TaxTMI 
TaxTMI 
2024 (8) TMI 1453
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....Petitioner from AOSH is illegal and without jurisdiction; c) Pass such further order(s) and other reliefs as the nature and circumstances of the case may require." 2. Heard learned counsel for the petitioner and learned counsel for the respondents and perused the material on record. 3. In addition to reiterating the various contentions urged in the petition and referring to the material on record, learned counsel for the petitioner invited my attention to the Audit report dated 24.11.2022 issued by the respondent under Section 65 (6) of the CGST Act, pursuant to which, intimation under Section 73 (5) of the CGST and KGST Acts, 2017, was issued by respondent No.3 to which the petitioner submitted a detailed response on 16.01.2023 pointing out that the demands were not sustainable in law and placing reliance upon several documents including the notifications bearing No. 9/2017 dated 28.06.2017 in which at Sl. No. 28, respondents have themselves stated that extending deposits, loans or advances insofar as the consideration is represented by way of interest or discount (other than interest involved in credit card services) and interse sale or purchase of foreign currency....
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.... 09/2022-23 dated 15.11.2022 and ACCT/LGSTO-140/T-336/2022-23 Assignment No. 10/2022-23 dated 15.11.2022 issued by Respondent No.3 enclosed at Annexure-A, Annexure-A1, Annexure-A2 and Annexure-A3 respectively, proposing to demand and recover total IGST amounting to Rs. 48,44,27,296/- [Rs. 12,11,06,824/- per tax period] along with interest and penalty for the periods 2017-2018, 2018-2019, 2019-2020 and 2020-2021. b) hold that the levy of GST on the activity of holding equity capital by the parent Company in the Petitioner is illegal and without jurisdiction and is ultra-vires Section 5 of the IGST Act, 2017 read with Section 7 of the CGST Act, 2017; c) pass such further order(s) and other reliefs as the nature and circumstances of the case may require." 2. Heard learned counsel for the petitioner and learned counsel for the respondents and perused the material on record. 3. In addition to reiterating the various contentions urged in the memorandum of petition and referring to the material on record, learned counsel for the petitioner invited my attention to the judgment of this Court in the case of M/s. Yonex India Private Limited Vs. Union of Ind....
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....rade and field formations seeking clarification on certain issues whether the holding of shares in a subsidiary company by the holding company will be treated as 'supply of service' under GST and will be taxed accordingly or whether such transaction is not a supply. 2. In order to clarify the issue and to ensure uniformity in the implementation of the provisions of law across the field formations, the Board, in exercise of its powers conferred by section 168 (1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as "CGST Act"), hereby clarifies the issues as under: Issue Clarification Taxability of share capital held in subsidiary company by the parent company 1. Whether the activity of holding shares by a holding company of the subsidiary company will be treated as a supply of service or not and whether the same will attract GST or not Securities are considered neither goods nor services in terms of definition of goods under clause(52) of section 2 of CGST Act and the definition of services under clause (102) of the said section. Further, securities include 'shares' as per definition of securities under c....
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.... holding company of the subsidiary company will be treated as a supply of service or not and whether the same will attract GST or not Securities are considered neither goods nor services in terms of definition of goods under clause (52) of section 2 of KGST Act and the definition of services under clause (102) of the said section. Further, securities include "shares" as per definition of securities under clause (h) of section 2 of Securities Contracts (Regulation) Act, 1956. This implies that the securities held by the holding company in the subsidiary company are neither goods nor services. Further, purchase or sale of shares or securities, in itself is neither a supply of goods nor a supply of services. For a transaction/activity to be treated as supply of services, there must be a supply as defined under section 7 of KGST Act. It cannot be said that a service is being provided by the holding company to the subsidiary company, solely on the basis that there is a SAC entry '997171' in the scheme of classification of services mentioning: "the services provided by holding companies, ie, holding securities of (or other equity interests in) companies and enterprises for ....
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....tly and squarely covered by the judgment of this Court in M/s. Yonex India Private Limited case supra, I am of the view that the impugned Show Cause Notices issued are without jurisdiction or authority of law and the same deserves to be quashed. 7. In the result, I pass the following: ORDER (i) Petition is hereby allowed and disposed of in terms of M/s. Yonex India Private Limited case supra. (ii) The impugned Show Cause Notices at Annexures - A, A1, A2 and A3 are hereby quashed." 7. The factual situation obtaining in the aforesaid two judgments are directly and squarely covered to the facts of the instant case and consequently, the proposal to demand / levy GST at Table No. VII in the impugned Show Cause Notice, is illegal, arbitrary and without jurisdiction or authority of law and the same deserves to be quashed. 8. Insofar as the proposal to demand / levy GST as indicated in Table No. IX is concerned, the said issue also was the subject matter of the Notification dated 28.06.2017, in which the respondents have stated that the petitioner was exempted from payment of GST as under: 28 Heading 9971 Services by way of - (a) ....
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....er GST. 2. Services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services) are exempted under sub entry (a) of entry 27 of Notification No. 12/2017-Central Tax (Rate). Therefore, it is clear that the supply of services granting loans / credit / advances, in so far as the consideration is represented by way of interest or discount, is fully exempt under GST. 3. It is mentioned that overseas affiliates or domestic related persons are generally charging no consideration in the form of processing fee / service fee, other than the consideration by way of interest or discount on the loan amount. Doubts are being raised regarding the taxability of the services of processing / administering / facilitating the loan in such cases, by deeming the same as supply as per clause (c) of sub-section (1) of section 7 of the CGST Act, read with S. No. 2 and S. No. 4 of Schedule I of CGST Act. The processing fee/ service fee is generally a one-time charge that lenders levy on applicants when they apply for a loan. This fee is generally non-refundable and is used to cove....
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....rty, on equal footing. 6. Even in case of loans provided between unrelated parties, there may not be any processing fee /administrative charges/loan granting charges etc., based on the relationship between the bank/independent lender and the person taking the loan. The lender might waive off the administrative charges in full, based on the nature and amount of loan granted, as well as based on the relationship between the lender and the concerned person taking the loan. 7. Accordingly, in the cases, where no consideration is charged by the person from the related person, or by an overseas affiliate from its Indian party, for extending loan or credit, other than by way of interest or discount, it cannot be said that any supply of service is being provided between the said related persons in the form of processing / facilitating / administering the loan, by deeming the same as supply of services as per clause (c) of sub-section (1) of section 7 of the CGST Act, read with S.No.2 and S. No. 4 of Schedule I of CGST Act. Accordingly, there is no question of levy of GST on the same by resorting to open market value for valuation of the same as per rule 28 of Central Goods and Servic....