2020 (1) TMI 1596 - AAAR - GST

Levy of GST - services received by it from a provider of service located in a non-taxable territory - reverse charge mechanism - supplier or not - applicability of provision of sec 5(3) read along with notification No. 10/2017 IGST(Rate) dated 28.06.2017 - HELD THAT - The services provided by ITEES to DoSD Govt of MP have already been accepted by appellant and held as falling under reverse charge as per section 5 (3) of IGST Act 2017 read with notification 10 IGST (Rate) dated 28.06.2017. These services are found awfully close to entry XVIII of Eleventh Schedule of Constitution of India. While reading the relevant entry in the notification it is found that it also covers by way of any activity in relation to any function . This phrase enlarges the scope of every entry to a very wide degree. The services being provided by ITEES may not be directly that of entry XVIII of Eleventh Schedule but when we delve deeper and resort to in relation to the function entrusted to a Panchayat under article 243G of Constitution of India it attains the status which fits very properly. The entry requires the services to qualify either 243G or 243W. 243W being relevant for Municipality. Thus the services provided by ITEES to DoSD are held to find favour with entry 3 of notification 9/2017 IGST (Rte) dated 28.06.2017 and thereby are held to be exempt from GST. As the appellant has been adjudged falling under reverse charge provisions as per section 5 (3) of the IGST Act 2017 the second leg of this sub-section also comes into play. It says that once liability of reverse charge is imposed all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. This provision makes the appellant a supplier. Thus it is a case of no supply as per notification 11/2017 IGST (Rate) dated 28.06.2017.

Summary

Issues Involved:
1. Applicability of IGST on import of services under Reverse Charge Mechanism.
2. Classification of activities performed by the appellant as business or non-business.
3. Eligibility for exemption under Notification No. 9/2017-Integrated Tax (Rate) dated 28.06.2017.

Detailed Analysis:

1. Applicability of IGST on Import of Services under Reverse Charge Mechanism:
The appellant sought clarification on whether services received from a provider located in a non-taxable territory attract IGST under the Reverse Charge Mechanism (RCM) as per Notification No. 10/2017-IGST (Rate) dated 28.06.2017. The Authority for Advance Ruling (AAR) ruled that the appellant is liable to pay IGST on the import of services under RCM. The Appellate Authority for Advance Ruling (AAAR) upheld this decision, confirming that the services received from ITE Education Services Pte. Ltd. (ITEES), a Singapore-based consultancy, fall under the RCM provisions of Section 5(3) of the IGST Act, 2017.

2. Classification of Activities Performed by the Appellant as Business or Non-Business:
The appellant argued that their activities do not constitute business as defined under Section 2(17) of the CGST Act, 2017, and are in line with the functions entrusted to the government under the Constitution of India. The appellant emphasized that the project aims to provide vocational and technical education without any commercial motive, thus should not be considered a business activity. The AAAR, however, did not delve deeply into whether the appellant's activities constitute business, focusing instead on the applicability of exemptions under the relevant notifications.

3. Eligibility for Exemption under Notification No. 9/2017-Integrated Tax (Rate) dated 28.06.2017:
The appellant contended that the services received from ITEES should be exempt under Entry 10 of Notification No. 9/2017-Integrated Tax (Rate), which exempts services received by the government for non-commercial purposes. The AAR initially ruled against this exemption, stating the services were for business purposes. However, the AAAR considered an alternative plea under Entry 3 of the same notification, which exempts "pure services" provided to the government related to functions entrusted under Article 243G of the Constitution.

The AAAR found that the services provided by ITEES to the Directorate of Skill Development (DoSD) align with the functions listed under Article 243G, specifically "Technical training and vocational education." Thus, these services qualify as "pure services" and are exempt from GST under Entry 3 of Notification No. 9/2017-Integrated Tax (Rate).

Additionally, the AAAR noted that as per Notification 11/2017-IGST (Rate), services related to functions entrusted under Article 243G or 243W of the Constitution are considered neither a supply of goods nor services, further supporting the exemption.

Conclusion:
The AAAR ruled that the services received by the appellant from ITEES qualify for exemption under Entry 3 of Notification No. 9/2017-Integrated Tax (Rate) and are not subject to GST. This decision was based on the classification of the services as "pure services" related to functions entrusted under Article 243G of the Constitution, thus falling within the scope of the exemption.