TaxTMI 
TaxTMI 
2021 (7) TMI 477
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....e corresponding provisions of the KGST Act, Rules and the notifications issued there under. BRIEF FACTS OF THE CASE: 3. The applicant is primarily engaged in the business of providing information technology enabled services such as mortgage orientation and related services. The applicant was established as a branch of SMSI, USA as the mortgage laws of United States of America prevented its Head Office from outsourcing of its work to any other third party. The applicant is set up as a branch in accordance with Reserve Bank of India general permission under Master Circular No. 07/2013-14 dated 01.07.2013 of foreign companies in SEZ to undertake service activities. The applicant has entered into an Inter-Company Agreement (hereinafter referred to as the "Agreement") with their Head Office SMSI, USA for providing services to the customers located outside India. SMSI, USA requires the following services performed on behalf of its customers who are located outside India; (i) Mortgage Orientation; (ii) Primary Servicing; (iii) Special Servicing; (iv) Cash Management and (v) Analytics and Reporting. The applicant is providing such servi....
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....g heard to the petitioner. The Hon'ble High Court in the above judgment observed as follows: "A reading of clauses (a) to (g) of sub-section (2) of Section 97 of the CGST Act would make it clear that 7 items are enumerated as per clauses (a) to (g) of sub-section (2) of Section 97 and all those clauses other than clause (e) thereof, are in specific terms. Whereas clause (e) of sub-section (2) of Section 97 of the CGST Act clearly mandates that the larger issue of "determination of liability to pay tax on any goods or services or both" would also come within the ambit of the questions to be raised and decided by the Advance Ruling Authority on which advance ruling could. be sought and rendered under the said provisions. Whereas Clauses (a), (b), (c), (d), (Ds& (g), i.e. the clauses other than clause (e), are in specific "pigeon holes" the provision as per clause (e) of sub-section (2) of Section 97 is in wide terms and the Parliament has clearly mandated that the latter issue of determination of liability to pay tax on any goods or services or both, should also be matters on which the applicant concerned could seek advance ruling from the Advance Ruling Authority on whi....
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....ction 97(2) of the CGST Act, but there cannot be any two arguments that the said issue relating to determination of place of supply, which is one of the crucial issues to be determined as to whether or not it fulfills the definition of place of service, would also come within the ambit of the larger issue of "determination of liability to pay tax on any goods or services or both" as envisaged in clause (e) of Section 97(2) of the CGST Act. The Advance Ruling Authority has proceeded on a tangent and has missed the said crucial aspect of the matter and has taken a very hyper technical view that it does not have jurisdiction for the simple reason that the said issue is not expressly enumerated in Section 97(2) of the Act. This Court has no hesitation to hold that the said view taken in the Advance Ruling Authority is legally wrong and faulty and therefore the matter requires interdiction in judicial review in the instant writ proceedings. In that view of the matter, it is ordered that the above said view taken by the Advance Ruling Authority is legally wrong and faulty and is liable to be quashed and accordingly declared and ordered." PERSONAL HEARING: 6. In compliance of the di....
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....The flow of the transaction shows that they are providing the services to the customers located outside India and net to Head office and therefore services would qualify as export of service which is considered as zero rated supply in terms or Section 16 of the IGST Act, 2017. 7.2 The term supplier is defined in Section 2 (105) CGST Act, 2017 as follows; "supplier" in relation to any goods or services or both, shall mean the person supplying the 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". The contracts for servicing the client are between SMSI, USA and the customers located outside India. SMSI USA and the applicant are the same legal entity and therefore the supplier in the transaction is the applicant. 7.3. The applicant was established as a branch of SMSI, USA as the mortgage law of USA prevented outsourcing of work to separate legal entity. Therefore SMSI USA has set up a branch office in India, and provides services io the customers in USA from the branch office in India. Section 2 (71) of the CGST Act, 2017 defines the term "location of supplier" as follows;- ....
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.... relevant extract of the SOW of one customer was reproduced as follows; "Staffing and facilities: Customer acknowledges that vendor (SMSI Inc) personnel performing the Conventional Mortgage Loan Underwriting or Compliance Underwriting services or Independent Valuation Review may be performed by the vendor personnel located in Vendor's secure off-shore facility located in India unless specifically instructed otherwise by AFOI or AFOI customers." Further the applicant quoted the relevant extracts of the contracts between SMSI, USA and the customers in support of their contention that the services are provided to the customers of SMSI, USA at USA as follows; Particulars of SOW Relevant Clause Freedom Mortgage Corporation and Sutherland Mortgage Services Inc The services will be provided from Sutherland's Mortgage facility located in Houston TX and in India. Services may be provided from an alternate location as agreed by both parties in writing. (Reference to Pg No. 32 of the Paper Book) DHI Mortgage Company Ltd and Sutherland Mortgage Services Inc The services will be provided from Sutherland's Mortgage facilities located in Houston TX, Clark....
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....mation: Vendor will provide necessary computer, software and telephone hardware necessary to perform the services set forth in the Statement of Work. Mortgage Insurance Underwriting Services will be performed in the AFOI affiliates processing system via a secure VPN, site to site VPN or other secured connections selected by AFOI in its sole discretion." The same fact is also corroborated from the other customer SOW between the SMSI, USA and Flagstar Bank. The relevant portion is reproduced below;- "Primary systems to be used: The Underwriting duties will be completed in Flagstar's Loan Originating System. All systems, access, licenses and applications required to deliver services to be provided by the Flagstar. Any required IVR and data connectivity shall be provided by the Sutherland." From the perusal of the above sample SOW it is clear that services are not provided by the applicant to SMSI, USA but provided directly to the customers located in USA. 7.8. The services provided by the applicant cannot be reviewed by SMSI, USA before the same is delivered to the customers. The services are directly delivered to the customers by the applicant without any consol....
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....ons of export of service namely; (a) the supplier of service is located in India; i.e; SMSI India Branch is located in India; (b) The recipient of service is located outside India; i.e; customers of SMSI, USA; (c) The place of supply of service is outside India; i.e; service provider is in India and the services are received in USA; (d) The Indian Branch has received the money in foreign exchange; i.e; SMSI India Branch has received the amount in foreign exchange; (e) the supplier of service and the recipients of service are not merely establishments of a distinct person in accordance with Explanation 1 in Section 8; i.e; services are directly rendered to the customer of SMSI, USA and not to SMSI, USA. As all the conditions of export of service are satisfied the service rendered by them are zero rated in terms of Section 16 (2) of the IGST Act, 2017. 7.11. They relied on the Judgment of the Hon'ble High Court of Mumbai in the case of Tech Mahindra Ltd Vs CCE reported in 2014 (36) STR 241 (Bom) wherein the question before the Hon'ble High Court was whether the service to the overseas customers with regard to on-site work (servi....
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....rely establishments of a distinct person in accordance with Explanation 1 in section 8." 10. It is an admitted and undisputed fact that the services rendered by the applicant as per the Agreement satisfies the conditions prescribed in clauses (i) to (iv) of the definition of export of service in Section 2 (6) of the IGST Act, 2017. Therefore, the only issue that is to be decided to answer the question raised by the applicant is whether the services rendered by the applicant as per the Agreement satisfy the condition at clause (v) ibid. To decide the issue it is necessary to determine the recipient of the service provided by the applicant. To determine the recipient of service it is necessary to analyse the terms of the Agreement with reference to the definition of recipient of service in the CGST Act, 2017 and the explanations to Section 8 of the IGST Act, 2017. 11. Section 2 (93) of the CGST Act 2017 defines recipient of supply of service as follows; "(93) "recipient" of supply of goods or services or both, means,- (a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration; (....
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....ance of regulations of Reserve Bank of India; Whereas, Company needs certain services performed on its behalf and Service Provider is willing to provide those certain services to Company on the terms and conditions set forth herein; and Whereas, in exchange for the performance of such services, Company is willing to pay Service Provider for such services and to reimburse Service Provider for the cost to perform such Services as specified in this agreement; and Whereas, the pricing and cost reimbursement amounts have been determined by an independent third party to be reasonable in the circumstances to the reasonable satisfaction of the parties hereto; Now, therefore the parties hereby agree as follows; 1. Definitions; 1.11. "Services" means tasks that Service Provider agrees to provide to Company as described in a Service Statement. 1.15. "Service Statement" means a written description of services that Service Provider will provide Company, together with a listing of fees to be paid and costs to be reimbursed in exchange for performance of the applicable services. 2. Services: 2.1. Services Generally: ....
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....e customer are legally entitled to receive the services from SMSI and is obliged to make payment to SMSI and the applicant being the branch of SMSI is providing services directly to the customers. The contention of the applicant is not sustainable in view of the deeming provision as discussed above wherein the applicant and SMSI, USA are deemed to be separate and distinct legal persons for the purpose of goods and services tax law and hence contract entered by the customers with SMSI, USA and the payment made by them to SMSI, USA cannot be considered as contract executed or payment made to the applicant. Even if it is assumed that the services are provided directly to the customers of SMSI, USA by the applicant, the applicant can only be considered as providing the services on behalf of SMSI, USA to the overseas customers. Thus, in any view of the matter the recipient of the services rendered by the applicant as per the Agreement is SMSI, USA the Head office of the applicant. 15. The applicant has placed reliance on the judgment of the Hon'ble High Court of Bombay in the case of Tech Mahindra Ltd Vs CCE, Pune III reported in 2014 (36) S.T.R. 241 (Bom) in support of their con....