Applicant must pay GST on Indian Railways charges as service recipient, not pure agent under Rule 33 CGST Rules 2017

AAR held that applicant must pay GST on charges paid to Indian Railways as they are the service recipient, not a pure agent. The arrangement where applicant pays Railways and recovers from operator does not qualify as pure agent service under Rule 33 of CGST Rules 2017, as applicant has not procured additional services on operator's behalf. GST rates apply as follows: Registration Fee and Right to Use at 18%, Haulage Charges and Station User Fee at 5%, Stabling and Cancellation Charges at respective prescribed rates.

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Issues Involved:

1. Whether Goods and Service Tax (GST) is required to be paid on charges paid to the Railways on behalf of the Operator and recovered from the Operator.
2. Whether the said charges fall under the scope of a "pure agent."
3. If the charges do not fall under the scope of a pure agent, what will be the applicable tax rateRs.

Issue-wise Detailed Analysis:

1. GST Requirement on Charges Paid to Railways:

The applicant, Rajasthan Tourism Development Corporation Limited (RTDC), sought clarification on whether GST is applicable on charges paid to the Railways on behalf of the Operator. According to the judgment, RTDC, as the recipient of services from Indian Railways, is required to pay GST on the charges paid to the Railways. The agreement between RTDC and the Operator stipulates that the Operator is responsible for reimbursing these charges to RTDC, including GST. The ruling emphasized that RTDC is the recipient of the service from Indian Railways and, hence, must pay GST on the charges, which are subsequently recovered from the Operator.

2. Scope of Pure Agent:

The judgment examined whether RTDC could be considered a "pure agent" under Rule 33 of the CGST Rules, 2017. A pure agent is defined as someone who incurs expenses on behalf of another party without holding any title to the goods or services procured. The ruling found that RTDC does not fulfill the conditions required to be a pure agent. Specifically, RTDC did not have a contractual agreement with the Operator to act as a pure agent, did not make payments to Indian Railways on authorization by the Operator, and did not separately indicate these payments in invoices as pure agent expenses. Therefore, the charges paid by RTDC to Indian Railways do not fall under the scope of a pure agent.

3. Applicable Tax Rate if Not a Pure Agent:

Since RTDC is not considered a pure agent, the judgment specified the applicable GST rates for various charges paid to Indian Railways. The rates are as follows:
- Registration Fee: 18% GST
- Haulage Charges: 5% GST
- Right to Use (RU) Charges: 18% GST
- Stabling Charges: 18% GST
- Station User Fee: 5% GST
- Cancellation Charges: 5% GST
- Security Deposit: No GST unless adjusted against other charges.

In conclusion, the ruling determined that RTDC must pay GST on the charges paid to Indian Railways, as they do not qualify as a pure agent. The applicable GST rates for these charges are outlined in the judgment.

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