2020 (4) TMI 694 - AAR - GST

Classification of services - Leasing of Satellite Transponder - covered under SAC 997319 as per HSN Code 8803-parts goods of Heading 8802 (Satellites) from the date of commencement of the service-Leasing of Satellite Transponder or not - rate of GST @ 5% or not - Notification No. 08/2017-Integrated Tax (Rate) dated 28.06.2017 - HELD THAT - In the instant case satellite transponders had been leased out. Therefore the rate of tax applicable on the service of leasing of the satellite transponders shall be the same as the rate of tax as applicable on the supply of the satellite transponders. Classification of goods - determination of the rate of tax on supply of service of leasing of satellite transponders - HELD THAT - The transponder essentially is a repeater which receives the signal transmitted from earth station on the uplink, amplifies the signal, converts to a dissimilar frequency and retransmits the same on the downlink. Therefore the essential / significant features of amplification and frequency conversion are done by the key payload of the communication satellite i.e. the transponder. Therefore the transponder becomes an integral part of the communication satellite, without which the communication satellite becomes defunct. In the instant case the transponder is a key payload of communication satellite and hence cannot form part of ground segment but is essentially a part of space segment and more specifically the main part to the communication satellite without which the communication satellite becomes defunct. Therefore transponders located on the communication satellite are not covered under the Heading 85256092. Communication Satellite Transponders are appropriately classifiable under Tariff Heading 8803, more specifically under 8803 90 00 - Transponders, being parts of communication satellites, are covered under 8803 90 00 and any leasing of such transponders would be covered under the Entry No.17 of Notification No. 11/2017 - Central Tax (Rate) dated 28th June 2017 at the rate applicable as on the supply of like goods involving the transfer of title in goods. Admittedly the transponders are goods and any transfer of right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration is covered under the clause (viii) of Entry No. 17 of the said Notification. Thus, the applicant is into supply of Leasing of Transponder service only. Therefore it is pertinent to mention here that in case if the applicant is into any other supply, in addition to the instant supply, then the ruling in this case will not be applicable. In such cases, the supply need to be examined whether it amounts to composite supply or mixed supply and accordingly the rate of tax need to be determined.

Summary

Issues Involved:
1. Whether leasing of satellite transponder services, covered under SAC Code 997319, should be charged at 5% GST as per HSN Code 8803.
2. Whether the applicant can levy GST at 5% for leasing of satellite transponder services from the date of commencement of the service.

Issue-wise Detailed Analysis:

Issue 1: Classification and Tax Rate for Leasing of Satellite Transponder Services
The applicant, a government entity under the Department of Space, provides leasing services for satellite transponders. They argued that these services fall under SAC 997319 and should be taxed at 5% GST, as transponders are parts of satellites classified under HSN Code 8803. The Authority examined the nature and characteristics of satellite transponders, noting that they are integral parts of communication satellites, performing essential functions like signal amplification and frequency conversion. The transponders are not ground-based equipment but are key components of the space segment. Therefore, they do not fall under "Other Satellite Communication Equipment" classified under HSN 8525 but are appropriately classified under HSN 8803 as parts of satellites. Consequently, the leasing of these transponders is taxable at 5% IGST, as per Entry No. 245 of Schedule I to Notification No. 1/2017-Integrated Tax (Rate).

Issue 2: Applicability of 5% GST from the Date of Service Commencement
The applicant sought clarification on whether they could retroactively apply the 5% GST rate from the date of service commencement. The Authority ruled that if GST has already been charged and collected under any invoice, the applicant cannot retroactively apply the 5% rate. Any excess tax collected must be paid to the government within the specified time, and corrections should be made through the debit note-credit note mechanism, as outlined in Section 34 of the CGST Act.

Ruling:
1. The service of leasing satellite transponders, covered under SAC 997319, falls under Entry No. 17 (viii) of Notification No. 8/2017-Integrated Tax (Rate) and is taxable at 5% IGST.
2. The applicant cannot levy GST at 5% retroactively if tax has already been charged and collected. Any excess tax collected must be paid to the government, and corrections should be made through the debit note-credit note mechanism, subject to conditions specified in Section 34 of the CGST Act.