2020 (7) TMI 80 - AAR - GST

Application dismissed due to lack of involvement in supply. IGST, ITC issues unresolved.

In Re: M/s. FUTUREDENT

The ruling authority rejected the application as not maintainable due to the applicant's lack of involvement in the supply of goods or services. The ... Maintainability of Advance Ruling Application - Supply of goods of services or both - Levy of IGST - intermediary services received from Fair Relations GmbH - reverse charge mechanism - input tax credit - HELD THAT:- The applicant has not undertaken the supply in the subject case, and is also not proposing to undertake the supply. We find that, the applicant is a recipient of services from a person situated abroad. The impugned transactions are not in relation to the supply of goods or services or both undertaken or proposed to be undertaken by the applicant and therefore, the subject application cannot be admitted as per the provisions of Section 95 of the GST Act. Hence without discussing the merits of the case, we reject the subject application as not being maintainable. The question with regard to ITC need not be answered. Issues:1. Applicability of IGST under reverse charge mechanism on intermediary services received from a foreign entity.2. Eligibility of Input Tax Credit (ITC) if IGST is payable under reverse charge mechanism.Analysis:Issue 1: Applicability of IGST under reverse charge mechanism on intermediary services received from a foreign entity:The applicant sought an advance ruling on whether IGST is required to be paid under reverse charge mechanism on intermediary services received from a foreign company. The applicant contended that the services provided by the foreign company fell under the category of intermediary services as per the agreement, and the place of supply of these services was outside India. The applicant argued that the payment made to the foreign entity would not qualify as an import of services under GST laws. However, the jurisdictional officer maintained that the foreign entity was acting as an agent and not fulfilling all aspects of the arrangement, making the intermediary liable to pay tax for the services. The ruling authority observed that the applicant was a recipient of services and had not undertaken or proposed the supply of goods or services, leading to the rejection of the application as not maintainable under the Advance Ruling provisions.Issue 2: Eligibility of Input Tax Credit (ITC) if IGST is payable under reverse charge mechanism:The applicant also inquired about the eligibility to claim ITC if IGST was payable under reverse charge mechanism, considering the existence of other business verticals within the same entity. The applicant argued that they were eligible to claim ITC on the reverse charge basis, even after the slump sale of the exhibition business, as per the provisions of the CGST Act. However, the jurisdictional officer highlighted that in cases of slump sale, which is considered an exempt supply under the GST Act, the tax paid on services for executing exempt supplies is not eligible for ITC. The ruling authority did not provide a specific answer to this question due to the rejection of the first question.In conclusion, the ruling authority rejected the application as not maintainable based on the applicant's lack of involvement in the supply of goods or services. The issues raised regarding the applicability of IGST under reverse charge mechanism and the eligibility of ITC remained unanswered due to the rejection of the primary question.