2020 (10) TMI 629 - AAR - GST

Construction of the pipeline in Bangladesh - Works contract service or not - export of service or not - place of supply of service - input tax credit on its inward supplies for the service rendered in the construction of Bangladesh portion of the pipeline - levy of tax on goods or services procured locally within Bangladesh for the purpose of construction of Bangladesh portion of the pipeline on behalf of NRL - input tax credit on procurement of such goods or services in Bangladesh used in the construction of Bangladesh portion of the pipeline on behalf of NRL. HELD THAT - A strip of land extending over more than a hundred kilometre is not a fixed establishment in terms of section 2(7) of the IGST Act. Location of the recipient in the present context cannot, therefore, be determined by applying the provisions under section 2(14) (b) or (c) of the IGST Act. NRL being registered and resident of India, the location of the recipient of the service shall be in India in terms of section 2(14)(d) of the IGST Act - The place of supply of the service should, therefore, be determined in terms of proviso to section 12(3)(a) of the IGST Act for carrying out the construction work of immovable property. It shall be in India, being the location of the recipient - The applicant s service will not, therefore, be the export of service within the meaning of section 2(6) of the IGST Act. The provisions for deemed export under section 147 of the GST Act is available for supply of goods only. The applicant s supply of service cannot, therefore, be considered deemed export under the GST Act - Although a public sector undertaking NRL is not a Govt Entity as defined in clause 4(x) of the Rate Notification (direct Govt participation in equity is less than 90% in NRL). The concessional rate in terms of Entry No. 3(iii)(c) of the Rate Notification is, therefore, unavailable. It will, therefore, be taxable @ 18% under Entry No. 3(xii) of the Rate Notification. GST shall be payable on the consideration receivable for the applicant s service.

Summary

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

Admissibility of the Application:
The applicant questioned the nature of their supply for the construction of an oil pipeline in Bangladesh and various related tax implications. The revenue officer did not object to the admissibility of the application, leading to its admission under relevant sections of the GST Act.

Submissions of the Applicant:
The applicant argued that their service should be considered an export under the IGST Act as the ultimate recipient was in Bangladesh. They also contested being classified as a works contract service provider and sought clarity on various tax-related queries, including input tax credit entitlement.

Submission of the Revenue:
The revenue officer contended that the applicant's supply did not qualify as an export under the IGST Act due to both supplier and recipient being in India. They supported the applicant's eligibility for input tax credit on goods or services procured in India but not on those procured in Bangladesh for the project.

Observations and findings of the Authority:
The Authority determined that the recipient of the service was in India based on contractual arrangements, making the service taxable in India. They ruled that the applicant's service was not an export, and it would be taxed at 18% under the relevant Notification. Input tax credit was allowed for GST paid on procurement but not for goods or services bought in Bangladesh. The ruling was declared valid unless voided under specified provisions.

This detailed judgment addressed the admissibility of the application, conflicting submissions from the applicant and revenue, and the final ruling based on legal interpretations of the GST Act and relevant Notifications.