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2019 (9) TMI 694 - AAR - GSTLiability of IGST - Reverse Charge Mechanism (RCM) - Import of Consulting Services by the Directorate of Skill Development - services received by it from a provider of service located in a non taxable territory - place of supply of services - section 5(3) read along with N/N. 10/2017 IT(R) - HELD THAT - The applicant is engaged in Business or profession as defined in the Section 2(17) of CGST Act. Further the supply might be chargeable to tax if it is falling under Notification No 11/2017 - Central Tax (Rate) dated 28lh June 2019. According to Section 5(3) of IGST Act, the Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and 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 - if the service is imported for the purpose of business or commerce even by the Govt then exemption would not be available and Govt need to pay GST under Reverse Charge. In the present case, the applicant is engaged in activities which is to be treated as Business or profession as defined in the Section 2(17) of CGST Act. Further applicant is taking the service from non taxable territory for the purpose of business or profession therefore exemption provided in the N/N. 9/2017-lntegrated Tax (Rate) dated June 28, 2017 would not be available to the applicant. Therefore the applicant needs to pay the IGST under Reverse Charge.
Issues Involved:
1. Whether the services received by the applicant from a service provider located in a non-taxable territory attract the provisions of Section 5(3) read along with Notification No. 10/2017 IT(R). 2. Whether the applicant is liable to pay tax under the reverse charge mechanism on the transaction mentioned. Detailed Analysis: Issue 1: Applicability of Section 5(3) and Notification No. 10/2017 IT(R) The applicant, Directorate of Skill Development, is part of the Department of Technical Education, Skill Development & Employment, Government of Madhya Pradesh. The project for the establishment of the Centre for Occupational Skills Acquisition within the Global Skills Park (GSP) in Bhopal was awarded to the Directorate. The project aims to transform the technical and vocational education and training (TVET) system in Madhya Pradesh. The Directorate entered into an agreement with ITE Education Services Pte. Ltd, a Singapore-based consultancy company, to provide consulting services for the project. The total consideration for these services is USD $3,812,740, payable in 11 installments. The applicant inquired whether the services received from ITE Education Services Pte. Ltd. would attract the provisions of Section 5(3) read along with Notification No. 10/2017 IT(R). According to Section 5(3) of the IGST Act, the Government may specify categories of supply of goods or services on which tax shall be paid on a reverse charge basis by the recipient. Notification No. 10/2017 specifies that any service supplied by a person located in a non-taxable territory to a person in a taxable territory, other than a non-taxable online recipient, is subject to reverse charge. Issue 2: Liability to Pay Tax Under Reverse Charge Mechanism The applicant argued that the services received from ITE Education Services Pte. Ltd. are exempt under Notification No. 9/2017, which exempts services received by the government from a provider of services located in a non-taxable territory for purposes other than commerce, industry, or any other business or profession. The concerned officer submitted that the applicant is liable to pay IGST on import of services under the reverse charge mechanism as per Notification No. 10/2017 IT(R) and Notification No. 8/2017 IT(R). Upon examination, it was found that the applicant is engaged in activities that fall under the definition of "business" as per Section 2(17) of the CGST Act. The services provided by ITE Education Services Pte. Ltd. are for the purpose of business or profession, and therefore, the exemption under Notification No. 9/2017 does not apply. The ruling concluded that the applicant is liable to pay IGST on the import of services under the reverse charge mechanism in terms of Notification No. 10/2017 IT(R). Ruling: 1. The Applicant shall be liable to pay IGST on the import of services under the Reverse Charge Mechanism in terms of Notification No. 10/2017-IT(R). 2. This ruling is valid subject to the provisions under Section 103(2) until and unless declared void under Section 104(1) of the GST Act.
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