TaxTMI 
TaxTMI 
2018 (11) TMI 887
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....erefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the "GST Act". 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submission (Brief facts of the case), as reproduced verbatim, could be seen thus - Statement of the relevant facts having a bearing on the question(s) on which the advance ruling is required (refer Sl. No. 15 of Form ARA-01) 1. The Applicant is a private limited company incorporated under the Companies Act, 1956. The registered office of the Applicant is situated at Elpro Compound, City Survey No. 4270, Chinchwadgaon, Pune - 411 033. The Applicant is a 100% subsidiary of Behr-Hella Thermocontrol GmBH, Lippstadt, Germany (hereinafter referred to as "BHTC Germany"). The Applicant is registered under GSTIN No. 271800000581ARQ. 2. In the normal course of business, the Applicant has entered into service agreements with BHTC Germany and its other overseas gr....
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....g services provided to its overseas group entities, being a zero-rated supply? Applicant's submissions 1.1 With effect from 01 July 2017, indirect tax regime in India has shifted from multiple taxes by multiple authorities at multiple times to a consolidated Goods and Services Tax ("GST") regime. 1.2 Conceptually, GST is a "destination based tax on consumption of goods and services", meaning thereby that the tax would accrue to the taxing authority which has jurisdiction over the "place of consumption" which is also termed as the "place of supply". In this regard, a reference is made to the Frequently Asked Questions on GST issued by the Central Board of Excise & Customs, New Delhi dated 31 March 2017 (2^nd Edition) which highlights the conceptual understanding of GST as under: Q 1. What is Goods and Services Tax (GST)? Ans. It is n destination based tax on consumption of goods and services. If is proposed to be levied at all Stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer. Q 2. What exactly....
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....rvices or both. ********* (105) "supplier" in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied. ********* 1.8 In the facts and circumstances of the present case, it is not in dispute that the Applicant is the "supplier of services" in terms of Section 2(105) of the CGST Act, and the overseas group entities, being liable to pay the consideration for the services supplied by the Applicant, are the "recipient of services" in terms of section 2(93) of the CGST Act. 1.9 Thus, condition provided under clause (a) and (b) of Section 2(6) of the IGST Act are satisfied in the present case. 1.10 It is not in dispute that the Applicant is receiving the consideration for the supply of the service in the form of convertible foreign exchange from the overseas group entities. Thus, condition provided under clause (d) of Section 2(6) Of the IGST Act is also satisfied. 1.11 Further, the Applicant and its overseas group entities are not merely establishments of a distinct person in accordance with E....
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....rom a remote location by way of electronic means, the place of supply shall be the location where goods are situated at the time of supply of services: Provided further that nothing contained in this clause shall apply in the case of services supplied in respect of goods which are temporarily imported into India for repairs and are exported after repairs without being put to any other use in India, than that which is required for such repairs; *********** 1.18 The terms "location of the recipient of services" and "location of the supplier of services" have been defined under Section 2(14) and Section 2(15) of the IGST Act as under: Definitions 2. In this Act, unless the context otherwise requires, - ******** (14) "location of the recipient of services" means,-- (a) where a supply is received at a place of business for which the registration has been obtained, the location of such place of business; (b) where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment; (c) where a supply is received at more than....
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.... of the IGST Act, the place of supply of services provided in respect of goods which are required to be made physically available to the supplier of services shall be the location where the services are actually performed. 1.25 In the present case, having regard to the nature of services rendered by the Applicant to its overseas group entities, it is mandatory for the overseas group entities to provide prototype goods to the Applicant. Further, the Applicant would be conducting tests in India and thereafter sending the test reports outside India to the overseas group entities on whose behalf the Appellant has carried out the testing services. 1.26 The Applicant is required to submit a test report and the contractual obligation of the Applicant towards overseas group entities in terms of the provision of testing services is complete only when the test reports are delivered to them. In other words, the provision of service is complete only when the test report is delivered to the overseas group entities. 1.27 It is submitted that the delivery of the test report by the Applicant to its overseas group entities is the most Important part of the services rendered by the Applican....
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....the Hon'ble Bombay High Court in the case of Commissioner of Service Tax, Mumbai - II v. SGS India (P.) Ltd. reported in 2014 (34) S.T.R. 554 (Bom.) = 2014 (5) TMI 105 - BOMBAY HIGH COURT, wherein the Hon'ble Bombay High Court held that service tax is a destination based consumption tax and therefore, even though the testing of goods has happened in India, the service will be treated as export of service as the benefit of service is accruing outside India. In a nutshell, the Hon'ble Bombay High Court held that since the delivery of the test report to the foreign clients was an essential part of testing services, the said services must be treated to be consumed abroad and therefore, falling within the ambit of "export of services" not liable to service tax. The relevant extracts of the judgment are reproduced below for ready reference: 24. In the present case, the Tribunal has found that the assessee like the respondent rendered services, but they were consumed abroad. The clients of the respondents used the services of the respondent in inspection/test analysis of the goods which the clients located abroad intended to import from India. In other words, the clients abroad were de....
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....ption tax" on goods and services, relying upon the judgment of the Hon'ble Bombay High Court in SGS India Ltd, (supra) and Qlndia Investment Advisory Pvt. Ltd. (supra), it is submitted that the place of supply in case of the testing Service provided by the Applicant to its overseas group companies is also outside India. 1.36 In this regard, it is further submitted that even if the services are provided from India, since the actual consumption of the testing services is taking place outside India, the place of supply of services ought to be outside India in terms of Section 13(2) of the IGST Act. 1.37 Basis the above discussion, it is submitted that the "place of supply of service" in respect of the testing Services provided by the Applicant to the overseas group entities is to be determined in terms of Section 13(2) of the IGST Act which provides that the place of supply shall be the location of the recipient of service i.e. outside India. 1.38 In view of the above, it is submitted that the testing services provided by the Applicant to its overseas group entities qualify as export of services and therefore, zero rated supply as defined under Section 16 of the IGST Act. Fur....
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.... mode and also in automated mode c) BHTCIN is interested in accepting such engagements from BHTC and willing to provide services related to man and machine resources as per requirement of BHTC (hereinafter referred to as "Services"); and d) BHTC and BHTCIN mutually desire to set forth in this Agreement certain terms and conditions applicable to all such engagements; Now it is hereby agreed as follows: 1. Scope, Duties and Responsibilities of BHTCIN a. BHTCIN shall recruit and maintain duly qualified, skilled and experienced resources to provide services to BHTC and its group companies as agreed in the beginning of each calendar year with BHTC. These services will be provided from BHTCIN facility or on-site as per requirement of BHTC or its affiliates. b. BHTCIN will track its resources in the manner agreed with BHTC and will ensure that the time booking is done properly on respective projects, BHTCIN is expected to take care that their own project hours are not captured on BHTC projects. BHTC will receive corresponding documentation which will be a matter of a se....
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....BHTC's Technical Coordinator, The invoice will mention the brief description of the project as well as the project number (TCE number or similar as requested by BHTC). In case resource available for BHTC projects are not fully utilized, the appropriate cost code will be provided by BHTC to BHTCIN to enable invoicing for the same. The hourly rate to be considered for invoicing Shall be reviewed between the parties in the beginning of each calendar year commencing from January 2014 and shall be notified separately. BHTC will pay the hourly' rate plus travel expenses (Air ticket, Transportation, Lodging, Meals or allowance), which will be approved in advance by BHTC for each Professional on project assignment on site at BHTC Lippstadt or at any other location. (BHTC will receive corresponding documentation) Except as expressly agreed with BHTC, BHTCIN shall bear all of its own expenses arising from its performance of its obligations under this Agreement, including (without limitation) expenses for facilities, work spaces, training, utilities and the like. 4. Ownership and Rights In relation to jobs received by BHTCIN from BHTC, all origi....
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..... If BHTCIN commits a material breach of the provisions of this Agreement which is not cured within thirty (30) days of the date of receipt of a cure notice by BHTCIN, BHTC shall be entitled to terminate this Agreement. 10. Force Majeure If the performance of this Agreement is impeded or there are reasonable grounds for anticipating that the same is or threatens to be impeded or rendered impossible by Force Majeure, such imminent outbreak of existence of hostilities or war like operations, whether declared or not, international or civil, involving the Government or either of the parties to this Agreement or the Major Powers, or Force Majeure of any other kind and such situation continues for a prolonged period, then either Party may by giving a notice to the other, terminate this Agreement provided that Such termination shall be without prejudice to existing rights and obligations at the date of the termination. 11. Severability Clause If a provision of this agreement is or becomes illegal, invalid or unenforceable in any jurisdiction, the contract shall be construed as if the same had not been inserted. The Parties hereby agree to make an amendment to the c....
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.... ("IGST Act"); (ii) The services of testing of prototype and providing the report based on which mass production is undertaken is more in the nature of advisory/ consultancy service, rather than the services prescribed under Section 13(3) of the IGST Act which, inter alia, entail provision of service on the goods made available physically by the recipient of service and which are subsequently returned to the recipient. The classic examples of services prescribed under Section 13(3) of the IGST Act are repair of car, maintenance of machines etc.; (ii) The service of the Applicant is not complete until the report is delivered to the overseas group companies, i.e., the recipients of services. The said recipients of services are interested in the result of the testing of the prototypes based on which the mass production can be undertaken; (iii) All the conditions as prescribed under Section 2(6) of the IGST Act for the purpose of qualification of "export of services" are satisfied and hence the services rendered to the group companies qualify as export of service. B. Without prejudice to the submissions made in the Application, it is submitted that the issue regarding the p....
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.... April 2011, Rule 3(2) of the Export of Services Rules, 2005 was amended and condition for the Technical Testing and Analysis Services for qualifying as export of services was changed from the place of performance of service to the location of the recipient of service. G. The aforesaid amendment indicates that the intention of the legislature at all times was to treat the said testing and analysis services, the report for which was issued to the overseas service recipient as export of service, based on the location of the recipient of service. The key factor being that service tax was a destination based consumption tax and the services with regard to the said testing were being consumed outside India, The Frequently Asked Questions (FAQs) to the Central Goods and Services Tax Act, 2017 published by the CBI&C states that Goods and Services Tax is also a destination based consumption tax and hence, the same intent should be applicable to the Goods and Services Tax law as well. The copy of the Export of Service Rules, 2005 (prior and post the amendment of 2011) is annexed at page numbers 6 to 16 Of the second compilation of documents. The copy of the FAQs to the Goods and Servi....
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....ile Finance Act. J. The judgment of the Hon'ble Bombay High Court in Commissioner of Service Tax, Mumbai-Il v/s. SGS India Pvt. Ltd. reported in 2016 (34) STR 554 (Bom.) = 2014 (5) TMI 105 - BOMBAY HIGH COURT is a leading judgment on the prevalent issue wherein, the Hon'ble Bombay High Court while interpreting the Export of Services Rules, 2005 has held as follows: 24. In the present case, the Tribunal has found that the assessee like the respondent rendered services, but they were consumed abroad. The clients of the respondents used the services of the respondent in inspection/test analysis of the goods which the clients located abroad intended to import from India. In other words, the clients abroad were desirous of confirming the fact as to whether the goods imported complied with requisite specifications and standards. Thus, client of the respondent located abroad engaged the services of the respondent for inspection and testing the goods. The goods were tested by the respondents in India. The goods were available or their samples were drawn for such testing and analysis in India. However, the report of such tests and analysis was sent abroad. The clients of the res....
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....de India qualify as export of services. A copy of the said judgment of Sai Life Sciences Ltd. (supra) is attached at page 35 of the first compilation of documents. M. As submitted above, the said Rule 4 of the Place of Provision of Services Rules, 2012 and Section 13(3) of the IGST Act are identical and hence, the judgment of the Hon'ble Appellate Tribunal in the case of Sai Life Sciences (supra) is squarely applicable to the facts of the present case. N. Without prejudice to the above it is submitted that the aforesaid judgments are binding judicial precedents. Merely because an appeal has been preferred against the judgment of the Hon'ble Bombay High Court in the case of SGS (supra), the ratio of the said judgment cannot be said to be in jeopardy, as no Stay has been granted against the same. In this regard, reliance is placed on the following judgments: (i) Union of India v/s. Kamlakshi Finance Corporation Ltd. reported in 1991 (55) ELT 433 (SC) = 1991 (9) TMI 72 - SUPREME COURT OF INDIA; (ii) Mycon Construction Ltd. v/s. Union of India reported in 2017 (350) ELT 514 (Bom.) = 2017 (3) TMI 347 - BOMBAY HIGH COURT; (Ill) Shree Sai Vamika Industries v/ s. Union of In....
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....mporarily imported into India for repairs and are exported after repairs without being put to any other use in India, than that which is required for such repairs; (b) services supplied to an individual, represented either as the recipient of services or a person acting on behalf of the recipient, which require the physical presence of the recipient or the person acting on his behalf, with the supplier for the supply of services. The applicant has entered into service agreement with BHTC Germany. The prototype goods are supplied by BHTC Germany on which tests are conducted by the applicant. The test reports are sent to BHTC Germany by e mail. The consumption of test reports takes place outside India. Hence this office is of the opinion that section 13(3) is not applicable to the applicant. Subsections (4) to (13) of section 13 are also not applicable to the applicant. The transaction of applicant falls under subsection (2) of section (13) and the place of supply is outside India. "Export of Service" is defined u/s (20)(6) of IGST Act as under: (6) "export of services" means the supply of any service when, (i) the supplier of service is located in India; ....
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....S. T. (PUNE-BST-E-001), Pune Division, Pune appeared and made written submissions. 05. OBSERVATIONS 5.1 We have perused the records on file and gone through the facts of the case and the submissions made by the applicant and the department. 5.2 facts of the subject matter are that the Applicant has entered into service agreement for providing testing services in relation to the prototype goods supplied by their overseas clients. The tests are directly carried out on the prototype goods provided by the overseas group entities and based on the same Applicant prepares the testing report and sends across the said report to their overseas clients by way of emails. The prototype goods are usually not sent back and the Applicant receives the consideration in convertible foreign exchange. The issue that has been raised by the applicant is with respect to 'place of such supply' of services rendered by them. They are contending that the place of supply is outside India and therefore such services have been exported by them and accordingly they have made their submissions in support of their contention. Therefore we find that the basic issue before us is to ascertain whether such sup....
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.... (3) to (13) of Section 13 of the IGST Act. We agree with the applicant that sub-sections (4) to (13) of the said Section 13 are irrelevant in the present case for the purpose of determination of the "place of supply" of the testing services provided by them to their overseas clients and therefore we restrict ourselves to the provisions of sub-section (3) of Section 13 of the IGST Act, which is as under:- Section 13 (3) The place of supply of the following services shall be the location where the services are actually performed, namely:- (a) services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services: Provided that when such services are provided from a remote location by way of electronic means, the place of supply shall be the location where goods are situated at the time of supply of services: Provided further that nothing contained in this clause shall apply in the case of services supplied in respect of goods which are temporarily imported into India for repairs and are ....
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....licant's main arguments are that the service is completed only when it is used by the applicant in manufacture of goods and their upgradation or removal of defects if any, on the basis of this test report is not sustainable and maintainable as the agreement between the applicant and the service recipient is only with respect to conducting of tests and providing of test report and is not with respect to its further use or otherwise by the service recipient as we can clearly see that even if the findings of test report are not used in any way by the service recipient, it cannot be said that the service of testing is not provided by the applicant to the service recipient as the provision of testing services as per the agreement between them is clearly there whether or not the test report is used by the service recipient. Thus the applicant's argument does not hold any ground and we are of the opinion that in the present case it can safely be inferred from a reading of the provisions of Section 13(3) that the services supply of which has been rendered by the applicant to their overseas client as per the agreement is taxable under IGST Act. 5.10 Further we specifically find that in t....