2021 (4) TMI 937 - AAAR - GST

Levy of GST - reimbursement of the subsidiary company to its ultimate holding company located in a foreign territory outside India - rate of GST - HELD THAT - GST is to be paid on such amounts of expenses reimbursed at the time determined as per Section 13 of the GST Act, as it represents the part of consideration received in advance by the appellant from its recipient (notwithstanding that the same is later included in tax invoice of the appellant) and to be paid at the time of reimbursement as by then the actual expenses borne by the recipient is known. Rate of GST - HELD THAT - The applicable rate of GST on such expenses incurred by the recipient and reimbursed by the appellant is the same rate at which the appellant charges for the software development service supplied by the appellant to the overseas holding company, on the ground that the expenses are part of the taxable value of such services and attract the same rate indicated in the tax invoice for the software development charges issued by the appellant on the overseas holding company. Appeal disposed off.

Summary

Issues:
1. Rectification of errors in the order by the Appellate Authority.
2. Binding nature of Advance Ruling under Sections 102 and 103 of the Act.
3. Declaration of void Advance Ruling under Section 104.
4. Appeal filed under Section 100 against the Order of the State Authority for Advance Ruling.
5. Clarification sought on GST applicability on reimbursement to a foreign holding company.
6. Determination of GST rate on reimbursement of expenses.
7. Grounds of appeal against the decision of the State Authority for Advance Ruling.
8. Personal hearing granted to the Appellant.
9. Discussion and findings by the Appellate Authority.

Rectification of Errors:
The Appellate Authority can rectify errors in the order if noticed within six months, as per Section 102 of the Act, provided it does not enhance tax liability or reduce input tax credit. Section 103 states that Advance Rulings are binding on the applicant and concerned officers unless facts or circumstances change. Section 104 allows voiding an Advance Ruling obtained by fraud or misrepresentation.

Binding Nature of Advance Ruling:
An Advance Ruling pronounced by the Appellate Authority is binding on the applicant and concerned officers, subject to changes in law or facts as per Section 103. The ruling can be voided if obtained through fraud or misrepresentation under Section 104.

Appeal and Grounds:
The appeal was filed against the Order of the State Authority for Advance Ruling, seeking clarification on GST applicability and rate on reimbursement to a foreign holding company. Grounds of appeal included contentions that the reimbursement is not a supply, the holding company is not an intermediary, and errors in the State Authority's decision.

Discussion and Findings:
The Appellate Authority found that reimbursements to the holding company were part of software development costs and constituted consideration received by the appellant. It determined that GST was applicable on such reimbursements as part of the consideration received in advance. The GST rate was to be the same as that charged for software development services.

This detailed analysis covers the rectification of errors, binding nature of Advance Rulings, the appeal process, grounds of appeal, and the final discussion and findings by the Appellate Authority regarding the GST applicability and rate on reimbursements to a foreign holding company.