2019 (10) TMI 875 - AAR - GST

Levy of GST - activity of technical testing and analysis - Whether the activity of technical testing and analysis carried out by the applicant is liable to Goods and Services Tax under the provisions of CGST Act and KGST Act? - HELD THAT - The activity of the applicant is examined and found that the applicant is supplying services and the same is covered under the definition of supply as envisaged in Section 7(1) of the CGST Act and KGST Act and there is a supply of services for consideration in the course or furtherance of business. Scope of supply - Where the material for testing and analysis is sent from outside India to the applicant and on which the applicant carries out testing and analysis and issues certificate based thereon to the person not residing in India, whether it can be said that there is no supply by KBRPL involved in terms of Section 7 of the CGST Act read with KGST Act, 2017? - HELD THAT - Since the activity of the applicant is treated as a supply it is immaterial from where the applicant is receiving goods and to whom he is supplying the services and in what form the consideration is received, so long as there is a supply of services and he receives consideration for the same and that supply is in the course or in furtherance of business. Hence the services provided by the applicant by receiving the goods from outside India and sending the report outside India is a supply of services. Where the customer providing the material is not residing in India and sends material from outside India to the applicant in India, for carrying out testing and analysis and issuance of certificate thereafter, such an activity if held to be supply in term of Section 7 of the CGST Act read with KGST Act, 2017, and where payments are received in convertible foreign currency, whether Invoice in terms of Section 31 of the CGST Act read with KGST Act, 2017, can be issued without charging Goods and Services Tax therein? - HELD THAT - It is clear from section 31 (2) of the CGST Act, 2017 that a registered person supplying taxable service shall issue a tax invoice, unless exempted by the Government by notification, Hence the applicant is required to issue an Invoice as required under section 31(2) of the CGST Act for the supplies made. Whether the services of technical testing and analysis provided by the applicant to customers located outside India can be regarded as export of services as per section 2(6) of the Integrated Goods and Services Tax, 2017? - HELD THAT - To determine the whether the transaction is an export of services the issue of place of supply must be determined and this authority is not authorised to decide on the issue of place of supply and hence no ruling is given on this account.

Summary

Issues Involved:
1. Liability of technical testing and analysis activity to GST.
2. Classification of services provided to clients outside India as a supply.
3. Requirement to issue a tax invoice for services provided to clients outside India.
4. Classification of services as export of services under IGST Act.

Detailed Analysis:

Issue 1: Liability of Technical Testing and Analysis Activity to GST
The primary issue is whether the technical testing and analysis activity carried out by the applicant is liable to GST. According to Section 7(a) of the CGST Act, 2017, "supply" includes all forms of supply of goods or services for a consideration in the course or furtherance of business. The term "services" is defined in Section 2(102) of the CGST Act as anything other than goods, money, and securities. The applicant's activity of technical testing and analysis is considered a supply of services, as it involves providing a service for monetary consideration. Therefore, the activity is liable to GST under the CGST Act and KGST Act.

Issue 2: Classification of Services Provided to Clients Outside India as a Supply
The second issue examines whether the technical testing and analysis services provided to clients outside India can be classified as a supply under Section 7 of the CGST Act. The applicant's activity involves providing a service to overseas customers, who pay in convertible foreign currency. Since the activity involves a service provided for consideration, it is classified as a supply under the CGST Act, regardless of the origin of the material or the location of the recipient.

Issue 3: Requirement to Issue a Tax Invoice for Services Provided to Clients Outside India
The third issue addresses whether the applicant is required to issue a tax invoice for services provided to clients outside India. As per Section 31(2) of the CGST Act, a registered person supplying taxable services must issue a tax invoice unless exempted by the government. The applicant's services are not specified as exempt under Notification No. 12/2017-Central Tax (Rate), dated 28-06-2017. Consequently, the applicant must issue a tax invoice for the supply of services, even when the recipient is located outside India and the consideration is received in convertible foreign currency.

Issue 4: Classification of Services as Export of Services under IGST Act
The fourth issue considers whether the services provided by the applicant to customers outside India can be regarded as an export of services under Section 2(6) of the IGST Act. The definition of "export of services" includes five conditions:
1. The supplier of service is located in India.
2. The recipient of service is located outside India.
3. The place of supply of service is outside India.
4. The payment for such service is received in convertible foreign exchange.
5. The supplier and recipient are not merely establishments of a distinct person as per Explanation 1 in Section 8.

The applicant meets the first, second, fourth, and fifth conditions. However, the determination of the place of supply is crucial to classify the transaction as an export of services. The authority is not authorized to decide on the place of supply, and hence no ruling is provided on this aspect.

Ruling:
1. The activity of technical testing and analysis carried out by the applicant is a "supply of services" under the GST Acts.
2. The activity of technical testing and analysis provided to a person outside India is also a "supply of service" under the GST Act.
3. The applicant must issue a tax invoice for the supply of service made to a person located outside India, with consideration received in convertible foreign exchange.
4. No advance ruling is given on whether the transaction is an "export of services" due to the need to determine the place of supply.