Facts: The applicant, The Karnataka State Co-Operative Marketing Federation Limited, has submitted that the Government of India announces Minimum Support Price for oil seeds and pulses under its Price Support Scheme (PSS). The Department of Agriculture, Co-operation and Family Welfare has appointed NAFED as one of the nodal agencies to Government of India for implementation of PSS. The applicant has submitted that they have been appointed as the State Level Supporter (SLS) by the State Government of Karnataka to implement the Price Support Scheme (PSS). Accordingly, the applicant procures Kharif Arhar (Tur) and Kharif Green Gram from the farmers and supply it to NAFED. Further the applicant submitted that they procure gunny bags from third parties at transaction value plus GST @ 5%. These gunny bags are utilised to pack the Kharif Arhar (Tur) and Kharif Green Gram as per the specifications issued by NAFED. The product does not bear any brand name. Cost of transportation of crop procured, handling charges, gunny bag pre-tax value are reimbursed by NAFED and NAFED also pays 2% of the Minimum Support Price as Administrative Markup to the applicant.
In this background, the applicant had sought Advance Ruling on,-
1. Whether the transaction of supplying Kharif Arhar (Tur) Crops and Green Gram crops from farmers to NAFED is a taxable supply? What is the rate of tax to be charged for sale of Agricultural produce to NAFED, if it is to be treated as taxable supply?
2. Whether GST paid on purchase of Gunny bags by KSCMFL eligible to be claimed as Input tax credit?
3. Whether provisions of Section 51 and Notification 50/2018 – Central Tax dated 13th September 2018 applicable on KSCMFL i.e. is KSCMFL required to deduct TDS u/s 51 of CGST/KGST Act, 2017 on payments to be made by KSCMFL to NAFED?
Observations & Findings : The tariff item 0713 relating to Dried Leguminous Vegetables, shelled, whether or not skinned or split, listed under the entry No.45 of the Notification No.2/2017- Central Tax(Rate) dated 28th June, 2017. Hence the supply of tur dal and green gram without any brand name by the applicant to NAFED is an exempted supply as per entry No.45 of the Notification No.2/2017- Central Tax(Rate) dated 28th June, 2017.
Further, the applicant purchasing gunny bags from third parties to pack the procured Kharif Arhar (Tur) and Kharif Green Gram from the farmers, by paying GST @ 5%. Since the supply of tur dal and green gram is an exempted supply as per entry No.45 of the Notification No.2/2017- Central Tax(Rate) dated 28th June, 2017 the input paid on purchase of gunny bags is ineligible to claim as input tax credit as per subsection 2 of section 17 of the CGST Act, 2017. The subsection 2 of section 17 of the CGST Act 2017 clearly says that, the amount of credit shall be restricted to so much of the input tax as is attributable to the taxable supplies including zero-rated supplies.
The applicant is not covered under the list provided either in the Notification 50/2018 – Central Tax dated 13/09/2018 or under the list prescribed under Section 51 of CGST/KGST Act,2017. Therefore the provisions of TDS as prescribed under section 51 of CGST/KGST Act, 2017 are not applicable to the applicant.
1. Supply of Kharif Arhar (Tur) and Green Gram to NAFED is an exempted supply as per entry No.45 of the Notification No.2/2017- Central Tax (Rate) dated 28th June, 2017.
2. GST paid on purchase of Gunny bags shall not be claimed an input tax credit as per subsection 2 of section 17 of the CGST Act 2017.
3. The provisions of TDS as prescribed under section 51 of CGST/KGST Act, 2017 does not apply to the applicant.
[2020 (10) TMI 812 – AAR, Karnataka – The Karnataka State Co-operative Marketing Federation Limited]
2. Supplies to Holding Company :
Facts : The applicant has stated that they are engaged in the business of software development for the infusion system manufactured by its Holding Company having its place of business in USA. The applicant’s employees incurring expenses towards tickets, food and accommodation during their travel and at certain times in India for the purpose of official’s travel, food and accommodation during such travel and for paying admin related expenses in India through the Credit Cards supplied by the Foreign Company.
These expenses are booked as an intercompany transaction, debiting the corresponding expenses and crediting the inter-company payable by the Holding Company. The Holding Company settles the monthly credit card liability with the Bank for all locations globally. An invoice is raised by the Holding Company, on the applicant for the credit card liability settled by it with the bank. The applicant settles the credit card liability paid by Holding Company to the bank in the form of reimbursement of expenses at actual. There is no agreement per se between the Holding Company and the applicant towards such arrangement of settlement of credit card liability paid by Holding Company by way of reimbursement.
The Applicant has sought Advance Ruling on the following questions:
1. Whether GST is leviable on the reimbursement of expenses from the Subsidiary Company to its Ultimate Holding company located in a foreign territory outside India.
2. In case GST is leviable what is the rate of GST applicable to the said reimbursement of expenses?
Observations & Findings: In the instant case, the Holding Company has entered into an agreement with a Bank for using credit card facilities by the employees of the group companies, affiliates etc. for business related expenses such as travel, accommodation etc. The billing of these transactions are made by the Bank to Holding Company. However, there is another separate transaction here. This transaction involves Holding Company and the applicant. Holding Company. sends the details of the business related expenses made by the employees of the applicant, as received from The Bank. The employees are issued the credit cards under the logo of the Holding Company and The Bank. For the privilege of using these cards, the applicant has to pay the Holding Company all the relevant expenses and charges made by its employees. This is made against the invoice raised by the Holding Company. A payment is made by the applicant to the Holding Company in response to the services of providing the cards. Therefore, this transaction falls within the definition of services and is for a consideration as defined in Section 2(7) and Section 2(31) of the Act. This transaction is also in the course or furtherance of business. Further, as per Section 2 (84) (h) a “person” includes any body corporate incorporated by or under the laws of a country outside India, which is Holding Company. in this case. Therefore, the transaction in question is a ‘Supply’ as per Section 7 of the Act.
1. The applicant is liable to pay IGST on the expenses paid by the applicant to its Holding company, having its place of business in USA under Reverse Charge basis as per SI. No 1 Notification 10/2017- Integrated Tax (Rate) dated 28.06.2017.
2. The rate of tax is 18% as per Sl.No.15 of Notification 8/2017 -Integrated Tax (Rate) dated 28.06.2017.
[2020 (10) TMI 764 – AAR, Tamilnadu – M/s ICU Medical LLP]
3. Export or Domestic Supply :
Facts : The Government of India and The Government of Bangladesh have signed a Memorandum of Understanding for construction of an oil pipeline from Siliguri in India to the depot of the Bangladesh Petroleum Corporation (BPC) at Parbatipur in Bangladesh. The work will be monitored by Ministry of External Affairs (MEA), Government of India, which has engaged M/s Numaligarh Refinery Ltd (NRL) as the implementation agency. NRL has awarded the applicant the contract for the installation of the pipeline by HDD method.
The applicant wants to know:
i. whether its supply is works contract service;
ii. whether the supply of service to NRL for the above construction in Bangladesh is an export and exempt under the GST Act;
iii. if the answer to the above query is negative, then what should be the appropriate tax rate;
iv. whether the applicant is entitled to input tax credit on its inward supplies for the service rendered in the construction of Bangladesh portion of the pipeline on behalf of NRL;
v. whether the applicant is liable to pay tax on goods or services procured locally within Bangladesh for the purpose of construction of Bangladesh portion of the pipeline on behalf of NRL;
vi. whether the applicant is entitled to input tax credit on procurement of such goods or services in Bangladesh used in the construction of Bangladesh portion of the pipeline on behalf of NRL;
vii. if all the queries come out with responses that led the applicant taxable, then what will be the proper method of valuation of tax.
Observations & Findings :
NRL has awarded the contract to the applicant for construction of the pipeline in Bangladesh and pays the consideration. NRL is, therefore, the recipient in terms of section 2(93)(a) of the GST Act. A strip of land extending over more than a hundred kilometer is not a fixed establishment in terms of section 2(7) of the IGST Act. Location of the recipient in the present context cannot, therefore, be determined by applying the provisions under section 2(14) (b) or (c) of the IGST Act. NRL being registered and resident of India, the location of the recipient of the service shall be in India in terms of section 2(14)(d) of the IGST Act. The place of supply of the service should, therefore, be determined in terms of proviso to section 12(3)(a) of the IGST Act for carrying out the construction work of immovable property. It shall be in India, being the location of the recipient. The applicant’s service will not, therefore, be the export of service within the meaning of section 2(6) of the IGST Act. The provisions for deemed export under section 147 of the GST Act is available for supply of goods only. The applicant’s supply of service cannot, therefore, be considered ‘deemed export’ under the GST Act. Although a public sector undertaking NRL is not a Government Entity as defined in clause 4(x) of the Rate Notification (direct Government participation in equity is less than 90% in NRL). The concessional rate in terms of Entry No. 3(iii)(c) of the Rate Notification is, therefore, unavailable. It will, therefore, be taxable @ 18% under Entry No. 3(xii) of the Rate Notification.
i. The applicant’s supply is works contract service.
ii. It is not an export of service.
iii. The applicant’s service is taxable @ 18% in terms of Entry No. 3(iii)(c) of Notification No. 11/2017 – CT (Rate) dated 28/06/2017, as amended from time to time.
iv. The applicant is entitled to input tax credit on the GST paid on procurement.
v. As the applicant has not paid GST on purchasing goods or services in Bangladesh used in the construction of the pipeline, the question of the input tax credit does not arise.
vi. GST shall be payable on the consideration receivable for the applicant’s service.
[ 120 taxmann.com 341 (AAR-WEST BENGAL) – Maninder Singh]
ORDER OF APPELLATE ADVANCE RULING AUTHORITY
1. Export or Domestic Supply :
Facts : The appellant is engaged in the business of providing IT software related consulting services in the area of Oracle ERP w.r.t Oracle Financials. The services provided by him currently are covered under the SAC (Service Accounting Code) 998313. He has entered into a contract with a GST registered IT Company in India, providing similar Oracle services.. The Indian Company is the Principal. As part of the Contract his role was that of a Consultant to provide support services to the Oracle ERP owned by the US client of based out of Boston. The original contract is between the Principal and their US client and a part of the service stands contracted to him. As per the terms of the contract entered into by the appellant with the principal, the consultancy fee for his services was decided to be billed on an hourly basis in USD. The fee was decided to be paid in equivalent INR based on the conversion rate of INR/USD on the average prevailing rate of the last 3 month. The GST would be charged separately while raising the invoice by him on the Principal. The appellant sought Advance Ruling was sought on the following Question.
1. Whether the services provided by the applicant shall be treated as local services or export of services
2. Whether the applicant is liable to pay GST on such services provided to the US Client directly
3. Whether the benefit of zero-rated supply can be availed by him for his services
4. Whether he is eligible for refund of taxes already paid in the past if the refund is within the time limit provided under the GST Act.
The Original Authorities has ruled as follows:
The services provided by the applicant to Doyen systems Private Limited is a supply of services under CGST /TNGST Act and the applicant is liable to pay relevant tax on such supply.
The Authority has not replied the remaining questions.
Observations & Findings : On a joint reading of the definitions, “recipient” as defined under section 2(93) of the CGST Act 2017 and “Consideration” as defined under section 2(31) of the CGST Act 2017, the statute is unambiguous in as much as it says, the person liable to pay the consideration for supply of services is the ‘Recipient’ of such supply and ‘Consideration’ is any payment made whether by the recipient or any other person for such supply. It is not disputed that the appellant is under contractual obligation to provide services through Indian Company for which payment is agreed to be made by to the appellant after verifying the invoice and the client time-sheet as in the Contract Agreement. Further as observed by the lower Authority the payment of ‘Consideration’ to the appellant is entirely with the principal and the appellant cannot claim consideration directly with the client of the principal and client of the principal is not the person liable to pay the appellant for the services supplied by the appellant. Thus, it is clearly evident that the recipient of Services of the appellant is Indian Company. We find that the lower authority has considered the above and accordingly pronounced the ruling. We do not find any reason to interfere with the same.
Order : We do not find any reason to interfere with the Order of the Advance Ruling Authority in this matter. The subject appeal is disposed of accordingly.
[2020 (10) TMI 813 – Appellate AAR, Tamilnadu – M/s Rajesh Rama Varma]