TaxTMI 
TaxTMI 
2019 (11) TMI 398
X X X X Extracts X X X X
X X X X Extracts X X X X
....vance Ruling No. GST-ARA-81/2018-19/B-25 dated 06.03.2019 = 2019 (6) TMI 719 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA. BRIEF FACTS OF THE CASE 1. Multiples Alternate Asset Management Private Limited (hereinafter referred to as the "Appellant") is an Investment Advisory Firm whose Registered Office is in 701/A, Poonam Chambers, 'B' Wing, Dr. Annie Besant Road, Worli, Mumbai 400018, India and hold GSTIN 27AAGCM0997FIZ8. The Appellant provides Investment Advisory & Management Services (SAC Code: 997153). 2. The Appellant filed an Application before The Authority for Advance Ruling (AAR) on 27.09.2018 seeking confirmation of its interpretation of the law with regard to applicability of GST on its Services. 3. The AAR granted hearing on 05.12.2018 and 10.01.2019 wherein the Appellant represented the matter and made Written Submissions subsequently to record the submissions. 4. The Authority for Advance Ruling passed its Ruling dated 06/03/2019 which was received by the Appellant by email on 10th June 2019. 5. The Appellant, aggrieved by the Ruling passed by the AAR is filing this appeal under Section 100 of the CGST Act, 2017 before the Appellate Authority f....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Private Placement Memorandum and the Fund Constitutive Documents and thereafter submits the same to SEBI for approval and to obtain necessary licenses/certificates 8.3.3 Whether the can function on its own? • The AIF has no Employees, No Infrastructure. It is just an Investment Vehicle and cannot function without the Appellant (the Investment • Manager) • The AIF cannot take any decision on itself with regard to any matter including Investment or Disinvestment decisions on behalf of the investors. The decision-making rests solely with the with the Appellant. • In fact, the status of the AIF under SEBI and Income Tax is explained in detail below this Table 8.3.4 Does the AIF retain Profits? The AIF does not retain Profits. All Profits are paid back to the investors as Return on Investment 8.3.5 AIF is a pooling pass through Investment Vehicle It is important to understand that the Alternate Investment Fund (AIF) is only a pooling Investment Vehicle. The AIF does not undertake any business and is used only as a Pooling Vehicle for making Investments. As stated in the above table, the AIF cannot function on i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed in any supply of goods or services nor engaged in any business. It is registered under GST ONLY because it required under Sec 24(iii) of the CGST Act, 2017 as it receives services which is liable to Reverse Charge. There is no Outward Supply made by the AIF nor any Output Tax Liability. This further proves that status of the AIF being a Pass-Through Investment Vehicle. 8.4 Fund Raising # Questions Answers 8.4.1 Who Does the Fund-Raising Activity? • The Appellant does the fund-raising activity by approaching each investor explaining them the Investment Opportunity in India and the Indian Growth Story to seek his investment 8.4.2 Whether the Appellant can reject any investor into the Fund? • It is the discretion of the Appellant whether or not to accept any investor into the Fund, irrespective of his eligibility or investment size. • Before accepting the Commitment from any investor, the Appellant performs KYC/AML checks as required 8.4.3 What is done by the investors? • If the investor is convinced to invest in India, he will provide his Commitment. • Before providing their commitment, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of Net Assets for each investor Separately and not at AIF Level. c) Preparing the communications for the contributors on a quarterly basis; providing updates on the business & financial performance of portfolio companies. d) Certain investors may seek additional information or reporting in order to meet their internal requirements, in addition to the above regular reporting • Transfer/Redemption a) For Transfer/Redemption, the investor needs to obtain prior approval of the Appellant and the same is not freely transferable. • Divestment Decisions a) Making Divestment decisions for the Portfolio companies at the appropriate time and price b) Realizing, exchanging or distributing Portfolio Investments which will include the purchase, subscription, acquisition, sale and disposal of Portfolio Investments, with the principal objective of providing the investors with high returns. Therefore, it is very clear from the above, that the relationship of the Investors/ Contributors is with the Appellant. The Contributors are the beneficiaries of the services provided by the Appellant. And without the Appellant, the Cont....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e services and the Fund has no obligation to make the payment at all. Findings by the Authority for Advance Ruling & Appellant's Defense 10 Questions put forth before the AAR QUESTION 1: Whether GST is applicable on the Advisory & Management Fees received in Indian Currency from Domestic Contributors located in India for the Services rendered by the Appellant? QUESTION 2: Whether GST is applicable on the Advisory & Management Fees received in Foreign Currency from Overseas Contributors located outside India for the Services rendered by the Appellant? 11 Appellant's Legal Interpretation 11.1 The Services of Investment Advisory & Management Services provided by the Appellant falls under SAC Code 997153 with a Rate of 18% 11.2 Services provided to the Domestic Contributors is liable to GST at the rate of 18%. CGST+SGST or IGST to be applied will be determined by Place of Supply as per Sec 12(12) of the IGST Act, 2017. 11.3 Services provided by the Appellant in respect of the contributions made by Overseas Contributors will fall under Export of Services as per Sec 2(6) of the iGST Act, 2017 and will be treated as Zero Rated Supply as per Sec 16 of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of the Advisory & Management Fee to the Appellant for the services. In event of any failure to make payment of fees by any Contributor, the Appellant has no recourse to recover the fees from the AIF. This is specifically agreed in the Investment Management Agreement (IMA) (Para 6.2 Page 13), Contribution Agreement (Para 3.2 Page 9). Relevant Extract from the Agreements relating to said non-recourse is reproduced below - "Advisory and Management Fee For the investment advisory and management services rendered in respect of the Fund Assets, the Investment Manager shall be entitled to receive from the Contributors an Advisory and Management Fee (the "Advisory and Management Fee"). Such Advisory and Management Fee shall be payable by the Contributors and shall be computed on the basis as identified for each such Contributor as set forth in the respective agreement entered into by the Investment Manager and the Contributor with respect to Advisory and Management Fee ("Advisory and Management Fee Agreement"). The Parties agree that the AIF shall have no liability to pay the Advisory and Management Fee and that such amounts shall be payable solely by the relev....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 04.10.2019, which was attended by Shri D. Arvind, representative of the Appellant, as well as by Shri Vivek Anand, the Jurisdictional Officer in the instant matter, who tendered oral submissions in support of their cases besides reiterating their respective written submissions filed before us. Discussions and Findings 16. We have gone through the entire case records including the facts of the case and submissions, written as well as oral, made by the Appellant as well as by the respondent. The questions raised by the Appellant vide the advance ruling application filed before the advance ruling authority were pertaining to the applicability of GST on the Investment Advisory and Management services provided by the Appellant to the Domestic and Overseas Investors. In this regard, the AAR has held that the GST is leviable on the Investment Advisory and Management Fees collected from both the Domestic as well as the Overseas Investors, as the said services of Investment Advisory and Management services have been rendered to the AIF (Alternate Investment Fund), and not to the Domestic or Overseas Investors, as the case may be. The Advance Ruling Authority concluded that since the....