Appellate Authority Quashes Advance Ruling on Place of Supply Jurisdiction

In Re: M/s. Micro Instruments

In Re: M/s. Micro Instruments - 2019 (31) G. S. T. L. 526 (App. A. A. R. - GST) Issues Involved:
1. Whether the "Commission" received by the Appellant qualifies as "Export of Services" under the IGST Act.
2. Whether the services provided by the Appellant are "Intermediary Services" under Section 13(8)(b) of the IGST Act.
3. Determination of the place of supply of services.
4. Jurisdiction of the Advance Ruling Authority to decide on the place of supply.

Issue-wise Detailed Analysis:

1. Whether the "Commission" received by the Appellant qualifies as "Export of Services" under the IGST Act:

The Appellant argued that the commission received in convertible foreign exchange for services rendered as an intermediary between a foreign exporter and an Indian importer should be considered as "Export of Services" under Section 2(6) of the IGST Act. The Appellant emphasized that the services were consumed outside India, as the effective use and enjoyment of the services were by the foreign principal. The Appellant cited various case laws and statutory provisions to support their claim that the services should be zero-rated under Section 16(1)(a) of the IGST Act.

The Advance Ruling Authority, however, held that the services provided by the Appellant were intermediary services and, as per Section 13(8)(b) of the IGST Act, the place of supply for such services is the location of the supplier, which is in India. Hence, the services do not qualify as export of services and are subject to IGST.

2. Whether the services provided by the Appellant are "Intermediary Services" under Section 13(8)(b) of the IGST Act:

The Appellant contended that although they fall under the definition of "intermediary," the services provided should not be classified as intermediary services. They argued that the term "intermediary services" should be interpreted narrowly, considering the context and statutory provisions. The Appellant referred to the definition of intermediary under Section 2(13) of the IGST Act and argued that the services provided were not intermediary services as they were involved in the cross-border sale/purchase of goods, not services.

The Advance Ruling Authority disagreed, stating that the Appellant's activities of procuring orders, negotiating terms, and facilitating the sale of goods between the foreign principal and Indian customers clearly fall under intermediary services. Therefore, the place of supply is the location of the supplier, i.e., India, making the services taxable under IGST.

3. Determination of the place of supply of services:

The Appellant's primary contention was that the place of supply should be outside India, as the services were consumed by the foreign principal. They argued that the effective use and enjoyment of the services were outside India, making it an export of services. The Appellant cited various case laws and international principles on VAT/GST to support their claim.

The Advance Ruling Authority, however, held that as per Section 13(8)(b) of the IGST Act, the place of supply for intermediary services is the location of the supplier, which is in India. Therefore, the services do not qualify as export of services and are subject to IGST.

4. Jurisdiction of the Advance Ruling Authority to decide on the place of supply:

The Appellate Authority examined whether the Advance Ruling Authority had the jurisdiction to decide on the place of supply. It was observed that the determination of the place of supply is not covered under Section 97(2) of the CGST Act, which outlines the scope of questions on which advance rulings can be sought. The Appellate Authority concluded that the Advance Ruling Authority overstepped its jurisdiction by deciding on the place of supply.

Conclusion:

The Appellate Authority quashed the ruling of the Advance Ruling Authority, stating that it did not have the jurisdiction to determine the place of supply. Consequently, no ruling could be passed on whether the services provided by the Appellant qualify as export of services or intra-state supply. The appeal was allowed, and the impugned order was set aside.