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

The Telangana HC allowed a writ petition challenging GST levy on construction services provided to the petitioner's Maldives office. The court held that re-registration under Maldivian law did not create a separate legal entity, establishing both supplier and recipient had fixed establishments in Maldives. Since the immovable property was located in Maldives, the place of supply was outside India per Section 13(4) IGST Act. The court ruled that GST provisions under CGST Act Section 9 and IGST Act Section 5 apply only to intra-state and inter-state supplies respectively, not supplies outside India. The merged order was set aside, directing respondents to reimburse GST, interest and penalty within 90 days.

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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.

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