2022 (7) TMI 410 - AAR - GST

Taxability - transaction of the Applicant of providing space on its web-portal for advertisements provided by a foreign entity i.e., Lenzing Singapore Pte Limited for a consideration - correct classification of the services provided and rate of tax on the transaction of the Applicant of providing space on its web-portal for advertisements provided by a foreign entity i.e., Lenzing Singapore Pte Limited - HELD THAT - The services provided by the applicant to M/s Lenzing is that of rendering Sale of internet Advertising Space (except on commission) and is charging a fixed rate and not a commission for providing such space. Hence the same is classified under six-digit SAC 998365 under the Heading 9983 which reads Other professional, technical and business services - The services provided by the applicant are covered under the Heading 9983 which reads Other professional, technical and business services and the same is taxable as per SI.No.21 of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017. The applicant, i.e the supplier of services M/s Myntra Designs Pvt Ltd is located in India, the recipient of services, M/s Lenzing Singapore Pte Ltd. is located outside India, and the consideration is received in convertible foreign exchange and the Applicant and the overseas entity are two separate legal entities as per the agreement. The only issue to be decided is whether place of supply is outside India or not and this is outside the jurisdiction of this Authority. Unless this is decided, the question, Whether the transaction of the Applicant of providing space on its web-portal for advertisements provided by a foreign entity i.e., Lenzing Singapore Pte Ltd. for a consideration, is taxable? canriot be answered.

Summary

Issues:
1. Admissibility of the application for advance ruling.
2. Taxability of providing space on a web portal for advertisements by a foreign entity.
3. Correct classification and tax rate for the services provided.

Admissibility of the Application:
The application for advance ruling was deemed admissible under Section 97(2)(a) of the CGST Act 2017 as it pertained to the "Classification of any goods or services or both."

Taxability of Providing Advertisement Space:
The applicant, an e-commerce company, sought a ruling on the taxability of providing advertisement space on its web portal to a foreign entity, Lenzing Singapore Pte Ltd. The applicant argued that this activity constituted 'export of services' under the IGST Act, as the consideration was received in foreign exchange. However, the authority noted that the determination of the place of supply was crucial in deciding the taxability of the transaction. As this issue fell outside the authority's jurisdiction, no advance ruling was provided on this aspect.

Correct Classification and Tax Rate:
The authority determined that the services provided by the applicant fell under SAC 998365, categorized as "Sale of internet Advertising Space (except on commission)" under Heading 9983. These services were found to be taxable at 9% CGST and 9% SGST, as per SI.No.21 of Notification No. 11/2017-Central Tax (Rate) dated: 28.06.2017.

In conclusion, while the application was admissible for ruling on the classification and tax rate of services provided, the determination of taxability based on the place of supply was deemed outside the authority's purview. The ruling clarified the correct classification and tax rate applicable to the services offered by the applicant on their e-commerce portal for advertisements.