2021 (1) TMI 434 - AAR - GST

Levy of CGST and SGST or IGST - Business Auxiliary Services - intermediary services or not - applicant entered into an agreement with Tsudokoma Corporation, Japan to sell their machinery and against the said services, they are receiving commission income from Japan in foreign currency - reverse charge mechanism. What is the nature of the transaction carried out by the applicant? - HELD THAT - As per the submission of the applicant, they have entered into an agreement with Tsudokoma Corporation, Japan to sell their machinery and against the said services, they are receiving commission income from Japan in foreign currency. Based on the submission of the applicant as well as the arguments and discussions made by the representative of the applicant during the course of personal hearing, it appears that the services provided by the applicant are in the nature of services of commission agents or commodity brokers who negotiate between buyers and sellers as a facilitator for the supply of goods for which they are paid a fee or commission. The said service can also be called as intermediary services . Sub-section(2) of Section 13 specifically provides that the place of supply of services except the services provided in sub-sections (3) to (13) shall be the location of the recipient of services provided that where the location of the recipient of services is not available in the ordinary course of business, the place of supply shall be the location of the supplier of services. In the instant case, the supplier of service is the applicant and the service recipient is M/s. Tsudokoma Corporation, Japan. The services provided by the applicant i.e. intermediary services appears at Sub-Section(8)(b) of Section 13. Also, sub-section (8) clearly mentions that the place of supply in respect of the services described under the said sub-section shall be the location of the supplier of services. Further, the supplier in the instant case is the applicant and the location of the said supplier is in Ahmedabad, Gujarat. Now, since the location of the applicant, who is supplier of services, is in Gujarat and both the supplier of service as well as the place of supply of service is in Gujarat, the supply of services would be considered akin to intra-state supply of services and would be liable to CGST and SGST (as per the provisions of Section 9(1) of the CGST Act, 2017). Therefore, the present procedure/course of GST payment followed by the applicant i.e. payment of CGST and SGST on the services provided by them, is correct. Further, the applicant would be liable to pay GST at the rate of 18% in terms of the provisions of Notification No 11/2017-Central Tax (Rate) dated 28.06.2017.

Summary

Issues:
Determining whether the services provided by the applicant are liable to CGST and SGST or IGST based on the nature of the transaction.

Analysis:
The applicant entered an agreement with a Japanese corporation to sell machinery and receive commission income. They faced issues with GST payments and refunds due to classification errors. The applicant sought an advance ruling on whether to charge CGST and SGST or IGST for their services. The Authority considered the nature of the transaction, defined as intermediary services under Section 2(13) of the IGST Act, 2017. The services were classified under Heading 9961, attracting 18% GST liability as per relevant notifications.

The determination of CGST and SGST or IGST liability depends on the type of supply and place of supply. Since the recipient was located outside India, Section 13 of the IGST Act, 2017 was referenced to ascertain the place of supply. Sub-section (8)(b) of Section 13 specified that the place of supply for intermediary services is the location of the supplier. As the applicant was located in Gujarat, the supply was considered intra-state, making them liable for CGST and SGST at 18%.

In conclusion, the Authority ruled that the applicant is liable to pay GST at the rate of 18% (9% CGST + 9% SGST) based on the nature of the transaction.