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2019 (11) TMI 475 - AAAR - GSTScope of Advance Ruling - Jurisdiction to decide the case - Taxability - Export of services or not - intermediary services - Commission received by the Applicant in convertible Foreign Exchange - zero rated tax or not - Whether the Commission received by the Applicant in convertible Foreign Exchange for rendering services as an Intermediary between an exporter abroad and an Indian importer of an Equipment; is an export of services falling under section 2(6) outside the purview of section 13 (8) (b), attracting zero rated tax under section 16 (1) (a) of the Integrated Goods and Services Tax Act, 2017? - Place of supply of services - challenge to AAAR decision. HELD THAT - The appellant (MI) is providing services to its principal Carl Zeiss GmbH in Germany in terms of procuring orders from customers in India for procurement of advanced laboratory instruments from its principal. The floor price is fixed by the principal and MI negotiates with customers in India for terms of supply and consideration / price above the floor price, for which they receive the commission from principal. After completion of the negotiations, the customers in India arranges for the foreign remittance for imports, and directly place the order to the foreign principal, who in turns directly supplies the instruments (goods) to the Indian customers. In most of the cases where the Indian Customers are entitled for the discounts, in kind ( discount in kind , like Free of cost items , such as a TV set, a Computer or a Camera etc.) with respect to the material purchased by them, are to be provided by the appellant. The Authority for Advance Ruling while deciding the issue relied upon the tern intermediary , and held that the appellant is an intermediary because they are acting as a broker and the facilitating the process of sale of materials by their foreign principals to the Indian parties because they locate the customer, negotiate the prices and ensure the sale, they also provide for discounts to the customers out of the commission received by them. The advance ruling authority further held since the appellant (the service provider) is located in India and service recipient are located outside India, section 13 (8) (b) of the IGST Act would be applicable in determining the place of supply of such service in the instant case - The contention of the appellant is that though he has been covered under term intermediary the services provided are not intermediary services has been rejected by the Authority for Advance Ruling for reason being not tenable. The authority for Advance Ruling after rejection of the appellant s claim of export of service held it as an interstate supply as per provisions of section 7 (5) (c) of the IGST Act and eligible to levy of IGST. The Advance Ruling authority decided that applicant is an intermediary and the place of supply of Intermediary Services , as per Section 13(8)(b) being the location of the supplier of services, the said intermediary services cannot be treated as export of services under the provisions of the GST Act. Further, the Advance Ruling Authority held that in case the intermediary services are provided to the recipient located outside India, the inter-state provisions as contained under section 7(5)(c) shall be applicable and hence IGST is payable under such transaction. But from the questions posed it is evident that the appellant already holds himself out as an intermediary and has only posed the question as to whether the services given by him qualify to be export of services falling under Section 2(6) or whether is a intra-state supply . Scope of Advance Ruling - Jurisdiction to decide the case - HELD THAT - The question on determination of the place of supply has not been covered in the above set of questions, on which the advance ruling can be given - Therefore, we cannot give any opinion or verdict on the question which involve the determination of the place of supply of the goods or services or both. As per the law we do not have jurisdiction to determine the place of supply of services or goods or both, and accordingly no ruling on this particular question can be passed by the Advance Ruling Authority. This rationale also holds true in case of the second question asked by the Appellant i.e. whether the said supply could be treated as intra-state supply under section 8 (1) of the IGST Act read with section 2(65) of the CGST Act.
Issues Involved:
1. Whether the "Commission" received by the Appellant qualifies as "Export of Services" under the IGST Act. 2. Whether the services provided by the Appellant are "Intermediary Services" under Section 13(8)(b) of the IGST Act. 3. Determination of the place of supply of services. 4. Jurisdiction of the Advance Ruling Authority to decide on the place of supply. Issue-wise Detailed Analysis: 1. Whether the "Commission" received by the Appellant qualifies as "Export of Services" under the IGST Act: The Appellant argued that the commission received in convertible foreign exchange for services rendered as an intermediary between a foreign exporter and an Indian importer should be considered as "Export of Services" under Section 2(6) of the IGST Act. The Appellant emphasized that the services were consumed outside India, as the effective use and enjoyment of the services were by the foreign principal. The Appellant cited various case laws and statutory provisions to support their claim that the services should be zero-rated under Section 16(1)(a) of the IGST Act. The Advance Ruling Authority, however, held that the services provided by the Appellant were intermediary services and, as per Section 13(8)(b) of the IGST Act, the place of supply for such services is the location of the supplier, which is in India. Hence, the services do not qualify as export of services and are subject to IGST. 2. Whether the services provided by the Appellant are "Intermediary Services" under Section 13(8)(b) of the IGST Act: The Appellant contended that although they fall under the definition of "intermediary," the services provided should not be classified as intermediary services. They argued that the term "intermediary services" should be interpreted narrowly, considering the context and statutory provisions. The Appellant referred to the definition of intermediary under Section 2(13) of the IGST Act and argued that the services provided were not intermediary services as they were involved in the cross-border sale/purchase of goods, not services. The Advance Ruling Authority disagreed, stating that the Appellant's activities of procuring orders, negotiating terms, and facilitating the sale of goods between the foreign principal and Indian customers clearly fall under intermediary services. Therefore, the place of supply is the location of the supplier, i.e., India, making the services taxable under IGST. 3. Determination of the place of supply of services: The Appellant's primary contention was that the place of supply should be outside India, as the services were consumed by the foreign principal. They argued that the effective use and enjoyment of the services were outside India, making it an export of services. The Appellant cited various case laws and international principles on VAT/GST to support their claim. The Advance Ruling Authority, however, held that as per Section 13(8)(b) of the IGST Act, the place of supply for intermediary services is the location of the supplier, which is in India. Therefore, the services do not qualify as export of services and are subject to IGST. 4. Jurisdiction of the Advance Ruling Authority to decide on the place of supply: The Appellate Authority examined whether the Advance Ruling Authority had the jurisdiction to decide on the place of supply. It was observed that the determination of the place of supply is not covered under Section 97(2) of the CGST Act, which outlines the scope of questions on which advance rulings can be sought. The Appellate Authority concluded that the Advance Ruling Authority overstepped its jurisdiction by deciding on the place of supply. Conclusion: The Appellate Authority quashed the ruling of the Advance Ruling Authority, stating that it did not have the jurisdiction to determine the place of supply. Consequently, no ruling could be passed on whether the services provided by the Appellant qualify as export of services or intra-state supply. The appeal was allowed, and the impugned order was set aside.
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