2020 (7) TMI 140 - AAR - GST

Levy of GST - Maintenance and Repair Contract with respect to the machinery and equipment it had supplied - reverse charge mechanism - N/N. 10/2017 Integrated Tax (Rate) dated 28/06/2017 - HELD THAT - The MARC Holder maintains suitable structures in terms of human and technical resources at the sites of BCCL. It ensures supervision of the equipment, supply of spares and consumable and overheads for 5000 annual working hours for seventeen years, indicating sufficient degree of permanence to the human and technical resources employed at the sites. The MARC Holder, therefore, supplies the service at the sites from fixed establishments as defined under section 2 (7) of the IGST Act. The location of the supplier should, therefore, be in India in terms of section 2 (15) of the IGST Act. Supply of the MARC Holder to BCCL is not, therefore import of service within the meaning of section 2 (11) of the IGST Act. The MARC Holder should be treated as a supplier located in India triggering clause 9.2.2 of the MARC, and made liable to pay GST, the place of supply being determined in terms of section 12 (2) (a) of the IGST Act. The applicant, being the registered branch of the Foreign Company, should be treated as the domestic MARC Holder in terms of clause 9.2.2 of the MARC and be liable to pay tax accordingly.

Summary

Issues:
1. Admissibility of the Application
2. Submissions of the Applicant
3. Submission of the Revenue
4. Observations and findings of the Bench

Admissibility of the Application:
The applicant, a branch of a Foreign Company, entered into a Maintenance and Repair Contract (MARC) with a local entity. The question raised regarding liability to pay GST under reverse charge basis is deemed admissible under section 97(2) (b) & (e) of the GST Act. The concerned officer did not object to the admissibility, leading to the application being admitted.

Submissions of the Applicant:
The applicant argues that the MARC constitutes import of service under the IGST Act, making the recipient liable to pay tax on reverse charge basis. The applicant, being a branch of the Foreign Company, asserts that the tax responsibility falls on the recipient as per Notification No. 10/2017 - Integrated Tax (Rate) dated 28/06/2017.

Submission of the Revenue:
The revenue officer highlights the applicant's tax status and ITC accumulation, indicating no liability in GSTR 3B and GSTR 1 but significant ITC in GSTR 2A. Additionally, an import of goods was reported in a return, raising further considerations.

Observations and Findings of the Bench:
The Bench notes that the applicant is not the direct supplier in the MARC but acts on behalf of the Foreign Company. Despite this, the application is accepted, and a ruling is to be pronounced due to the conviction that the applicant is indeed the service supplier. Detailed analysis of the MARC terms reveals the supplier's location in India, making them liable to pay GST as per the MARC clause.

Conclusion:
The ruling states that the service supply under the MARC does not qualify as an import of service, shifting the tax liability to the domestic MARC Holder, i.e., the applicant. The recipient is not liable to pay GST on reverse charge basis. The ruling remains valid unless declared void under the GST Act provisions.