2019 (3) TMI 592 - AAR - GST

GST advance ruling application rejected as recipient of leased circuit services cannot seek ruling under Section 95

The AAR, Maharashtra rejected an advance ruling application under Section 97 of the GST Act for non-maintainability. The applicant, being a recipient of ... Advance ruling - place of supply - leased circuit - Integrated Tax (IGST) - input tax credit - reverse charge mechanism - location of supplier - location of recipient - Explanation to Section 12(11)(d) of the IGST ActAdvance ruling - reverse charge mechanism - applicant - Maintainability of the advance ruling application filed by the recipient of services - HELD THAT: - The Authority examined Sections 95 and 97 and the statutory definition of an advance ruling to determine whether a recipient (who is not the supplier) may seek a ruling in relation to supplies received by it. The Authority found that an advance ruling is to be given to an applicant in relation to supplies 'being undertaken or proposed to be undertaken by the applicant' and that, as a matter of the scheme, a recipient who is not the supplier may seek a ruling only where the recipient is liable to pay tax under the reverse charge mechanism. In the present case the applicant is a recipient of leased circuit services but is not paying tax under reverse charge on the impugned transaction. Consequently the applicant did not satisfy the conditions in Sections 95/97 to obtain an advance ruling in respect of the questions framed. [Paras 5]Application is not maintainable because the applicant is a recipient who is not liable to pay tax under reverse charge and therefore cannot obtain an advance ruling on the impugned transaction.Place of supply - leased circuit - Integrated Tax (IGST) - Explanation to Section 12(11)(d) of the IGST Act - Admissibility of the question whether supplier should charge IGST (and related entitlement to input tax credit) where a leased circuit is installed in more than one State and the contract lacks a state-wise value break-up - HELD THAT: - The Authority considered whether the specific question on charging of IGST by the supplier and consequent input tax credit to the applicant falls within matters on which an advance ruling may be sought. Since the underlying question concerns the supplier's liability to charge IGST (place of supply determination under the Explanation to Section 12(11)(d)) and the applicant is not the supplier nor a recipient paying tax under reverse charge, the Authority held that the question does not fall within the matters specified in Section 97(2) insofar as the present applicant is concerned. Therefore the question is inadmissible for determination in this advance ruling proceeding. [Paras 5, 6]The question regarding charging of IGST and the applicant's entitlement to input tax credit is inadmissible in this application and cannot be answered in the advance ruling sought by the present applicant.Final Conclusion: The Authority rejected the applicant's request for an advance ruling and dismissed the application as not maintainable - the applicant, being a recipient who is not liable to pay tax under reverse charge, cannot seek the advance ruling sought; the questions on IGST charging and input tax credit are therefore inadmissible. The application is rejected under the provisions of Section 98(2) of the CGST Act. Issues Involved:1. Whether the supplier should charge Integrated Tax (IGST) on the supply of leased circuit facilities installed in multiple states without state-wise service proportion.2. Whether the recipient can avail Input Tax Credit (ITC) on the tax charged by the supplier of the leased circuit facility.Issue-wise Detailed Analysis:1. Charging of Integrated Tax (IGST):The applicant, engaged in providing internet connectivity services, sought clarity on whether IGST should be charged on leased circuit services installed across multiple states when the contract does not specify the proportion of service provided in each state. The applicant argued that the place of supply for such services should be determined as per Section 12(11) of the IGST Act, which states that if the leased circuit is installed in more than one state and the value of the service cannot be determined, the place of supply should be the location of the recipient of services.The applicant further contended that since no specific rules have been prescribed under Section 12(11)(d) of the IGST Act, the place of supply should default to the recipient's location, thereby necessitating the charging of IGST. They also referenced the case of Suresh Kumar Bansal v. Union of India, asserting that if no mechanism exists to ascertain the value of a particular service, the service should be considered outside the levy of tax.2. Admissibility of Input Tax Credit (ITC):The applicant also sought a ruling on whether they could avail ITC on the IGST charged by the supplier of the leased circuit facility. They argued that since the leased circuits are essential for providing internet connectivity services, the tax paid on such services should be eligible for ITC as per Section 16 of the CGST Act, which allows ITC for taxes paid on goods or services used in the course or furtherance of business.Observations:The Authority for Advance Ruling (AAR) noted that the applicant is the recipient of the services, not the supplier. As per Section 95 of the CGST Act, only the supplier of goods or services can seek an advance ruling unless the recipient is liable to pay tax under the reverse charge mechanism. Since the applicant is not paying taxes under reverse charge for the leased circuit services, they do not qualify to seek an advance ruling.The AAR also highlighted that the applicant's question about charging IGST does not fall under the matters specified in Section 97(2) of the CGST Act, which lists the permissible questions for an advance ruling. Consequently, the application was deemed inadmissible.Conclusion:The application for advance ruling was rejected as the applicant, being the recipient of services and not paying taxes under reverse charge, does not qualify to seek an advance ruling under Section 95 of the CGST Act. Additionally, the questions raised do not pertain to matters specified in Section 97(2) of the Act.