2019 (7) TMI 1388 - AAR - GST

AAR Declines Ruling on CTIPL Service Classification

The Authority for Advance Ruling (AAR) declined to provide a ruling in the case involving Cummins Technologies India Private Limited (CTIPL) regarding the ... Export of services - zero rated supply - intermediary - place of supply - location of recipient - advance ruling jurisdiction under Section 97Advance ruling jurisdiction under Section 97 - determination of the liability to pay tax - Whether the question on assessment of taxability of the subject supplies as 'zero rated supply' falls within the matters on which an advance ruling can be given under Section 97 of the CGST Act. - HELD THAT: - Sections 95 and 97 define the scope of matters on which the Authority for Advance Ruling may pronounce. Section 97(2) lists specific categories (classification, applicability of notifications, determination of time and value of supply, admissibility of input tax credit, determination of liability to pay tax on any goods or services, registration requirement, and whether an activity amounts to supply). The applicant sought clarification whether liability to pay tax on the subject supplies can be assessed based on taxability as accorded to 'zero rated supply'. The Authority examined the question and concluded that the formulation of the applicant's query seeks an assessment of their supplies based on taxability rather than seeking a question squarely falling within the specified categories as presented. On this basis, the Authority found that the question as framed does not fall within the scope of matters envisaged by Section 97(2) for which an advance ruling may be given, and therefore the Authority refrained from answering the substantive classification/zero-rating issue. [Paras 4]The question does not fall within the purview of Section 97 of the CGST Act and is therefore not answered.Final Conclusion: The Advance Ruling Authority declined to answer the applicant's question because, as framed, it did not fall within the matters enumerated in Section 97(2) of the CGST Act; the substantive issue of whether the subject services qualify as export of services/zero rated supply was not adjudicated. Issues Involved:1. Classification of services as 'export of service.'2. Applicability of 'Zero rated supply' taxability.3. Determination of whether the services qualify as 'intermediary services.'Issue-Wise Detailed Analysis:1. Classification of Services as 'Export of Service':The applicant, Cummins Technologies India Private Limited (CTIPL), provides various support services to its group companies, both in India and overseas. The applicant sought an advance ruling to determine if these services can be classified as 'export of service' under the Integrated Goods and Services Tax Act, 2017 (IGST Act). According to Section 2(6) of the IGST Act, a service qualifies as an export if:- The supplier of service is located in India.- The recipient of service is located outside India.- The place of supply of service is outside India.- The payment for such service is received in convertible foreign exchange.- The supplier and recipient are not merely establishments of a distinct person.CTIPL argued that it fulfills all these conditions, as it is located in India, provides services to overseas group companies, receives payment in convertible foreign exchange, and the group companies are independent legal entities. Therefore, the services should be classified as 'export of service.'2. Applicability of 'Zero Rated Supply' Taxability:CTIPL contended that since the services qualify as 'export of service,' they should be treated as 'Zero rated supply' under Section 16 of the IGST Act. This means no tax would be payable on such supplies, and the supplier would be eligible for a refund of input tax credit. The applicant emphasized that the services provided are independent and not in the nature of facilitation or arrangement between the group company and any third party, which would otherwise classify them as intermediary services.3. Determination of Whether the Services Qualify as 'Intermediary Services':The applicant sought clarification that the services do not fall under the definition of 'intermediary services' as per Section 2(13) of the IGST Act, which defines an intermediary as a broker, agent, or any person who arranges or facilitates the supply of goods or services between two or more persons but does not include a person who supplies such goods or services on his own account. CTIPL argued that its services are provided on a principal-to-principal basis and are independent of any transaction between the group company and its vendors or customers. The applicant cited judicial precedents, including the Advance Ruling in the case of Godaddy India Web Services Pvt. Limited, which held that similar services were not intermediary services but business support services.Observations and Conclusion:The Authority for Advance Ruling (AAR) examined the facts and submissions. It noted that the applicant's query pertained to the assessment of taxability based on 'Zero rated supply,' which does not fall under any of the categories specified in Section 97(2) of the CGST Act. The AAR emphasized that it could only provide rulings on matters explicitly mentioned in Section 97(2), such as classification of goods or services, applicability of notifications, determination of time and value of supply, admissibility of input tax credit, determination of tax liability, registration requirements, and whether an activity amounts to a supply of goods or services.Since the applicant's query did not fall within these specified categories, the AAR refrained from answering the question and concluded that the application was not maintainable.Order:The AAR ruled that the question raised by the applicant does not fall within the purview of Section 97 of the CGST Act and, therefore, was not answered.