2024 (8) TMI 943 - HC - GST

GST cannot be levied on construction services for Maldives office under Section 13(4) IGST Act

Sri Avantika Contractors (I) Limited. Versus Appellate Authority for Advance Ruling (GST) and others.

The Telangana HC allowed a writ petition challenging GST levy on construction services provided to the petitioner's Maldives office. The court held that ... Levy of GST on export of various goods to its Maldives office - zero rate supplies - fixed establishment’ of the petitioner - location of recipient of services and location of supplier of services Fixed Establishment/Separate Legal Entity - HELD THAT:- A careful reading of Section 94 (a) leaves no room for any doubt that an existing company registered outside Maldives needs to get itself ‘re-registered’ before commencing any business in Maldives. The aforesaid Certificate of Re-registration was obtained by the petitioner as per the requirement of Section 94 (a). It is clear like noon day that same company registered outside Maldives (in India) got re-registered. Thus, it is difficult to hold that merely because petitioner got Certificate of Re-registration under the Maldivian law, the Maldivian entity became a separate legal entity or person. Admittedly, no contract is entered into between respondent Nos.1 and 2 with the re-registered entity of Maldives. In absence thereof, it is difficult to give seal of approval to the finding that the ‘works contract services’ were rendered at Maldives by independent/separate legal entity. For these cumulative reasons, it is constrained to hold that the petitioner and respondent No.2 had ‘fixed establishments’ at Addu city, Maldives and the petitioner was ‘re-registered’ at Addu which is evident from the re-registration certificate. Scope of Judicial Review - HELD THAT:- The parties have rightly placed reliance on the judgment of Supreme Court in the case of APPROPRIATE AUTHORITY AND ANOTHER VERSUS SMT. SUDHA PATIL AND ANOTHER [1998 (11) TMI 124 - SUPREME COURT]. As per the said judgment, the interference can be made if (i) High Courts come to the conclusion that in arriving at the conclusion, the authority has failed to consider some relevant material (ii) has considered some extraneous irrelevant materials, (iii) findings are based on no evidence and (iv) the finding is such that no reasonable man can come to such a conclusion on the basis of which the finding has been arrived. Location of recipient of services and Location of supplier of services - HELD THAT:- Admittedly the location of immovable property i.e., ISLES is located in Maldives/outside India. Hence, the place of supply shall determine the ‘location of recipient’. As analysed above, the place of supply of services is at Addu, Maldives. The ‘location of recipient’ is already interpreted by us by holding that as per Section 2(14)(b), it will be the ‘fixed establishment’ of respondent No.2 which will be the location of recipient. Thus, even as per the aforesaid proviso to Section 12(3), we are unable to give our stamp of approval to the OIA passed by the Appellate Authority. Section 13 of the IGST Act is a direct and special provision which deals with a matter of this nature where the place of supply of service (carrying out construction work) and location of supplier and location of recipient is outside the territory of India - A plain reading of Section 13 (4) makes it clear like cloudless sky that the ‘place of supply’ in relation to an immovable property for carrying out construction work shall be the place where the immovable property is located. Section 13 is clear and unambiguous and hence must be given effect to irrespective of its consequences. In the peculiar facts of this case, since the supply of service and location of recipient and supplier is outside India, the question of levy and collection of tax in the teeth of Section 9 of the CGST Act or Section 5 of IGST Act does not arise. The said provisions can be pressed into service only in cases of intra-state and inter-state supplies respectively. The merged order dated 05.08.2021 are set aside. The respondents shall reimburse the amount of GST, interest and penalty (if any) deposited by the petitioner to him in respect of construction services provided in Maldives as per contract dated 08.07.2016 within 90 days from the date of production of copy of this order. The Writ Petition is allowed. Issues Involved:1. Applicability of GST on services provided outside India.2. Definition and relevance of a 'fixed establishment' under GST laws.3. Determination of the 'location of supplier' and 'location of recipient' for GST purposes.4. Interpretation of Section 12 and Section 13 of the IGST Act.5. Reimbursement of GST by the Government.Detailed Analysis:1. Applicability of GST on Services Provided Outside India:The petitioner contested the applicability of GST on services provided for the construction of a Police Academy in Maldives, arguing that such services fall outside the scope of Indian GST laws. The petitioner relied on various provisions of the CGST and IGST Acts, emphasizing that the lawmakers did not intend for these laws to apply beyond Indian territory. The petitioner highlighted that the works contract service was executed entirely in Maldives, and thus should not be subject to GST.2. Definition and Relevance of a 'Fixed Establishment' Under GST Laws:The petitioner and respondent No.2 established offices in Maldives to execute the construction project. The court examined whether these offices could be considered 'fixed establishments' under Section 2(7) of the IGST Act. The court concluded that the establishments in Maldives met the criteria of having a sufficient degree of permanence and suitable structure in terms of human and technical resources, thus qualifying as 'fixed establishments.'3. Determination of the 'Location of Supplier' and 'Location of Recipient' for GST Purposes:The court analyzed the definitions of 'location of recipient of services' and 'location of supplier of services' under Sections 2(14) and 2(15) of the IGST Act. It was determined that the location of the recipient (NBCCL) and the supplier (petitioner) should be considered as their fixed establishments in Maldives, not their registered offices in India. This interpretation was based on the fact that the supply and receipt of services occurred in Maldives.4. Interpretation of Section 12 and Section 13 of the IGST Act:The court examined the applicability of Sections 12 and 13 of the IGST Act. Section 12 deals with the place of supply of services where both the supplier and recipient are in India, while Section 13 applies when either the supplier or recipient is outside India. The court found that Section 13(4), which states that the place of supply for services related to immovable property is where the property is located, was applicable in this case. Since the property was in Maldives, the place of supply was determined to be Maldives.5. Reimbursement of GST by the Government:The petitioner argued that even if GST was applicable, the tax amount should be reimbursed by the Government of India to NBCCL, and subsequently to the petitioner, as per the contract terms. The court agreed, noting that the petitioner should not suffer financially for activities carried out in Maldives. The court directed the respondents to reimburse the GST amount to the petitioner within 90 days.Conclusion:The court set aside the Order-in-Appeal dated 16.07.2022 and the original advance ruling dated 05.08.2021. It was concluded that the GST laws of India do not apply to the works contract services provided by the petitioner in Maldives. The court ordered the respondents to reimburse the GST amount, interest, and any penalty paid by the petitioner. The writ petition was allowed, and no costs were imposed.