2022 (4) TMI 1089 - AAAR - GST

Service recipient cannot seek advance ruling on GST liability for services from foreign supplier under Section 103

The AAAR Karnataka dismissed an appeal by a service recipient seeking advance ruling on GST liability for services procured from a US entity. The ... Maintainability of Advance Ruling application - Levy of IGST - services procured by the applicant from Beacon US in respect of the referral of the FIS client - import of service or not - person liable to tax in respect of the said services rendered by Beacon US to applicant - Place of supply - HELD THAT:- The determination of place of supply per se is conspicuously absent in the list of issues enumerated under Section 97(2). However, in certain situations, the liability to pay tax or otherwise is dependent on the place of supply and in such cases, the determination of tax liability inevitably involves a determination of place of supply. Therefore, clause (e) of Section 97(2) covers within its scope the determination of place of supply if such determination is linked with the liability to pay tax and in such cases the Authority has the jurisdiction to pass a ruling on the issue of place of supply. In the present case, the Appellant who is the applicant of the advance ruling, although registered under GST, is not the supplier of the transaction in question but is the recipient of the supply of service. The Appellant has sought for a ruling as a recipient of service. The advance ruling mechanism under GST does not envisage giving a ruling to a recipient of supply of goods or services or both for the simple reason that any ruling passed by the Authority is applicable only to the supplier of the transaction and to the jurisdictional officer. In terms of Section 103 of the CGST Act, the advance ruling pronounced by the Authority is binding only on the applicant who has sought for the ruling on any matter referred to in Section 97(2) as well as on the concerned officer or jurisdictional officer of the applicant. The Appellant in the capacity of recipient of service is not eligible under law to seek a ruling on the taxability of a transaction which is received by him. The lower Authority does not have the authority to determine the classification or nature of service supplied by Beacon, US based on an application made by the recipient of service. If the classification or nature of the service supplied by Beacon, US cannot be determined for lack of jurisdiction, it automatically flows that determination of place of supply also cannot be determined. A reading of clauses (a) to (g) of sub-section (2) of Section 97 of the CGST Act would make it clear that 7 items are enumerated as per clauses (a) to (g) of sub-section (2) of Section 97 and all those clauses other than clause (e) thereof are in specific terms. Whereas clause (e) of sub-section (2) of Section 97 of the CGST Act clearly mandates that the larger issue of 'determination of liability to pay tax on any goods or services or both' would also come within the ambit of the questions to be raised and decided by the Advance Ruling Authority on which advance ruling could be sought and rendered under the said provisions. Thus, it is concluded that, M/s Beacon, US is well within its rights to seek an advance ruling whether the service supplied by them to M/s Workplace Options India Pvt Ltd is liable to tax and if so whether the tax is to be paid by the latter under reverse charge treating it as an import of service. As regards this appeal, it is held that the lower Authority was correct in dismissing the application on the grounds of lack of jurisdiction. The appeal filed by the Appellant M/s. Workplace Options India Pvt Ltd, stands dismissed on all accounts. Issues Involved:1. Jurisdiction of the Advance Ruling Authority to determine the place of supply.2. Applicability of GST on services procured from Beacon US.3. Whether the services qualify as an import of service under Section 2(11) of the IGST Act, 2017.4. Determination of the liability to pay tax on the services rendered by Beacon US to the appellant.Detailed Analysis:1. Jurisdiction of the Advance Ruling Authority to Determine the Place of Supply:The appellant contended that the lower Authority erred in dismissing the application on the grounds of jurisdiction, arguing that Section 97(2) of the CGST Act does not bar questions on the place of supply. They cited the Kerala High Court decision in Sutherland Mortgage Services Inc vs Pr Commissioner of GST, which held that determination of place of supply falls within the ambit of 'determination of liability to pay tax' under Section 97(2)(e). The appellant also referenced multiple rulings where the place of supply was determined by various Advance Ruling Authorities, including those in Karnataka.The appellate authority agreed that while determination of place of supply is not explicitly listed under Section 97(2), it is inherently linked to the determination of tax liability. However, the authority emphasized that the advance ruling mechanism is designed for suppliers, not recipients, of goods or services. Since the appellant is the recipient of the service, the authority concluded that the lower Authority was correct in dismissing the application for lack of jurisdiction.2. Applicability of GST on Services Procured from Beacon US:The appellant sought a ruling on whether the referral services procured from Beacon US are liable to GST and qualify as an import of service. The lower Authority refrained from examining this aspect, citing jurisdictional limits. The appellate authority upheld this stance, clarifying that the advance ruling mechanism does not cover the classification of services supplied by third parties to the applicant.3. Whether the Services Qualify as an Import of Service under Section 2(11) of the IGST Act, 2017:The definition of import of service under Section 2(11) includes three criteria: the supplier is located outside India, the recipient is located in India, and the place of supply is in India. The appellant argued that the place of supply should be determined to ascertain if the services qualify as an import. The appellate authority noted that determining the place of supply in this context requires classifying the service, which is beyond the scope of the advance ruling mechanism when the applicant is the recipient.4. Determination of the Liability to Pay Tax on the Services Rendered by Beacon US to the Appellant:The appellant argued that the liability to pay tax on the services should be determined, including whether it falls under reverse charge mechanism (RCM). The appellate authority reiterated that such determinations are linked to the classification of services, which cannot be addressed when the applicant is the recipient. The authority suggested that Beacon US could seek an advance ruling on the taxability of their services to the appellant.Conclusion:The appellate authority upheld the lower Authority's decision, dismissing the appeal on the grounds of lack of jurisdiction. The authority emphasized that the advance ruling mechanism is intended for suppliers of goods or services and does not extend to recipients seeking rulings on the taxability of transactions received by them.