2021 (5) TMI 813 - AAR - GST

DCCI Liaison Office Activities Deemed Supply under GST Law: Registration & Liability Implications

The Authority for Advance Ruling, Maharashtra, held that the activities performed by Dubai Chamber of Commerce and Industry - Liaison Office (DCCI LO) are ... Supply of services - intermediary - consideration - business - GST registration - liability to pay GST - place of supply (as intermediary) - pure agentIntermediary - supply of services - place of supply (as intermediary) - Whether activities performed by DCCI LO constitute a supply under the GST law and whether DCCI LO is an intermediary - HELD THAT: - The Authority examined the applicant's stated liaison activities of connecting businesses in India with business partners in Dubai and applied the statutory definition of 'intermediary'. The three limbs of the definition were held to be satisfied: the applicant (i) is a person by whatever name called; (ii) arranges or facilitates supplies of goods or services between two or more persons by connecting businesses in India with Dubai counterparts; and (iii) does not supply such goods or services on its own account but acts on behalf of its Head Office. Consequently, the Authority concluded that the applicant performs intermediary services which amount to supply of services under the GST law. The Authority further noted that when an entity is an intermediary, the place of supply rules apply and, in this case, the place of supply is the location of the supplier (the applicant in Maharashtra). The Authority rejected the applicant's reliance on liaison-office character and certain advance rulings with different facts, finding those cases distinguishable. [Paras 5, 6]Activities of DCCI LO are a supply of services and DCCI LO is an intermediary; place of supply is the location of the applicant in Maharashtra.Consideration - pure agent - business - GST registration - Whether DCCI LO is required to obtain registration under GST - HELD THAT: - The Authority addressed the contention that reimbursements from the Head Office are not consideration and that the liaison office is a non profit/extension of the Head Office. On examination of financial records and submissions, the Authority found that the applicant received remittances in excess of expenses (surplus cash balances and liabilities shown to Head Office), undermining the claim of functioning strictly on a cost to cost basis. The Authority also observed that the applicant's activities fall within the ambit of 'business' and that the applicant does not satisfy the conditions to be treated as a pure agent for the purpose of excluding amounts from value. In view of these findings, the applicant's receipts from the Head Office were held to amount to consideration and the applicant was held required to obtain GST registration. [Paras 2, 3, 5, 6]DCCI LO is required to obtain registration under the GST law.Liability to pay GST - consideration - supply of services - Whether DCCI LO is liable to pay GST - HELD THAT: - Having held that the applicant performs intermediary services constituting supply and that remittances in excess of expenses amount to consideration, the Authority held that such supplies are taxable. The Authority relied on the inclusive definitions of 'supply' and 'business' under the GST law and on the financial evidence of surplus remittances and cash balances to conclude that the applicant cannot be treated as a non profit merely by virtue of being a liaison office. Accordingly, the applicant was held liable to pay GST on its taxable supplies. [Paras 2, 3, 5, 6]DCCI LO is liable to pay GST on its taxable supplies.Final Conclusion: The Authority answered all questions in the affirmative: the liaison activities of DCCI LO constitute a supply (the applicant acts as an intermediary), DCCI LO is required to obtain GST registration, and DCCI LO is liable to pay GST on its taxable supplies. Issues Involved:1. Whether activities performed by DCCI LO shall be treated as supply under GST lawRs.2. Whether DCCI LO is required to obtain GST registrationRs.3. Whether DCCI LO is liable to pay GSTRs.Issue-wise Detailed Analysis:1. Whether activities performed by DCCI LO shall be treated as supply under GST lawRs.The applicant, Dubai Chamber of Commerce and Industry - Liaison Office (DCCI LO), undertakes liaison/representation activities in India, such as connecting businesses in India with business partners in Dubai. The applicant argued that these activities do not constitute a supply under GST law as they do not involve consideration and are performed on a cost-to-cost basis. However, the Authority examined the definition of 'intermediary' under Section 2(13) of the IGST Act, which includes any person who arranges or facilitates the supply of goods or services between two or more persons. The Authority concluded that DCCI LO, by connecting businesses in India with those in Dubai, acts as an intermediary. Therefore, the activities performed by DCCI LO are treated as supply under GST law.2. Whether DCCI LO is required to obtain GST registrationRs.The Authority noted that the applicant receives payments from its head office, DCCI UAE, which are considered as consideration under Section 15(2)(c) of the CGST Act. Despite the applicant's claim of being a non-profit organization, the Authority found that DCCI LO's activities fall under the definition of 'business' as per Section 2(17)(a) of the CGST Act. Additionally, the applicant's financial records indicated surplus amounts, suggesting that it is not operating solely on a cost-to-cost basis. Consequently, the Authority determined that DCCI LO is required to obtain GST registration.3. Whether DCCI LO is liable to pay GSTRs.Given that DCCI LO's activities are treated as supply and it is required to obtain GST registration, the Authority further concluded that DCCI LO is liable to pay GST. The payments received from DCCI UAE, even if considered reimbursements, are treated as consideration for the supply of services. The Authority emphasized that the applicant's activities, including connecting businesses and representing DCCI UAE in various events, constitute taxable supplies under GST law.Conclusion:The Authority for Advance Ruling, Maharashtra, ruled affirmatively on all three questions: the activities performed by DCCI LO are treated as supply under GST law, DCCI LO is required to obtain GST registration, and DCCI LO is liable to pay GST. The decision was based on the interpretation of relevant provisions of the CGST Act and the nature of the applicant's activities as an intermediary facilitating business connections between India and Dubai.