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2020 (12) TMI 836 - AAR - GSTSupply of services or not - supply of electric transformers, static converters, electric wires/ cables for transmission of electricity, equipment for spark ignition, installation and commissioning services - Applicant's holding company, desires to join the 'develoPPP.de programme' (said program) run by the German Federal Ministry for Economic Cooperation and Development. Pretti GmbH desires to provide financial assistance of 540,000 Euro to the Applicant under the said program - financial assistance to be received by the Applicant is a consideration for supply or not - Section 7 of the Central Goods and Services Tax Act, 2017 / Maharashtra Goods and Services Tax Act, 2017 - exempted supply or on taxable supply - Zero Rated Supply or not - export of services or not - reversal of input tax credit - classifiable under SAC 9997 or otherwise?. Whether the financial assistance to be received by the Applicant is a consideration for supply and whether their activity is covered under the meaning of supply of services in terms of Section 7 of the GST Act? - HELD THAT - We agree with the applicant that, the charging event under GST law is supply of goods or services for consideration. Any payment will be treated as 'consideration' only if it is made against supply of goods and services. We will therefore discuss, whether the activities undertaken by applicant, in terms of the service contract, constitutes a supply' or not - This argument of the applicant that, the financial assistance to be received, is a mere transaction in money and not against supply of goods or services, is not acceptable. The develoPPP.de project' intends to promote investments of German companies in India. Accordingly, Prettl Gmbh has asked the applicant to undertake some activities for which financial assistance is provided. Applicant contends that, there is no supply flowing from them to Prettl Gmbh. We do not agree with this view. The activities undertaken by the applicant are in pursuance of a service agreement with Prettl Gmbh and the amount received/to be received is also in pursuance of the same agreement. Further, activities undertaken by the applicant are to promote the investments of German companies in India and are undertaken only on the directions of Prettl Gmbh. In the entire agreement it is seen that, the said agreement is for provision of services. Prettl Gmbh is treated as a Service Recipient and the applicant is treated as a service provider. We also find, from the agreement that, applicant has agreed to provide certain services for which they will be paid some amounts. The applicant is terming these amounts as financial assistance whereas it is very clear from the agreement that the said amounts must be treated as consideration since they are being given to the applicant in lieu of certain supply of services to be effected by the applicant on the directions of Prettl Gmbh, i.e. the holding company - Hence, as per the agreement, applicant has consented/agreed to do some acts and as per clause 5 of Schedule II appended to GST Act, 'an agreement to do an act' will be considered as supply of services. Hence in the subject case, we hold that the applicant is rendering supply of services for which it is receiving consideration in the form of financial assistance . We do not agree with the jurisdictional office that, there is no supply in the subject case. If the above activity is considered as supply of service, then whether the same is classifiable under SAC 9997 as other services nowhere else classified under Sr. no 35 of the Notification-11/2017- C.T. (Rate) dated 28th June 2017 / Sr. no 35 of the Notification-11/2017-S.T. (Rate) dated 29th June 2017 / sr. no 35 of the Notification 8/2017-I.T. (Rate) dated 28th June 2017? - HELD THAT - In the subject case it cannot be said that the applicant is involved in education per se since the element of normal schooling is absent. Further, the Applicant has also agreed that it is not imparting any classroom training, knowledge lessons thereby not running any educational institution also not issuing any degree or diploma certificate to students beneficiaries. In fact, the applicant has submitted that they are not providing any Education services to anyone - the entire activities undertaken by the applicant are only as per the impugned contract, implying that, in the absence of such contract, the applicant would not undertake the said activities. Hence it is clear that, the applicant is obliged to perform the subject activity, i.e. to do an act, under the terms of the impugned agreement. We do not agree with the submissions made by the applicant with respect to classification of services rendered by applicant - the applicant has agreed to do acts under the impugned contract and therefore their supply is to be classified under SAC Heading 999792 which pertains to Agreeing to do an Act . Whether the said activity, if considered as supply of service, is covered as Zero Rated Supply and qualifies as export of service under the provisions of IGST Act, 2017 and can be exported without payment of IGST? - HELD THAT - The clause (e) of Section 97 (2) of the CGST Act, 2017 has got a very wide connotation and would cover all sorts of transactions, where the Advance Ruling on the questions related to the determination of the liability to pay tax can be sought by the Applicant - The subject transaction satisfies the conditions mentioned in clauses (i), (ii), (iv) and (v) of Section 2 (6) of the Integrated Goods and Services Tax Act, 2017 (IGST Act). However to be considered as Export of Services as per the GST Laws clause number (iii) with respect to Place of Supply of Services should be outside India. Whether the subject transaction is taxable or otherwise can be decided only by discussing the place of supply. Place of supply - HELD THAT - The impugned Service Contract requires the applicant to; construct a training center; implement training measures for trainers, apprentices, unskilled workers, students or college graduates as well as integration of teaching content at four educational institutes; train vocational students from the Industrial Training Institute Pune and Don Bosco; train unskilled workers to become mechanics, electricians, technicians; etc. As per Section 13 (5) of the IGST Act, the place of supply of services supplied by way of admission to, or organisation of a cultural, artistic, sporting, scientific, educational or entertainment event, or a celebration, conference, fair, exhibition or similar events, and of services ancillary to such admission or organisation, shall be the place where the event is actually held - the entire gamut of supply as per the agreement between the applicant and Prettl GMBH, will be performed in India and therefore we have no hesitation in holding that the place of supply, being event based in the subject case, is in India. The subject transaction does not satisfy the condition mentioned in clauses (iii) of Section 2(6) of the Integrated Goods and Services Tax Act, 2017 (IGST Act) and therefore the said transaction cannot be considered as Export of Services under the GST Laws.
Issues Involved:
1. Whether the financial assistance received by the Applicant is a consideration for supply and the activity is covered under the meaning of supply of services as per Section 7 of the CGST Act, 2017 / MGST Act, 2017. 2. If not considered as 'supply of services,' whether the activity is to be considered as 'exempted supply' or 'non-taxable supply' and the corresponding input tax credit reversal in accordance with Section 17 of CGST Act, 2017 / MGST Act, 2017 read with Rule 42 of CGST Rules, 2017 / MGST Rules, 2017. 3. If considered as supply of service, whether the same is classifiable under SAC 9997 as other services nowhere else classified under Sr. No. 35 of the Notification-11/2017- C.T. (Rate) dated 28th June 2017 / Sr. No. 35 of the Notification-11/2017-S.T. (Rate) dated 29th June 2017 / Sr. No. 35 of the Notification 8/2017- I.T. (Rate) dated 28th June 2017. 4. If considered as supply of service, whether the same is covered as 'Zero Rated Supply' and qualifies as 'export of service' under the provisions of IGST Act, 2017 and can be exported without payment of IGST. Issue-wise Detailed Analysis: 1. Whether the financial assistance received by the Applicant is a consideration for supply and the activity is covered under the meaning of supply of services as per Section 7 of the CGST Act, 2017 / MGST Act, 2017: The applicant contended that the financial assistance received is not a consideration for supply of any goods or services. However, the Authority observed that the activities undertaken by the applicant are in pursuance of a service agreement with Prettl GmbH, and the financial assistance is provided for these services. The definition of 'supply' under Section 7 of the CGST Act includes activities like agreeing to do an act, which applies here. Therefore, the financial assistance is considered as consideration for supply of services, and the activity is covered under the meaning of supply of services. 2. If not considered as 'supply of services,' whether the activity is to be considered as 'exempted supply' or 'non-taxable supply' and the corresponding input tax credit reversal in accordance with Section 17 of CGST Act, 2017 / MGST Act, 2017 read with Rule 42 of CGST Rules, 2017 / MGST Rules, 2017: Since the activity is considered as supply of services, this question does not arise. 3. If considered as supply of service, whether the same is classifiable under SAC 9997 as other services nowhere else classified under Sr. No. 35 of the Notification-11/2017- C.T. (Rate) dated 28th June 2017 / Sr. No. 35 of the Notification-11/2017-S.T. (Rate) dated 29th June 2017 / Sr. No. 35 of the Notification 8/2017- I.T. (Rate) dated 28th June 2017: The applicant suggested that the services might fall under SAC 9997 as other services nowhere else classified. The Authority observed that the applicant is required to perform a gamut of services under the contract, which are agreed to be undertaken as per the requirements of Prettl GmbH. The services are classified under SAC Heading 999792, which pertains to 'Agreeing to do an Act.' 4. If considered as supply of service, whether the same is covered as 'Zero Rated Supply' and qualifies as 'export of service' under the provisions of IGST Act, 2017 and can be exported without payment of IGST: To qualify as 'export of services,' the place of supply must be outside India. The Authority noted that the entire gamut of services under the agreement will be performed in India. As per Section 13(5) of the IGST Act, the place of supply for services related to educational events is where the event is held, which in this case is India. Therefore, the transaction does not qualify as 'export of services,' and hence, it does not qualify as 'Zero Rated Supply.' Order: 1. The financial assistance received by the Applicant is considered as consideration for supply of services. 2. The question regarding exempted or non-taxable supply does not arise as the activity is considered a supply of services. 3. The supply of service is classifiable under SAC 999792. 4. The activity does not qualify as 'Zero Rated Supply' and cannot be exported without payment of IGST.
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