TaxTMI 
TaxTMI 
2023 (9) TMI 763
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....l advance ruling have changed. 4. In terms of Section 104 of the Act, where the Authority finds that advance ruling pronounced by it under sub-section (4) of Section 98 or under sub-section (1) of section 101 has been obtained by the applicant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the applicant as if such ruling had never been made. 5. At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act. M/s. AVEVA Software Private Limited, Smart work coworking spaces Pvt Ltd, Block 3, A3 and A4, North Phase, Guindy Industrial Estate, Guindy, Chennai, Tamilnadu-600032 (hereinafter called the Applicant) are registered under GST with GSTIN33AAHC....
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....on specific request. It also promotes and markets the software products to the End-users. The Applicant provides all the services in its own name and for its own account within the territory. The Applicant acts as an authorized distributor of Central Hub while sub-licensing the software products. It has been agreed between the two parties that the Applicant does not represent itself as an agent of the Central Hub for distribution of software products, provision of the services or for any other purpose. Therefore, the applicant has stated that there is no principal and agent in terms of the said arrangement. The Central Hub grants the rights to the Applicant, to further sub-license the software products within the identified territories, the Applicant as and when required enters into a valid and binding contractual agreement with the End-users for sub-licensing the software, in its own name. Upon receipt of executed agreement, the Applicant delivers a copy of the relevant product to the-End-users in object code form only, along with the copy of product documentation. In other words, the Applicant sub-licenses the software by transferring the right to use, to the End-user. For the sa....
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....ensing of software products shall be the taxable value. Q.No. 2 : Applicability of GST on the "Market Support Fee" received by applicant from Central Hub: * The Market Support fee is to compensate the applicant, where the guaranteed profit margin is not being maintained. The activity of tolerating an act by not being able to maintain the guaranteed margin upon distribution, shall be considered as 'supply of service' as it is within the ambit of clause 5(e) of Schedule II of the Act. * As the applicant and recipient are not located in the same stated the applicable GST is in terms of Section 5 of IGST Act, 2017. However, there is an exception in case where the supply of services qualifies as Zero rated Service in terms of Section 16 of IGST Act. Zero rated * From the above facts, it is seen that the said activity shall qualify as 'export of service' and as the applicant undertakes the said supply of service as a principal supplier and it is not facilitating a supply of service between central hub and any third party. Hence, the applicant is not covered under definition of 'intermediary' as defined under section 2(13) of the IGST Act. * The applicant has placed reliance on ....
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....mport of service under Section 2(11) of the IGST Act. * The conditions of a service to qualify as import of service and the present case scenario is evaluated below: * To determine the value of supply for the said activity the applicant claims that as per explanation to Section 15(5) of the CGST Act, the applicant and central hub are related persons. Hence, value cannot be determined in terms of Section 15(1) of the CGST Act. The applicant has referred to Section 15(4) of the CGST Act read with Chapter IV of the CGST Rules 2017. * Rule 28 of the CGST rules contains provisions for determining the value of supplies between related persons. In terms of second proviso to Rule 28, in case where the recipient is eligible for full Input tax credit, the value declared in invoice shall be 'open market value' * The applicant has referred to the Appeal Ruling pronounced by Tamil Nadu AAAR in the case of M/s Specsmakers Opticians Pvt Ltd in TN/AAAR/09/20-19 (AR) dated 13.11.2019. * In the instant case the Applicant is engaged in providing only taxable supplies. It does not undertake any exempt supplies. Therefore, there shall not be any proportionate reversal of ITC and the Applicant....
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....nvisaged to be incurred by the applicant ii. Demand of the product iii. Price range of competitive products available in the market (if any) iv. Economic factors such as inflation, deflation etc. v. Government and legal regulations 3.3 Further vide their letter dated 20.05.2022, they submitted (received on 30.05.2022) submitted the following documents: * Operating agreement between AVEVA SOLUTIONS LIMITED and AVEVA SOFTWARE PRIVATE LIMITED 3.4. The applicant was sent a mail on 14.07.2022 to submit sample contractual agreement with end users, copies of invoices issued for such supply. Further, on perusal of the Operating Agreement, Schedule 7, the para No. 4.2 and 4.3 mentioned in the document was not available and hence they were asked to furnish the same. The applicant vide their letter dated 21.07.2022, submitted the End user Licence Agreement (EULA). They also stated that they have not issued any invoices pursuant to this arrangement yet. Further they also stated that para 4.2 and 4.3 in Schedule 7 in the Operating Agreement was inadvertently quoted and there is no such para. 3.5. A personal hearing was conducted on 10.01.2023, as there were changes in both Centre a....
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....egarding Question 2, the Market support fees is subject to GST; Apart from the Market Support fees, Market Support Service fees, 'Services Fees', which are mentioned in the agreement are also subject to GST. * Regarding their claim in question No. 2, that their activity would amount to 'Export of Services', as per their agreement, they are not to be classified as 'intermediary' in terms of section 2(13) of the IGST Act, 2017, would be applicable only with regard to sub-licensing service and not to any other service/activity; As per the provisions of Para 3.5 of the Schedule 7 read with Schedule 3, 'Market Support Service Fee' is paid by the Central Hub to the Applicant for various type of services apart from sub-licensing service. Such services apart from sub-licensing, when offered by the Applicant to the Central Hub, the place of supply to be determined in terms of Section 13(3)(a) read with Section 13(8)(b). Further in as much as the 'toleration' is effected by Intermediary' in relation to business activity in taxable territory, it is not treatable as 'Export' and hence tax leviable. * Regarding question 3, the taxable value for the operation fees payable to the Central Hub ....
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....Central Hub to decide whether the activity would amount to supply. The relevant portions of the agreement is extracted and given below:- 2.1. The Central Hub hereby appoints the Local Operating Entity: 2.1.1. as a non-exclusive distributor of the Products within the Territory to: (b) grant sub-licences and distribute the products within the Territory on its own account including to resellers and other distributors. The definition of 'Supply' as per Section 7(1) of CGST Act, the expression 'Supply' includes: (a) All forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course of furtherance of business; Based on the above definition, the clause 2.1.1(b) of the OA, denotes that the activity shall qualify as 'supply'. The next question which arises is whether the said activity would be supply of goods or services. The applicant submitted that they supply software license(s) to their customers in object code form only, along with copy of product documentation. The Applicant has claimed that the supply of software license would be 'supply of ser....
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....f Services. 997331 Licensing services for the right to use computer software and databases. This service code includes:- - licensing services for the right to reproduce, distribute or incorporate computer programs, program descriptions and supporting materials for both systems and applications software. This applies to various levels of licensing rights such as rights to reproduce and distribute the software, rights to use software components for the creation of and inclusion in other software products; - licensing services for the right to reproduce, distribute or incorporate databases (i.e. compilations of facts/information) in other databases or applications. This applies to various levels of licensing rights such as rights to reproduce and distribute the database, rights to use database components for the creation of and inclusion in other databases and applications. This service code does not include:- packaged (non-customized) software/ database, limited end-user licence as part of packaged software, licensing services for the right to use database software, cf. 997331. From the above, it is evident that the above heading excludes the services of limited end-....
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....o maintain the guaranteed margin upon distribution, shall be considered as a "supply of service" since it squarely falls within the ambit of clause 5(e) of Schedule II of CGST Act. However, it is the contention of the Applicant that, since the Applicant and Central Hub are not located in same state, GST on the same shall be applicable in terms of Section 5 of IGST ACT, further there is an exception to the same in case the supply qualifies as zero-rated in terms of Section 16 of the CGST Act. 5.3.2. On perusal of the Operating Agreement(OA) entered between Aveva Solutions Ltd., and Aveva Software Pvt. Ltd.(the Applicant, the following are noticed:- * As per Para 15, a Market Support Service Fee shall be payable by the Central Hub to the Local Operating Entity to the extent of any shortfall in profit margin guaranteed to the Local Operating Entity. * As per the definitions and interpretations provided in the OA, Market Support Service fees has been defined as ' the amount payable by the Central Hub to the Local Operating Entity pursuant to clause 15.7, as determined and calculated in accordance with paragraph number 4 of schedule 7 annexed to the OA. * As per Clause 15.1.4, a ....
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....ed 03.08.2022. But, as per Para No. 7.2 of the said circular, it has been clarified that compensation paid by the Government to prior allottees for cancellation of coal blocks pursuant to the order of the Hon hie Supreme Court of India was not taxable, as no promise or offer was made by the prior allotees to the Government. Hence, it is not applicable to the issue of the Applicant. 5.3.5. 'Consideration' as defined in Section 2(31) of the CGST Act, 2017, specifies that; (31) "consideration" in relation to the supply of goods or services or both includes (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government. 5.3.6. Thus, consideration in relation to su....
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....ghts granted by the Central Hub to the Applicant shall qualify as 'import of services' in the hands of the Applicant. If the supplier of service is located in a non-taxable territory, the recipient of services located in the taxable territory is liable to pay GST under reverse charge as per Notification No. 13/2017-CT(Rate) and 10/2017-CT(Rate) dated 28.06.2017. 5.4.4. Coming to the Valuation part, the Applicant and the Central Hub qualifies to be related persons in terms of Explanation to Section 15(5) of CGST Act, 2017. Hence, value cannot be determined as per Section 15(1) of the CGST Act and consequently Section 15(4) of the CGST Act read with Chapter IV of CGST Rules, 2017 i.e. Rule 27 to Rule 35 of the CGST Rules will be applicable. 5.4.5. Rule 28 of CGST Rules, contains the provisions for determining the value of supplies between the related persons, which reads as follows:- 28. Value of supply of goods or services or both between distinct or related persons, other than through an agent. - The value of the supply of goods or services or both between distinct persons as specified in sub-section (4) and (5) of section 25 or where the supplier and recipient are related, o....