2025 (4) TMI 418 - AAR - GST

Scope of Advance Ruling application - Rate of GST - Whether the rate of GST reimbursable to M/s. Tata Projects Limited Mumbai shall be 5% as per the Bill of Entry or 12% considering that the overall contract falls within the definition of the Works Contract? - HELD THAT - From the statement of facts furnished by the applicant in their application and from the submissions made during the personal hearing it is understood that the determination of the liability to pay tax vests with the contractor M/s. Tata Projects Limited Mumbai in the instant case and not with the applicant. Therefore it becomes clear that in this case the assessment to tax does not relate to the applicant who happens to be the recipient of service only and the question raised in the application for advance ruling is about reimbursement of charges to the supplier of service. As the said question does not fit into any of the clauses at (a) to (g) of Section 97 (2) of the CGST Act 2017 thus no ruling could be pronounced in this regard. The applicant did not file any reply to the notice issued. A reminder dated 14.03.2025 reiterating the contents of the original notice was also issued to the applicant which was sent by RPAD and through email. However we bring to note that till date the taxpayer has not filed any reply to the notice and the reminder which were sent to them on 26.02.2025 and 14.03.2025 respectively. Hence it is construed that the applicant has no reason to file and in view of the same it is opined that no ruling could be pronounced in this case. Conclusion - No ruling is issued in this case as the question put forth by the applicant does not fall under the scope of Section 97(2) of the CGST/TNGST Acts 2017.

Summary

1. ISSUES PRESENTED and CONSIDERED

The primary legal question considered by the Authority for Advance Ruling (AAR) was whether the rate of GST reimbursable to the contractor, M/s. Tata Projects Limited, on Customs Duty should be 5% as per the Bill of Entry or 12% considering the overall contract falls within the definition of a Works Contract under GST law. Specifically, the issue was framed as a determination of the liability to pay tax on the reimbursable GST amount claimed by the contractor in relation to imported materials under a turnkey contract for establishment of an Integrated Cryogenic Engine and Stage Test Facility.

In addition, the AAR considered whether the applicant, being the recipient of services and not the supplier, was entitled to seek an advance ruling on the question posed, in light of the scope of Section 97(2) of the CGST Act, 2017, which enumerates the categories of questions eligible for advance ruling.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Whether the GST reimbursable on Customs Duty to the contractor should be 5% or 12%?

Relevant legal framework and precedents: The question relates to the interpretation of GST rates applicable on reimbursement of Customs Duty and IGST on imported goods under a works contract. The GST Act defines "Works Contract" and prescribes rates applicable to such contracts. Section 97(2) of the CGST Act lists the types of questions on which advance rulings can be sought, including determination of liability to pay tax.

Court's interpretation and reasoning: The AAR noted that the applicant's contract was a turnkey project involving supply of indigenous and imported materials and services. The contractor imports goods at concessional customs duty and IGST rates, but invoices the applicant with GST at 12% treating the transaction as a works contract service. The applicant sought clarity on whether reimbursement of GST should be at 5% (as per Bill of Entry) or 12% (as per works contract rate).

Key evidence and findings: The applicant submitted the contract, invoices, and Bills of Entry showing customs duty and GST charged. It was found that the contractor's liability to pay tax arises in relation to the supply of goods and services to the applicant. The applicant is only reimbursing the contractor and is not the supplier of goods or services themselves.

Application of law to facts: The AAR applied Section 97(2) which restricts advance ruling to certain categories of questions. It observed that the determination of liability to pay tax is vested with the contractor (supplier), not the applicant (recipient). Hence, the question raised by the applicant regarding the reimbursable GST rate does not fall within the scope of advance ruling as the applicant is not the person liable to pay tax.

Treatment of competing arguments: The applicant argued that since the overall contract was a works contract, the 12% GST rate should apply. However, the AAR emphasized that the question relates to the contractor's tax liability, not the applicant's. The applicant's role as recipient and reimburser does not entitle them to seek advance ruling on this issue.

Conclusions: The AAR concluded that the question of GST rate on reimbursement to the contractor does not fit within the categories enumerated under Section 97(2) and therefore no ruling could be pronounced on this issue.

Issue 2: Whether the applicant is entitled to seek advance ruling on the question posed?

Relevant legal framework and precedents: Section 95(a) of the CGST Act defines "Advance Ruling" as a determination by the Authority on questions relating to supply of goods or services by the applicant who undertakes or proposes to undertake such supply. Section 97(2) specifies the types of questions eligible for advance ruling.

Court's interpretation and reasoning: The AAR observed that the applicant is not the supplier of goods or services but the recipient and payer of reimbursement. The contractor is the supplier and liable to pay GST. Hence, the applicant does not fall within the definition of "applicant" entitled to seek advance ruling on the supply-related question.

Key evidence and findings: Correspondence from jurisdictional authorities confirmed no pending proceedings against the applicant on this issue. The applicant was given opportunity to respond to a notice pointing out the ineligibility to seek advance ruling, but no reply was filed.

Application of law to facts: The AAR applied the statutory provisions and found that the applicant's question does not fall within the scope of advance ruling as the applicant is not undertaking supply of goods or services. The question relates to the contractor's tax liability and reimbursement claims, which are outside the applicant's purview for advance ruling.

Treatment of competing arguments: The applicant did not respond to the notice challenging their eligibility. The AAR relied on statutory language and absence of contrary submissions to hold that the applicant is not entitled to seek advance ruling in this matter.

Conclusions: The AAR held that the applicant is not entitled to seek advance ruling on the question posed and therefore the application is not maintainable.

3. SIGNIFICANT HOLDINGS

"As per the definition of 'Advance Ruling', as laid down in Section 95 (a) of the CGST Act, 2017, only the applicant who undertakes, or who proposes to undertake supply of goods/services can seek advance ruling in relation to supply of goods or services."

"From the statement of facts furnished by the applicant in their application and from the submissions made during the personal hearing, we come to understand that the determination of the liability to pay tax vests with the contractor M/s. Tata Projects Limited, Mumbai, in the instant case, and not with the applicant. Therefore, it becomes clear that in this case, the assessment to tax does not relate to the applicant, who happens to be the recipient of service only."

"The question raised in the application for advance ruling is about reimbursement of charges to the supplier of service. As the said question does not fit into any of the clauses at (a) to (g) of Section 97 (2) of the CGST Act, 2017, as enumerated above, we are of the considered opinion that no ruling could be pronounced in this regard."

"No ruling is issued in this case, as the question put forth by the applicant does not fall under the scope of Section 97(2) of the CGST/TNGST Acts, 2017."

The core principle established is that only the person who undertakes or proposes to undertake the supply of goods or services is entitled to seek advance ruling on questions relating to such supply. Questions relating to reimbursement of tax by a recipient to a supplier, where the recipient is not liable to pay tax, do not fall within the scope of advance ruling under Section 97(2) of the CGST Act.

Accordingly, the final determination was that the application for advance ruling was not maintainable and no ruling could be issued on the question of GST rate applicable on reimbursement of Customs Duty to the contractor under the works contract.