2022 (5) TMI 964 - AAR - GST

Manager arranging subscriptions from non-taxable territory not liable for GST under reverse charge mechanism Section 13(8)(b)

The AAR Gujarat ruled that GST under reverse charge mechanism is not leviable on services of arranging subscriptions supplied by managers located in ... Levy of GST - reverse charge mechanism - services of arranging for subscription supplied to the Applicant, by the Managers located in the non-taxable territory - whether the Manager is an intermediary or not - HELD THAT:- AGEL issues Notes which are subscribed by Investors. It is found that the Senior Secondary Notes issued by AGEL are in the nature of securities. The main supply of Notes is between AGEL and investors both acting as Principals and the Manager is supplying ancillary supply of arranging the main supply between the Principals. It is noted that an intermediary includes a person who arranges/ facilitates supply of securities between two or more persons. It is found that Manager has the characteristics of an agent and a broker, performing subsidiary role in arranging the said main supply. We note that Manager’s role is supportive in main supply. We find the Manager satisfying the definition of Intermediary as per IGST Act. AGEL is agreed upon that place of supply in present case is determined as per Section 13(8)(b) IGST Act which is the location of Manager. Both the Manager and Place of Supply both being in non-taxable territory, subject transaction is not an import of service as place of supply is outside India. GST is not leviable on subject transaction under RCM by AGEL. Issues Involved:1. Determination of whether the Managers are intermediaries under the IGST Act.2. Determination of the place of supply for the intermediary services provided by the Managers.3. Applicability of GST under the reverse charge mechanism (RCM) for services provided by Managers located outside India.Issue-Wise Detailed Analysis:1. Determination of whether the Managers are intermediaries under the IGST Act:AGEL submitted that the Managers were engaged to procure subscribers for the Notes issued by AGEL. The Managers undertook various activities such as initiating the book building process, scheduling meetings, arranging roadshows, liaising between investors and AGEL, and collecting subscription proceeds. These activities, as per AGEL, fall within the definition of 'intermediary' under 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, services, or securities between two or more persons but does not include a person who supplies such goods, services, or securities on his own account.The Authority examined the role of the Managers and found that they performed a gamut of activities to facilitate the issuance of the Notes. The Managers arranged and facilitated coordination between AGEL and potential investors, solicited and arranged investors for subscribing to the Notes, and undertook activities like scheduling meetings, arranging roadshows, and negotiating offers. The Authority concluded that the Managers acted as intermediaries, as their role was supportive and ancillary to the main supply of Notes between AGEL and the investors.2. Determination of the place of supply for the intermediary services provided by the Managers:Section 13 of the IGST Act applies for determining the place of supply of services where either the supplier or the recipient is located outside India. Section 13(8)(b) specifically states that the place of supply for intermediary services shall be the location of the supplier. In this case, the Managers, who are located outside India, are the suppliers of the intermediary services.AGEL argued that since the Managers are located outside India, the place of supply for their intermediary services is also outside India. Therefore, the services do not qualify as an import of services, as one of the conditions for import is that the place of supply must be in India.The Authority agreed with AGEL's interpretation, confirming that the place of supply for the intermediary services provided by the Managers is outside India, as per Section 13(8)(b) of the IGST Act.3. Applicability of GST under the reverse charge mechanism (RCM) for services provided by Managers located outside India:AGEL contended that since the place of supply for the intermediary services is outside India, these services do not fall within the scope of interstate supplies and, therefore, are not subject to GST. Consequently, there can be no GST liability on AGEL under the reverse charge mechanism.The Authority concurred with AGEL's submission, ruling that GST is not leviable on the intermediary services provided by the Managers under the reverse charge mechanism, as the place of supply is outside India.Ruling:The Authority concluded that GST is not leviable on the subject transaction under the reverse charge mechanism by AGEL.