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2021 (3) TMI 1342 - AAAR - GSTNature of transaction - goods or service - e-goods as commercially known in the market - HSN classification - rate of GST on its sale/ supply within state - exemption from GST or not - applicability of reverse charge mechanism - If the customer is from India and paying the consideration in dollar, whether it will be allowed as exports or if not allowed as exports then whether GST is leviable? - levy of SGST AND CGST or IGST, If customer pays for the e goods in Indian rupees and goods delivered through CLOUD located outside India - In case the buyer is from India, the goods/ services are stored in CLOUD which are the servers outside India. therefore even though payment is received in rupees, it is again export of service being services are received from distantly installed servers. Condonation of the delay which had occurred in filing of the subject Appeal - HELD THAT - It is observed that the said delay of 20 days in filing the subject Appeal has occurred under the circumstances which appears to be beyond the control of the Appellant and accordingly, the said delay cannot be considered as intentional or deliberate on the part of the Appellant, and hence the said delay of 20 days is condoned in filing the subject Appeal in terms of the proviso to Section 100 (2) of the CGST Act, 2017. On perusal of the subject appeal memorandum filed by the Appellant, it is observed that the Appellant have not disputed the classification of the impugned e-goods dealt with by the Appellant where the MAAR has held the same as supply of services under the SAC 998439 bearing the description Other online contents not elsewhere specified . It is an undisputed fact that the Appellant are the recipient of the impugned OIDAR services procured from their foreign supplier/vendors, hence the place of supply in this case will be the location of the recipient, i.e., the Appellant, who are located in India. i.e., in the taxable territory - As per the definition of import of services, the supplier is outside India and the recipient i.e applicant is in India. The place of supply of OIDAR as per Section 13 (12) of the IGST Act is the location of the recipient of services. Therefore, all the conditions being fulfilled as the place of supply of service is in India. Therefore. the transaction qualifies for import of services. So even though the said e-goods, after being purchased by the Appellant are stored on the Cloud Servers located outside India. and the same are not downloaded by the Appellant in India. the same will be import of services. The Appellant has made the payments to the foreign suppliers i.e consideration is paid which enables him to supply them to his customers or provide access to them, the fact that he gets the right to supply it to his customers shows that there is supply by the foreign supplier to the Appellant and the Appellant gets the right to supply it further. The transaction of purchase of e-goods from the foreign suppliers will attract the levy of IGST under the Reverse Charge Mechanism in terms of the provisions of Section 5(3) of the IGST Act, 2017 read with the Notification No. 10/2017-I.T. (Rate) dated 28.06.2017. Accordingly, the Appellant will be liable to pay IGST under reverse charge basis on the purchase of the e-goods from their foreign suppliers even though the said e-goods, after being purchased by the Appellant, are stored on the Cloud Servers located outside India. and the same are not downloaded by the Appellant in India. It is so because the said provision related to the place of supply of OIDAR services as prescribed under Section 13 (12) of the IGST Act. 2017 does not mention about how and where the services related to OIDAR are received by the recipient but mentions only of the place of the recipient. Supply of e-goods by the Appellant to the Indian customers. from whom the payments are received in Indian Rupees, will also attract GST which leads to conclude that the place of supply of OIDAR services in the subject transaction will be in India, i.e., in the taxable territory because the recipient of the OIDAR services, i.e. the customers of the Appellant are located in India. The MAAR has further held that since both the Appellant and the recipient are located in India and the place of supply is also in India, hence, the Appellant will be liable to pay GST on the transaction under consideration - there is no case of an out and out sale, there is import of digital goods by the Appellant by which he gets the right to transfer it to his customers and as his customers are located in India, it will attract GST. As to whether it attracts SGST-CGST or IGST will depend upon the location of the customers in India- whether in or out of Maharashtra. As regards this issue under discussion, we approbate the ruling pronounced by the MAAR and reject the contention, put forth by the Appellant in as much as the supply of the subject e-goods to the Indian customers are being made through the Cloud Servers located abroad. Export of the said OIDAR services being provided by the Appellant to their foreign customers - HELD THAT - It is truly not possible to determine the place of supply of the subject OIDAR services without putting to the test all the seven non-contradictory conditions prescribed under explanation to Section 13 (12) of the IGST Act, 2017 with respect to the potential recipient of the subject OIDAR services. Also, the fulfillment of the conditions will be vis- -vis an evaluation of every single transaction undertaken by the Appellant - As the evaluation is based on pure facts, it is deemed proper not to answer it.
Issues Involved:
1. Classification of e-goods as goods or services under GST. 2. GST applicability and rate on supply of e-goods. 3. Exemption status of e-goods under GST. 4. Applicability of IGST under Reverse Charge Mechanism (RCM) for procurement from foreign suppliers. 5. GST applicability on transactions where the customer is from India but pays in foreign currency. 6. GST applicability on transactions where the customer pays in Indian rupees and goods are delivered through a cloud server located outside India. 7. Export status of e-goods/services and related GST implications. 8. Rate of IGST on procurement of e-goods from foreign suppliers. Detailed Analysis: 1. Classification of e-goods as goods or services under GST: The Appellate Authority upheld the MAAR's ruling that the supply of e-goods by the Appellant is considered a supply of services under the CGST Act, 2017, in terms of the definition of Online Information and Database Access or Retrieval (OIDAR) Services provided under Section 2(17) of the IGST Act, 2017. The classification of these services falls under SAC 998439. 2. GST applicability and rate on supply of e-goods: The MAAR determined that the supply of the said services would attract 18% GST. This was upheld by the Appellate Authority, agreeing that the services are not exempt from GST and fall under SAC 998439, "Other online contents not elsewhere specified." 3. Exemption status of e-goods under GST: The MAAR held that e-goods are not exempt from GST, which was confirmed by the Appellate Authority. 4. Applicability of IGST under Reverse Charge Mechanism (RCM) for procurement from foreign suppliers: The MAAR ruled that the procurement of e-goods from foreign vendors would attract IGST under RCM as the place of supply for OIDAR services is the location of the recipient (the Appellant), who is in India. The Appellate Authority agreed, stating that the transaction qualifies as an import of services, thus attracting IGST under RCM. 5. GST applicability on transactions where the customer is from India but pays in foreign currency: The MAAR concluded that if the customer is from India and pays in dollars, the transaction would attract GST as the place of supply is in the taxable territory (India). The Appellate Authority upheld this ruling, emphasizing that the location of the recipient is the determining factor. 6. GST applicability on transactions where the customer pays in Indian rupees and goods are delivered through a cloud server located outside India: The MAAR held that such transactions would attract GST as both the supplier and recipient are located in India. The Appellate Authority agreed, rejecting the Appellant's contention that it should be considered an out-and-out transaction. 7. Export status of e-goods/services and related GST implications: The MAAR was unable to ascertain the place of supply for transactions with foreign customers due to insufficient details provided by the Appellant. The Appellate Authority concurred, stating that without meeting the conditions under Section 13 (12) of the IGST Act, 2017, it is not possible to determine the place of supply and thus the export status. This issue was left to be decided by the jurisdictional officer based on transaction-specific facts. 8. Rate of IGST on procurement of e-goods from foreign suppliers: The MAAR ruled that the procurement of e-goods from foreign suppliers would attract IGST at a rate of 18%. The Appellate Authority upheld this decision. Order: The Appellate Authority dismissed the appeal, upholding the Advance Ruling No. GST-ARA-06/2019-20/B-58 dated 15.12.2020 pronounced by the MAAR, confirming the applicability of GST and IGST on the transactions as detailed above.
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