2021 (4) TMI 1345 - AAAR - GST

Japanese consultancy services to Indian recipient taxable in India under Section 13(2) IGST Act 2017

AAAR Odisha condoned six-day delay in filing application due to COVID-19 difficulties. The original advance ruling was set aside as contract circumstances ... Condonation of delay in filing application - sufficient reasons/difficulties submitted by the Applicant or not - Whether the ruling of Authority for Advance Ruling, Odisha can be set aside or modified based on changed facts/circumstances as the contract is terminated on dt. 04.03.2021? - Place of supply - reverse charge mechanism - HELD THAT:- The delay happened due to the practical difficulties faced by the Applicant on account of restrictions prevailed during that time and outbreak of COVID-19 pandemic. Therefore, the delay of six days as empowered under proviso to sub-section 2 of Section 100 of CGST/SGST Act, 2017 is condoned. The Advance Ruling Authority has made the advance ruling based on the facts that the Applicant will use the office premises of OPTCL for rendering the consultancy service in India. This situation does not arise as the contract has been terminated. Whatever service has been rendered by M/s. Tokyo Electric Power Company (TEPCO) are executed from Japan. Now it is clear that the fact and circumstances based upon which the advance ruling has been made now changed. In such situation, we hold that ruling passed by the Authority for Advance Ruling, Odisha is not legal & proper as per law. Taxability of consultancy service rendered (training conducted in Japan) by the Applicant in Japan - HELD THAT:- In such situation, the place of supply of service is more important. It is already enumerated under sub-section 2 of Section 13 of the IGST Act, 2017 that under such situation place of supply will be location of the recipient of the services. As the recipient of service is M/s. OPTCL in India, then the place of supplied service by M/s. Tokyo Electric Power Company (TEPCO) will be treated as in India. The supplier of service M/s. Tokyo Electric Power Company(TEPCO) is located in Japan, which is non-taxable territory. The recipient of service M/s. Odisha Power Transmission Corporation Limited is located in India, which is the taxable territory and place of supply of service will be in India. Therefore, in our view, the consultancy service rendered by M/s. Tokyo Electric Power Company (TEPCO) to M/s. Odisha Power Transmission Corporation Limited upto dt.04.03.2021 covered under Entry Sl.No.1 of Notification No. 10/2017-Integrated Tax(Rate) dated 28.06.2017. Accordingly, the tax liability rest upon the recipient of the service i.e. M/s. Odisha Power Transmission Corporation Limited, on reverse charge basis. Issues Involved:1. Condonation of delay in filing the appeal.2. Taxability and registration requirement for consultancy services provided by M/s. Tokyo Electric Power Company (TEPCO) to M/s. Odisha Power Transmission Corporation Limited (OPTCL).Detailed Analysis:1. Condonation of Delay:The Applicant filed the appeal six days after the prescribed time limit under Section 100(2) of the CGST/SGST Act, 2017. The reasons for the delay included:- COVID-19 pandemic-related difficulties and restrictions.- Geographical complexities as the Applicant is based in Tokyo, Japan, and consultants are in Gurugram, Haryana.- Banking formalities for payment of appeal fees through Indian banks.The Appellate Authority found these reasons satisfactory and condoned the six-day delay under the proviso to sub-section 2 of Section 100 of the CGST/SGST Act, 2017.2. Taxability and Registration Requirement:The Applicant, TEPCO, entered into an agreement with OPTCL to provide consultancy services for the Odisha Transmission System Improvement Project. The services included technology transfer, GIS operation and maintenance, and training for OPTCL engineers. The Applicant performed these services primarily from Japan, except for certain physical inspections and demonstrations in India.The Advance Ruling Authority initially ruled that the supply of services by TEPCO to OPTCL was not an import of service under Section 2(11) of the IGST Act, and thus, TEPCO was required to register under the Odisha Goods and Services Act, 2017, and Central Goods and Services Act, 2017.Changed Facts and Circumstances:The Applicant's contract with OPTCL was terminated on 04.03.2021, which altered the facts and circumstances supporting the original ruling. The Appellate Authority reviewed the termination letter and accepted the claim of contract termination. Consequently, the further consultancy services to be rendered by TEPCO were suspended, and the services already rendered were carried out in Japan.Place of Supply:Under sub-section 2 of Section 13 of the IGST Act, 2017, the place of supply of services is the location of the recipient, which in this case is OPTCL in India. Therefore, the consultancy services rendered by TEPCO from Japan to OPTCL in India are considered as supplied in India.Tax Liability:The consultancy services provided by TEPCO fall under Entry No. 1 of Notification No. 10/2017-Integrated Tax (Rate) dated 28.06.2017, which states that any service supplied by a person located in a non-taxable territory to a person in a taxable territory is subject to reverse charge mechanism (RCM). Hence, the tax liability rests upon OPTCL, the recipient of the service.Contractual Agreement:The contract between TEPCO and OPTCL included a clause that the client (OPTCL) would reimburse the consultant (TEPCO) for GST and other taxes, and if payments were made directly to TEPCO, GST would be applied under the RCM.Order:Given the changed facts and circumstances, the Appellate Authority concluded that the original ruling by the Authority for Advance Ruling, Odisha, was not legal and proper. TEPCO is not required to take GST registration, and the tax liability for the services rendered by TEPCO lies with OPTCL under the reverse charge mechanism as per Entry No. 1 of Notification No. 10/2017-Integrated Tax (Rate) dated 28.06.2017.