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2020 (10) TMI 764 - AAR - GSTSupply or not - Levy of GST - reimbursement of expenses from the Subsidiary Company to its Ultimate Holding company located in a foreign territory outside India - rate of GST applicable to the said reimbursement of expenses - Intermediary or not - HELD THAT - In the instant case, ICU Medical Inc. has entered into an agreement with Wells Fargo for using credit card facilities by the employees of the group companies, affiliates etc. for business related expenses such as travel, accommodation etc. The billing of these transactions are made by Wells Fargo to ICU Medical Inc. However, there is another separate transaction here. This transaction involves ICU Medical Inc. and the applicant. ICU Medical Inc. sends the details of the business related expenses made by the employees of the applicant, as received from Wells Fargo. The employees are issued the credit cards under the logo of ICU Medicals and Wells Fargo. For the privilege of using these cards, the applicant has to pay ICU Medical Inc. all the relevant expenses and charges made by its employees - It is evident that this is a separate transaction between the applicant and ICU Medical Inc. for the services of providing the credit cards to the employees of the applicant which are to be used only for business related activities. For this, a payment is made by the applicant to ICU Medical Inc. in response to the services of providing the cards. Therefore, this transaction falls within the definition of services and is for a consideration as defined in Section 2(7) and Section 2(31) of the Act. This transaction is also in the course or furtherance of business as is seen in the Travel 86 Expense Policy- Non-U.S. Based employees issued by ICU Medicals Inc. that the card should be used only for business related expenses and not personal expenses of the card holders - Further, as per Section 2 (84) (h) a person includes any body corporate incorporated by or under the laws of a country outside India, which is ICU Medical Inc. in this case. Therefore, the transaction in question is a Supply as per Section 7 of the Act. ICU Medical Inc., Intermediary or not - HELD THAT - As per the definition, an Intermediary does not include anyone supplying goods or services on his own account. In the instant case, ICU Medical Inc. has an agreement with Wells Fargo, billing by Wells Fargo is done to ICU Medical Inc., payment to Wells Fargo is also done by ICU Medical Inc. The applicant does not come into the picture for any transactions with Wells Fargo - ICU Medical Inc. has a Travel Expense Policy- Non-U.S. Based employees to be followed for the usage of the applicant s employees. As per this, the cards are the property of ICU Medical Inc. and can be revoked at any time. From this it is evident that ICU Medical Inc. is making the supply of the credit cards to the applicant, for use of its employees, on its own account and not as an Intermediary . Thus, it is evident that ICU Medicals Inc., is supplying credit services to the applicant for specific use of its cardholders/employees for travel, accommodation, meals etc. while on travel for business use alone. which fall under the definition of Supply under GST - In the case at hand, the service imported by the applicant is one of extension of credit for furtherance of business. On perusal of the Classification of Service, it is seen that the said service is appropriately classifiable under SAC 997113 - Having decided that there is Supply and the applicant is liable to pay IGST under Reverse Charge, the applicable rate of IGST is 18% as per Sl.No.15 of Notification 08/2017- Integrated Tax Rate dated 28.06.2017.
Issues Involved:
1. Whether GST is leviable on the reimbursement of expenses from the Subsidiary Company to its Ultimate Holding company located in a foreign territory outside India. 2. If GST is leviable, what is the rate of GST applicable to the said reimbursement of expenses? Detailed Analysis: Issue 1: GST Leviability on Reimbursement of Expenses The applicant, engaged in software development for ICU Medical Inc. (Ultimate Holding Company), uses credit cards provided by Wells Fargo Bank for business-related expenses. ICU Medical Inc. settles these expenses with Wells Fargo and invoices the applicant for reimbursement. The applicant argues that these reimbursements do not constitute a "supply" under GST law as they are merely logistical arrangements without any element of income or consideration, citing various case laws to support this interpretation. However, the Authority for Advance Ruling (AAR) examined the contractual and operational details, noting that ICU Medical Inc. bears financial and legal obligations for the credit cards. The cards are issued for business purposes, and the applicant reimburses ICU Medical Inc. for these expenses. The AAR concluded that this arrangement constitutes a "service" under Section 2(102) of the CGST Act, as it involves consideration for the use of credit cards provided by ICU Medical Inc. to the applicant's employees for business purposes. Thus, the transaction qualifies as a "supply" under Section 7 of the CGST Act. Issue 2: Applicable GST RateHaving established that the transaction is a supply of services, the AAR classified it under SAC 997113, which includes "credit-granting services." This classification covers various forms of credit services, including those extended through credit cards for business-related expenses. According to Notification 10/2017-Integrated Tax (Rate) dated 28.06.2017, services supplied by a person located in a non-taxable territory to a person in a taxable territory are subject to IGST on a reverse charge basis. The applicable rate of IGST for financial and related services, as per Sl.No.15 of Notification 08/2017-Integrated Tax (Rate) dated 28.06.2017, is 18%. Ruling:1. Leviability of GST: The applicant is liable to pay IGST on the reimbursement of credit card expenses to ICU Medical Inc. under the reverse charge mechanism. 2. Rate of GST: The applicable rate of IGST is 18%. Conclusion: The AAR ruled that the reimbursement of expenses from the Subsidiary Company to its Ultimate Holding Company constitutes a supply of services under GST law, subject to IGST at the rate of 18% on a reverse charge basis.
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