RULINGS OF ADVANCE RULING AUTHORITIES

1. Mutuality Concept

Facts : The applicant is a club is and a non-profit organization established by the British in the year 1868 as a literary and scientific society. The members contribute by way of subscription fees and infrastructure development fund which is used for the purposes of provision of services and goods and a reading room, library, chambers for accommodating family and guests, a bar and sports facilities. The applicant outsources catering services who supply foods and beverages and run a super market within the premise of the applicant. These facilities are only available for use by the members. These outsourced agencies charge GST on their supplies of food, beverages and sale of goods to members. The applicant bears the cost of such goods and services from the subscription fees paid by the members.

The applicant sought advance ruling on the following questions:

1. Whether amount collected as membership subscription fees paid by the members of the applicant towards facilities provided by the applicant are liable as supply of service under GST?

2. Whether amount collected as infrastructure development fund for the development and maintenance of the facilities provided by the applicant are liable as supply of service under GST?

Observations & Findings : We have considered the submissions made by the applicant in their application for advance ruling. We also considered the issues involved, on which advance rulings are sought by the applicant, relevant facts and the applicant’s interpretation of law.

We observe that the Hon’ble Supreme Court judgment in the case of M/s. Calcutta Club Limited [AIR 2019 SC 5310] is fully applicable on the applicant. We also observe that Section 108 of Finance Act 2021 brought in a retrospective amendment in Section 7 of CGST Act, 2017, which is reproduced below:

108. Amendment of section 7.

In the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the Central Goods and Services Tax Act), in section 7, in sub-section (1), after clause (a), the following clause shall be inserted and shall be deemed to have been inserted with effect from the 1st day of July, 2017, namely:-

“(aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration.

Explanation.-For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another;”.

Ruling : The applicant is not liable to pay GST on subscription fees and Infrastructure development fund collected from the members and this ruling is subject to the amendment to the CGST Act by section 1 of the Finance Act 2021, as and when it is notified.

[2021 (4) TMI 1112 – AAR, Karnataka – M/s Bowring Institute]

2. Reverse Charge Mechanism /Rate of tax

Facts : The applicant is engaged in the business of sand mining and have been granted mining lease for extraction of sand at Basti District. The said product is classifiable under tariff heading 2505, leviable to GST @5%. During the lease period of five years the applicant has to pay lease rent as per mutually agreed terms and conditions.

The applicant has sought an advance ruling on the following questions:-

1. What shall be the classification of service provided by the Government of Uttar Pradesh to M/s. Ajay Kumar Singh in accordance with the Notification No. 11/2017-CT (Rate) dated 28.06.2017 read with annexure thereof.

2. Whether the said service can be classified under Chapter number 9973 as “Licensing services for the right to use minerals including its exploration and evolution” or any other service under the said chapter.

3. What shall be the rate of GST on given services provided by the Government of Uttar Pradesh to M/s. Ajay Kumar Singh for which royalty is being paid.

Observations & Findings : The liability of payment of GST liability on the amount of royalty paid to the Government is on the Service recipient i.e. the applicant in the instant case, in terms of Sl. No. 5 of Notification No. 13/2017 -Central Tax (Rate) dated 28-06-2017.

Mining lease service granted by Government, on payment of royalty as applicable, there is transfer of right to exploit the minerals lying under the lease hold area and to appropriate the exploit. On examining the aforesaid nature of the service being received by the applicant vis-a-vis classification of service, the impugned service received by the Applicant from the State Government merits classification under the head “Licensing services for the right to use minerals including its exploration and evaluation” at Serial No. 257, Heading 9973, Group 99733.

On reading of the Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018 and Minutes / Agenda / Proposal/ Discussion of the GST council, we are of the view that the service received by the applicant from State Government is liable to be taxed @ 18%.

Ruling : The service under the question would be classifiable under “Licensing services for the right to use minerals including its exploration and evaluation” at Serial No. 257, Heading 9973, Group 99733, sub heading 997337 of “annexure: Scheme of Classification of Service” to the Notification No. 11/2017-C.T. (Rate) dated 28.06.2017 (as amended) and attracts 18% GST.

[2021 (3) TMI 643 – AAR, Uttar Pradesh – M/s Ajay Kumar Singh]

3. Taxable Supply

Facts : The applicant is providing services such as loading, unloading, packing, storage or warehousing of Agricultural produce including wheat that are being imported by any importer or trader through the Karaikal Port.

The applicant have filed an application seeking an Advance Ruling on “Whether exemption provided in SI.No.54(e) under Heading 9986 of GST Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 while rendering services such as loading, unloading, packing, storage or warehousing of imported agricultural products including wheat, to any importer or trader.’

Observations & Findings : On perusal of the Notification 12/2017 Central Tax (Rate) dated 28.06.2017, it is clear that for getting eligibility for exemption under SI.No.54 (e) covered under Heading 9986 the services of loading, unloading, storage or warehousing have to fulfill the conditions mentioned therein i.e. the Services need to be relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel raw material or other similar products or agricultural produce.

It is further seen that the term “agricultural produce” has been defined in the same said Notification as below:

“(d) “agricultural produce” means any produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products, on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market;”

It is very clear from the agreement, that the applicant is providing the services of loading, unloading, packing, storage or warehousing in respect of the ‘wheat’ which is procured from the farmers from the foreign country and after getting imported into India at Karaikal Port is destined to importer’s factory for further processing and it is not destined to the primary market as required for the services to be classified under sl. No. 54 (e) of Heading 9986 of the said exemption Notification. Therefore, the said services rendered by the applicant in the instant case are not eligible for the exemption under the said Notification.

Ruling : The services of loading, unloading, packing, storage or warehousing rendered by the applicant after the cargo of ‘Wheat’ imported from a foreign country, reaches the Karaikal Port, are not eligible for the Exemption provided in SI.No.54(e) under Heading 9986 of the Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017.

[2021 (3) TMI 914 – AAR, Puducherry – Karaikal Port P Ltd.]

ORDERS OF APPELLATE ADVANCE RULING AUTHORITY

1. Composite Supply

Facts : The Appellant is a private limited company having various regional offices in various states. They are engaged in supply of Billboards, Building Wraps, Fleet Graphics, Window Graphics, Trade Show Graphics, Office Branding, In-store Branding, Banners, Free Standing Display Units and Signage Graphics. These products are hereinafter referred to as ‘trade advertisements’. The printing of trade advertisements is carried out by the Appellant on Poly Vinyl Chloride (‘PVC’) material. The various types of PVC material on which printing is carried out are Frontlit Flex, Back Lit Flex, Block out Flex, Vinyl (self-adhesive) and Foam Board, all falling under Chapter 39 of the Customs Tariff Act, 1975 (CTA). The customers desirous of getting images/ written text/ trade monograms printed from them place a purchase order on them. The said purchase order spells out the type and specifications of the material on which the trade advertisement (provided by the customer) is to be printed.

On an application for Advance Ruling, the AAR has ruled as follows:

1. The printing of content provided by the recipient on the PVC materials of the appellant and supply of printed trade advertising material to the recipient is a composite supply, and ‘Supply of service of printing’ is the principal supply.

2. The classification of the service is SAC 998912 and the applicable tax rate is 9% CGST + 9% SGST as per Sl.No.27/27 (ii) of Notification No.11/2017 CT(Rate) dated 28.06.2017 & G.O. (Ms)No.72 dated 29.06.2017 No.II(2)/CTR/532(d-14)/2017 for the period 01.07.2017 to 13.10.2017 and thereupon the applicable rate is 6% CGST & 6% SGST as per Sl.No. 27(i) of Notification No. 11/2017- CT(rate) dated 28.06.2017 as amended & G.O.(Ms) No.72 dated 29.06.2017 No.II(2)/CTR/532(d-14)/2017 as amended.

Aggrieved by the above decision, the Appellant has filed the present appeal.

Observations & Findings : The appellant are primarily engaged in printing of trade advertisements in the media required by the recipient. They have stated that they procure the media, on own account, in which the content of trade advertisements provided by the recipient is required to be printed and the final supply of the Trade Advertisement’ is made. The main contention of the appellant is that their supply is a single supply of Trade Materials’, i.e. goods and not composite supply involving goods and printing services, of which ‘Printing service’ is the predominant supply’; that as per the statutory definition of ‘Services’ under the GST ACT, ‘anything other than goods’ are services. Therefore, they contend that primarily, it is to be established that the supply is not that of ‘goods’ and the LA has not stated how their supply is not supply of goods but have gone to state that the supply is a ‘Composite Supply’. They have also contended that even if the supply is considered as Composite supply involving supply of material and supply of printing service, the predominant supply of ‘goods’ in form of trade advertisement is the ‘principal supply’ and printing is ‘ancillary, to the dominant supply of goods in form of trade advertisement.

It is evident from the Purchase Order issued by their clients for ‘Printing’ the ‘Copyrighted Digital Content of the client’ in the desired material. The material blanks’ owned by the appellant are transferred to the client as Trade Advertisement material’ after undertaking Printing of the Content of the client on the blanks. The appellant is vested with and undertakes the printing of the content, the copyright of which rests with the recipient and the copyright always rests only with the client and the appellant do not have any propriety rights to the content. The content is never owned by the appellant, while the property in ‘blanks’ held by the appellant, on printing of the received content is transferred to the client. Thus the appellant do not have the whole propriety right on the final product-trade advertisement material’ supplied by them to their clients. In such a situation, we hold that in the case at hand, in the execution of the printing contract, the property held by the appellant in blanks stands transferred as ‘Trade Advertisement Material’ and therefore the activity is a contract for work or service only and not a contract of sale of goods.

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.

[2021 (3) TMI 499 – Appellate AAR, Tamilnadu – Macro Media Digital Imaging P Ltd.]

2. Time and Value of Supply

Facts : The appellant is a Board constituted under Uttar Pradesh Avas Evam Vikas Parishad Adhiniyam, 1965 and entrusted with the work to execute housing and improvement schemes in the State, whether chalked out by itself or by any local authority. Further, as per Section 46 of the Uttar Pradesh Avas Evam Vikas Parishad Adhiniyam, 1965, the applicant may also undertake the execution of any housing or other building project at the request of the State Government on such terms and conditions as may be agreed upon. This work is popularly known as “Deposit Work”.

The appellant receives funds, in advance, for said “Deposit Work”, with certain prefixed conditions such as:

1. All the money should be used for execution of particular project only and not for any other purpose.

2. If any interest is earned on the money received for execution of the project, the same will be transferred back in the head of account from which it was drawn.

As per the appellant the said fund received can neither be classified as “Advance Payment” nor as “Loans”, but can only be classified as “Deposit”. Further the appellant can use the funds only in the execution of earmarked project. Accordingly, the appellant submitted an application for Advance Ruling and sought Advance Ruling on the following issues : –

1. What is the time of supply in case of Deposit Works’ being executed by the applicant-whether it is the time of receipt of funds from the client government department or the time when expenditure incurred towards execution of the work is debited to Deposit Works account’?

2. What shall be the value of supply in aforementioned two alternatives?

The AAR ruled that:

1. As regard to the first question it was ruled by the Authority that “The time of supply in case of ‘Deposit Works’ being executed by the applicant will be the time of receipt of funds from the client government department.”

2. With reference to the value of the supply it was ruled by the Authority that “The value of the supply, on the advance payment received by the applicant, will be the amount of advance received by the applicant towards that particular work/supply.”

Aggrieved with the aforesaid ruling, the appellant filed this appeal application before the Appellate AAR.

Observations & Findings : In respect to the advance received by the appellant, for the said deposit work, is to be treated as “Advance Payment” received for the said work or as “Deposit”, we observe that as per the appellant the money received for the said “deposit work” to be treated as “deposit” in terms of proviso of Sub Section (31) of Section 2 of the CGST Act, 2017 which is as under:-

“Provided that a deposit given in respect of supply of goods or service or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply”

As regard to the appellant’s contention regarding proviso of Sub Section (31) of Section 2 of the CGST Act, we observe that the proviso itself makes it clear that if the deposit are applied towards consideration for the said supply then such deposit will be treated as payment towards said supply. Accordingly, in our opinion, the said proviso envisages a condition wherein the funds are not at all used for the provision of service and in such case no GST will be applicable on it. However, in the instant case the appellant have themselves informed that once any expenditure is incurred towards execution of the earmarked project, the advance amount, received by them, get debited. This itself shows the applicability of GST on the said amount and now the only question left to decide, is the time and value of the supply.

We observe that in term of Section 13 Sub Section 2 (a) and 2 (b), the time of supply of services shall be the earliest of the following:-

1. the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed, or

2. the date of provision of service, if the invoice is not issued within the period prescribed, or

3. the date of receipt of payment.

Coming to the value of taxable supply in case of advance payment, we observe that explanation given in the sub Section 2 of Section 13 of the CGST Act, 2017 provides that-:

“Explanation– For the purpose of clause (a) and (b)-

(i) the supply shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment.”

From the above discussion we observe that issue has been aptly clarified and the Authority of Advance Ruling has correctly ruled that the value of the supply, on the advance payment received by the applicant, will be the amount of advance received by the applicant towards that particular work/supply.

Order : The Ruling passed by the AAR, Uttar Pradesh, is just and proper and merits no interference.

[2021 (3) TMI 802 – Appellate, AAR, Uttar Pradesh – Uttar Pradesh Avas Evam Vikas Parishad]