TaxTMI 
TaxTMI 
2025 (12) TMI 1726
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....ons, 2018. 1.1 At the outset, we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like matter except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the WBGST Act. Further to the earlier, henceforth for the purposes of these proceedings, the expression 'GST Act' would mean the CGST Act and the WBGST Act both. 1.2 Mr. Nilabhra Banerjee, Director of the applicant wanted to file patent in Japan (and later in USA and UK). Seenergi IPR (GSTIN 19ABLFS2275H1ZR) has been allocated the task by the Company. Seenergi IPR on completion of the task in Japanese patent office, raised the invoice (Invoice No. 202425010239) which is fully PAID by the company. However, Seenergi IPR did not collect GST and directed the company to pay under reverse charge mechanism for total invoice amount. The invoice has two parts. Part-A is reimbursement of payment to Japanese atto....
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.... GST is not applicable in the case. • The company (incorporated in India) does not earn any monetary benefit from the patent filed in Japan. Therefore, the transaction cannot be termed as a consideration. • The company agrees that Seenergi IPR's fees mentioned on the invoices attract GST and the company is ready to pay that part only and not the reimbursement of foreign attorney fees. 2.3 The applicant has submitted the following points in respect of the subject matter of the advance ruling: a) The service is analogous to "legal protection" and should be treated as exempt for firms with zero turnover. "Legal services" provided by advocates or law firms are exempt under GST when provided to individuals or business entities under exemption category. Since MedTrainAI is a start up, having zero turnover in the years 2023-24 and 2024-25, it is exempt from paying GST as per Notification No. 9/2017-Integrated Tax (Rate), serial no 47, Header 9982/9991. Patent filing, the applicant believes, is essentially a legal service - it involves drafting, representation, and submission before an IP authority, which demands representation by an ....
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.... states) in the preceding financial year • By a senior advocate by way of legal services to: • any person other than a business entity; or • a business entity with an aggregate turnover up to Rs. 20 lakh (Rs. 10 lakh in special category states) in the preceding financial year. Thus, legal services to a small business entity below the registration threshold are expressly exempt. (e) Reverse change on legal services-Section 9(3), CGST Act and Notification 13/2017 Central Tax (Rate) • Section 9(3) empowers the Government to notify categories of supply on which tax shall be paid on reverse charge by the recipient. • Notification No. 13/2017 Central Tax (Rate), SI No. 2, notifies "services supplied by an individual advocate including a senior advocate or firm of advocates by way of legal services to any business entity located in the taxable territory", making such business entity liable under RCM. However, RCM applies only to taxable supplies; if a particular category of legal services is exempt under Notification 12/2017, no tax can be demanded under RCM for that exempt supply. 3. Submission of th....
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....ing will happen in case of such reimbursements in other foreign countries such as USA and UK? 4.4 The applicant's beliefs and interpretations of law can be summarised as under: A) Part A of the invoice states that it is a re-imbursement of expenditure done by Japanese patent lawyers in Japan. Therefore the applicant believes that the actual transaction was done on the applicant's behalf in Japan. B) Actual transaction has taken place in Japan. The company is only reimbursing the money. Therefore, it is outside the jurisdiction of GST law of the country and GST is not applicable in this case. C) The Company (incorporated in India) does not earn any monetary benefit from the patent filed in Japan. Therefore, the transaction cannot be termed as a consideration. D) There is an opportunity of income, if any from royalty. Though the chance is remote, still that may come into consideration. The patent owner (here the applicant) is liable to pay tax on the inward royalty if that happens. E) The applicant agrees that Seenergi IPR's fees mentioned in Part B of the invoice attracts GST and the applicant is ready to pay the corresponding tax. But....
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....pended; restoration of an equivalent for something paid or expended. Deriving the common points or the common spirits of all the above definitions, we can say that reimbursement is repayment of what has already been spent or incurred for the restoration of the spent or incurred amount. It is not a consideration for a service rendered. 4.8 The Income Tax Tribunal at Bengaluru in the Bovis Lend Lease (I) Pvt. Ltd. Vs. ITO case has pronounced certain parameters essential for a payment to be considered as reimbursement. The parameters are as under: • The actual liability to pay should be of the person who reimburses the money to the original payer. • The liability should be clearly determined. It should not be an approximate or varying amount. • The liability should have crystallised. In other words, the reason given that the payments that were never required but were made just to avoid a potential problem might not qualify. • There should be a clear ascertainable relationship between the paying and reimbursing parties. Therefore, alleged reimbursement by an unconnected person may not qualify. • The payment should f....
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....rged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services; (d) interest or late fee or penalty for delayed payment of any consideration for any supply; and (e) subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. Explanation.--For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy. (emphasis added) The CGST Act includes any amount charged for anything done by the supplier in respect of the supply of goods or services or both in the incidental expenses to be included in the value of supply. It is also evident that clause (c) as above is an inclusive clause. But exception to this clause has been provided in Rule 33 of the CGST Rules, 2017. 4.10 It is in Rule 33 that we find the concept of 'pure agent' in GST. The Explanation to Rule 33 provides: For the purposes of this rule, the expression "pure agent means a person wh....
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....ct, 2017? Before going into the details of the above issues we must look into the agreement signed between the applicant and Seenergi IPR and other related documents like the invoice issued by the foreign attorneys. 4.12 No contractual agreement signed between the applicant and Seenergi IPR has been placed on records though the applicant was instructed to produce such documents. So it appears before us that such contractual agreement between the two never existed. We have in our hand copies of certain mails transacted between the two. We have also in our hand copies of application for patents filed by the applicant in Japan, USA and UK. The certified English transcripts of the Japanese documents have been furnished by Seenergi IPR. From the above noted documents it appears before us: 1. No contractual agreement was signed between the applicant and Seenergi IPR for the works detailed in the application. The nature and scope of the work can be understood from the mails of the applicant and Seenergi IPR. 2. In our considered view, Seenergi IPR never acted as a 'pure agent' as per Rule 33 supra since all the conditions noted there are not satisfied in the ....
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.... the services specified in sub-sections (3) to (13) shall be the location of the recipient of services As per the provisions of the act legal services do not fall in sub-sections (3) to (13). So the place of supply received by the applicant is the location of the applicant i.e. West Bengal. 4.14 Here the applicant has put forward the argument that Notification No. 12 - Central Tax (Rate) Dated 28.06.2017, as amended has made the transaction under question an exempt one. He has referred to Entry No. 45 of the notification. For understanding the issue we are reproducing the relevant portions of the entry. Sl.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent) Condition (1) (2) (3) (4) (5) 45 Heading 9982 or Heading 9991 Services provided by- (a) an arbitral tribunal to - (i) any person other than a business entity; (ii) a business entity with an aggregate turnover up to [such amount in the preceding financial year as makes it eligible for exemption from registration under the Central Goods and Services Tax Act, 2017 (12 of 2017)]; or [(iii)the Central ....
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....bility of legal services provided by foreign attorneys to the applicant we have to refer to Section 9(3) of the CGST Act, 2017 read with Notification No. 13 - Central Tax (Rate) Dated 28.06.2017, as amended. The relevant portions of the notification are reproduced hereinunder: Sl.No. Category of Supply of Services Supplier of service Recipient of Service (1) (2) (3) (4) 2 Services supplied by an individual advocate including a senior advocate by way of representational services before any court, tribunal or authority, directly or indirectly, to any business entity located in the taxable territory, including where contract for provision of such service has been entered through another advocate or a firm of advocates, or by a firm of advocates, by way of legal services, to a business entity. An individual advocate including a senior advocate or firm of advocates. Any business entity located in the taxable territory. So the tax on the above service is to be paid on reverse charge basis. The applicant has drawn our attention to the argument that for application of tax on reverse charge basis, the supply has to be taxable first. According to the....