2024 (10) TMI 714 - AAR - GST

Levy of GST on the charges paid to the Railways on behalf of Operator and those charges were recovered from the Operator - scope of supply - pure agent service or not - If charges paid to the Railways on behalf of Operator were not come under the scope of the pure agent or liable to be tax then what will be the tax Rate? Scope of supply - Whether GST is required to be paid on the charges paid to Railways on behalf of operator and those charges recovered from operator? - HELD THAT - As per Agreement entered between Applicant and Indian Railways, the later has supplied various services to the Applicant wherein some of them are taxable and Indian Railways has not entered any Agreement with the operator at all, As the Applicant being recipient of service from the Indian Railways hence required to pay the GST on the charges paid to the Indian Railways and Applicant has sub-late this task to the operator for smooth operation Of Palace On Wheels (POW), operator is supposed to pay the charges to the Applicant and not Indian Railways along with GST as per terms and conditions Of Agreement dated 28.06.2023 entered between them (Rajasthan Tourism Development Corporation Ltd. and the operator). Why not the said charges were come under the scope of the pure agent? - HELD THAT - A pure agent is a registered taxable person who liaises between other suppliers on behalf of his client. Under this concept, While providing services to the client, he also undertakes to receive other ancillary services from other service providers, and incurs expenditure on behalf Of his client - Since the Applicant has not procured any additional service, there is no question of holding to the title of service and therefore they cannot use any service for their own interest. Since none of the condition of Pure Agent enumerated in a rule 33 of CGST Rule,2017is met, the Applicant cannot act as Pure Agent. As they are not Pure Agent, they are required to pay GST on the taxable supply received from Indian Railways. lf charges paid to the Railways on behalf of Operator were not come under the scope of the pure agent or liable to be tax then what will be the tax Rate? - HELD THAT - Yes, the charges are paid to the Indian Railways by the Applicant and not operator and therefore are leviable to GST as per the rate given below 1. Registration Fee @ 18% 2. Haulage Charges @ 5% 3. Right to Use (RU) @ 18% 4. Stabling Charges @ 18% 5. Station User Fee @ 5% 6. Cancellation Charges @ 5% 7. Security Deposit - Though no GST is leviable on this amount but if it is adjusted against any aforesaid charge, then GST will be charged according to that charges.

Summary

Issues Involved:

1. Whether Goods and Service Tax (GST) is required to be paid on charges paid to the Railways on behalf of the Operator and recovered from the Operator.
2. Whether the said charges fall under the scope of a "pure agent."
3. If the charges do not fall under the scope of a pure agent, what will be the applicable tax rate?

Issue-wise Detailed Analysis:

1. GST Requirement on Charges Paid to Railways:

The applicant, Rajasthan Tourism Development Corporation Limited (RTDC), sought clarification on whether GST is applicable on charges paid to the Railways on behalf of the Operator. According to the judgment, RTDC, as the recipient of services from Indian Railways, is required to pay GST on the charges paid to the Railways. The agreement between RTDC and the Operator stipulates that the Operator is responsible for reimbursing these charges to RTDC, including GST. The ruling emphasized that RTDC is the recipient of the service from Indian Railways and, hence, must pay GST on the charges, which are subsequently recovered from the Operator.

2. Scope of Pure Agent:

The judgment examined whether RTDC could be considered a "pure agent" under Rule 33 of the CGST Rules, 2017. A pure agent is defined as someone who incurs expenses on behalf of another party without holding any title to the goods or services procured. The ruling found that RTDC does not fulfill the conditions required to be a pure agent. Specifically, RTDC did not have a contractual agreement with the Operator to act as a pure agent, did not make payments to Indian Railways on authorization by the Operator, and did not separately indicate these payments in invoices as pure agent expenses. Therefore, the charges paid by RTDC to Indian Railways do not fall under the scope of a pure agent.

3. Applicable Tax Rate if Not a Pure Agent:

Since RTDC is not considered a pure agent, the judgment specified the applicable GST rates for various charges paid to Indian Railways. The rates are as follows:
- Registration Fee: 18% GST
- Haulage Charges: 5% GST
- Right to Use (RU) Charges: 18% GST
- Stabling Charges: 18% GST
- Station User Fee: 5% GST
- Cancellation Charges: 5% GST
- Security Deposit: No GST unless adjusted against other charges.

In conclusion, the ruling determined that RTDC must pay GST on the charges paid to Indian Railways, as they do not qualify as a pure agent. The applicable GST rates for these charges are outlined in the judgment.