent mistake some input tax credits were not declared in TRAN-1, therefore assesse seeking re-course to get the skipped credit.

Amortized cost of tools re-supplied to supplier free of cost shall be added to value of component

Authority for Advance Ruling Karnataka

Applicant: Nash Industries (AAR No.KAR ADRG 24/2018)

The applicant was in the business of manufacturing sheet metal pressed components and caters to various industries. The applicant had sought advance ruling in respect of the question that, whether the amortized cost of the tool to be added to arrive at the value of goods supplied for the purpose of GST under section 15 of CGST Act, 2017 read with rule 27 of CGST Rules, 2017. The applicant stated that, in erstwhile Excise law the same provision was applicable. In the instant case the applicant and the recipient entered into agreement where the applicant is required to ‘supply’ certain components. These components require specialized tools for their manufacture. The tools could be either manufactured by the applicant himself or they could supply them free of cost. In case the applicant procures the tools from a third party, then they would incur a cost and the cost could be included in the value of taxable supply to the recipient. There is no scope of any dispute in this situation about the fact that the cost of the tools is an essential element to be included in the cost of component finally supplied by the applicant. This is also because without the tools the final component could not have been manufactured.

However, when the first and third situation prevails, then the applicant has not spent any amount in respect of the tools. Nevertheless the applicant could not have manufactured the components without the tool. Here the cost the tool is borne by the recipient of the supply whereas the same should have been borne by the applicant, as evident from the situation discussed above, (where the applicant procures the tool from a third party).

Therefore, the amortized cost of the tools which are re-supplied back to the applicant free of cost shall be added to the value of the components while calculating the value of the components supplied as per section 15 of the CGST Act, 2017.

Leave a Reply

Your email address will not be published. Required fields are marked *