2018 (7) TMI 1334 - AAR - GST

Sourcing services to Hong Kong associate deemed taxable supplies under GST but export status determination outside AAR jurisdiction

AAR Haryana ruled that services provided by the applicant to its Hong Kong associate concern, including sourcing of goods like apparel and accessories, ... Place of supply - sourcing (on a worldwide basis)) of goods from India - export or not - sourcing (on a worldwide basis)) of goods which includes wearing apparel, shoe & accessories and fabric - sub-contract - refund of GST paid on inputs and input services used in export of services - Jurisdiction. Taxability of above stated services provided by Esprit India to its associate concern in Hong Kong EDCFE under GST regime? - Held that:- As per Explanatory Notes to the Scheme of Classification of Services read with N/N. 11/2017-Central Tax (Rate) dt. 28/07/2017 (as amended), the services enumerated by the applicant in tabular form as given above, qualify as taxable services - taxability upheld. Whether the above stated services provided by Esprit are covered under Export of Services having Zero rated taxability? - Jurisdiction - Held that:- Whether a transaction is “export of services” or not, is dependent upon the tact as to whether the place of supply of service is out of India or not. Consequently, if the advance ruling authority proceeds ahead with examination and consideration of this fact, discussions and findings on the aspect of “place of supply” will be inevitable - where a question also involves examination of “place of supply” (which is not among the issues which can be decided by AAR], the question cannot be taken up by the authority for lack of jurisdiction. Whether Esprit India is eligible for seeking refund of GST for the taxes paid on input services or goods or both? - Jurisdiction - Held that:- It is dependent upon the fulfillment of conditions as prescribed under Section 2(6) and Section 16(1), both of the Integrated Goods and Services Tax, 2017. Such refund claims merit to be examined in terms of provisions of Section 54 of the CGST/HGST Act, 2017 and rules made thereunder. The proper officer under the CGST/HGST Act, 2017 and roles made thereunder is the competent authority for the same - However, with regard to giving Advance Ruling on this question, it is observed that as the earlier question relating to export of services is dependent upon the definition of “place of supply”, which is out of jurisdiction of the authority, this instant question too, being corollary to earlier question, cannot be taken up for pronouncing any ruling due to lack of jurisdiction. Ruling:- The services provided by Esprit India to its associate concern in Hong Kong EDCFE are taxable supplies. The above stated services being taxable supplies, the question as to whether they qualify as “export of services” and accordingly “zero rated supply”, is out of jurisdiction of this authority. The same proposition applies to the question as to whether Esprit India is eligible for seeking refund of GST for the taxes paid on input services or goods, due to lack of jurisdiction. Issues Involved:1. Taxability of services provided by Esprit India to its associate concern in Hong Kong EDCFE under GST regime.2. Whether the services provided by Esprit India qualify as 'Export of Services' with zero-rated taxability.3. Eligibility of Esprit India for seeking refund of GST paid on input services or goods.Detailed Analysis:1. Taxability of Services Provided by Esprit India:The Authority observed that the services provided by Esprit India to EDCFE, as enumerated in the application, qualify as taxable services under the GST regime. The classification and taxability of each service are as follows:- Market Research: Conducted by Esprit India to understand market dynamics and advise on pricing, classified under SAC 998371 (Market research services), taxable at 18% under forward charge.- Purchase of Goods and Trademark Protection: Esprit India assists in trademark protection and does not purchase goods, classified under SAC 998599 (Other support services n.e.c.), taxable at 18% under forward charge.- Identification of Suppliers: Esprit India evaluates and maintains supplier data, classified under SAC 998599 (Other support services n.e.c.), taxable at 18% under forward charge.- Negotiation with Suppliers: Esprit India communicates terms but does not negotiate, classified under SAC 998599 (Other support services n.e.c.), taxable at 18% under forward charge.- Inspection and Quality Control: Conducted by Esprit India based on guidelines, classified under SAC 998311 (Management consulting and management services), taxable at 18% under forward charge.- Logistics: Esprit India arranges logistics as per instructions, classified under SAC 998311 (Management consulting and management services), taxable at 18% under forward charge.2. Qualification as 'Export of Services' with Zero-Rated Taxability:The Authority noted that 'zero-rated supply' under Section 16(1) of the IGST Act, 2017, includes the export of goods or services. However, the determination of whether a transaction qualifies as 'export of services' depends on the 'place of supply' being outside India. Since the 'place of supply' is not within the jurisdiction of the Advance Ruling Authority under Section 97(2) of the CGST/HGST Act, 2017, the question of zero-rated taxability could not be addressed.3. Eligibility for GST Refund on Input Services or Goods:The eligibility for a refund of GST paid on inputs and input services used in the export of services is contingent upon fulfilling the conditions under Section 2(6) and Section 16(1) of the IGST Act, 2017, and Section 54 of the CGST/HGST Act, 2017. However, as the determination of 'export of services' involves the 'place of supply,' which is outside the jurisdiction of the Authority, the question of refund eligibility could not be addressed.Conclusion:1. The services provided by Esprit India to EDCFE are taxable under GST as discussed.2. The question of whether these services qualify as 'export of services' and are zero-rated is outside the jurisdiction of the Authority.3. The eligibility for a refund of GST on input services or goods is also outside the jurisdiction of the Authority due to its dependence on the 'place of supply.'Ordered accordingly.