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TMI Blog2019 (2) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... for the same. Whether invoice for quality claim raised by the Applicant on POSCO Daewoo Corporation located in Korea will be treated as '“export of service”? - Held that:- In the present case, in respect of the so called defective goods they have not stated whether the goods were sold as such to their clients or whether the goods were sold to their customers after they have carried out “low value-added processing function in respect of some of the traded goods based on customer's requirements - the complete details regarding the transaction have not been submitted by them and therefore this issue is not answered. Whether recovery of Parents Health Insurance expenses from employee in respect of the insurance provided by the Applicant amounts to “supply of service” under Section 7 of the Central Goods and Service Tax Act, 2017(CGST Act, 2017)? - Time of supply - value of supply - input tax credit of GST charged by the insurance company - Held that:- Appellant are not rendering any services of health insurance to their employees and hence there is no supply of services in the instant case. Since there is no supply, we do not find the need to answer the second part of this quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FACTS OF THE CASE 1. We, M/s. POSCO-India Pune Processing Center Pvt. Ltd, (hereinafter referred to as the Applicant ) are South Korea based company. The Applicant is situated at Talegaon, MIDC, Taluka Maval, village Navlakh Umbhre. District Pune. The Applicant is primarily engaged in distribution of steel coils. In certain cases, the Applicant also performs low value-added processing function in respect of some of the traded goods based on customer's requirements. The Applicant has two plants at Pune, one plant at Hyderabad and distribution centers at Pune, Bangalore and Hyderabad. The Applicant is also paying GST under reverse charge mechanism under import of services, transport of goods by road, legal service etc. 2. As per POSCO group policy, key personnel are deputed to the Indian POSCO group companies. Accordingly, Managing Director (hereinafter referred to as the MD ) and General Manager (hereinafter referred to as the GM ) of POSCO-IPPC are deputed from POSCO overseas entity. 3. In the resent case, both the above key personnel have relocated to India without family. Therefore, as per the terms of deputation, instead of making payment in cash, the MD and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Parents Health Insurance expenses from employee in respect of the insurance provided by the Applicant amounts to supply of services under Sec. 7 of the Central Goods Service Tax Act, 2017(CGST Act,2017) ? 2. If the said recovery amounts to supply , what will be the time of supply and value of the said supply? 3. Whether the Applicant can claim input tax credit of GST charged by the insurance company? FACTS OF THE CASE 1. It is the practice of the Applicant to provide mediclaim cover to the employees as well as to their parents. 2. In case of Parent Insurance facility, the Applicant initially pays the entire premium along with taxes and then 50% of the premium is recovered from the respective employees on a monthly basis. (Copy of the Company Policy is enclosed and marked as Annexure D ) 3. The Applicant would like to know whether GST is payable on recovery of 50% of the insurance premium from the salary of the employees. If yes, then what is time of supply and the value on which CST is payable. Also whether the Applicant can claim input tax credit of GST charged by the insurance company. Additional submissions on 10th July, 2018 Statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation with all good facilities is pre-requisite for working efficiently in India. 3. Considering the language constraint, finding a good accommodation is a stressful and time consuming activity and requires local assistance. If the Applicant asks the MD and the GM to arrange for accommodation on their own, it would become a stressful activity for the MD and the GM would definitely have a bearing on the business activities for which they have been deputed to India. Accordingly, considering the cost of the hotel accommodation vis-a-vis the benefit that would arise if the MD and the GM concentrate on only business activities, the Applicant has itself arranged one-bedroom apartment in the hotel and all the cost and related compliances with respect to the same are taken care by the Applicant so that the MD and the GM can concentrate mainly on business activities. 4. Providing rent-free accommodation to the expatriate employees is generally accepted business practice across most of the businesses in India. 5. The said expenditure is included as a part of salary of the MD and the GM as per the Income Tax Act, 1961. It is worth important to submit here that the Income Tax Departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed payment in foreign currency against Tax Invoice raised towards recovery of loss. Further, as per the provisions of Section 34 (1) of the CGST Act, 2017, where goods or services or both supplied are found to be deficient, the registered person, who has supplied Such goods or services or both, may issue to the recipient a credit note. Text of Section 34 (1) is reproduced below for your ready reference: 34. (1) Where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient a credit note containing such particulars as may be prescribed. The term registered person is defined u/s 2 (94) of the CGST Act, 2017. AS defined, registered person means a person who is registered under section 25 but does not include a person having a Unique Identity Number. In the present case, the foreign supplier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant is located in India; ii) The recipient of service i.e. POSCO Daewoo Corpn/POSCO Asia Company Ltd is located in Korea i.e. outside India; iii) As per the provisions of Section 13 of the IGST Act, 2017, this service is not covered under any of the provisions therefore, as per general clause mentioned under Section 13(2) of the IGST Act, 2017, the place of supply of services except the services specified in sub-sections (3) to (13) shall be the location of the recipient of services. In the present case, the recipient of service is located in Korea therefore, the place of supply is Korea i.e. outside India; iv) The payment of such service has been received by the Applicant in convertible foreign exchange; and v) The Applicant and POSCO Daewoo Corporation, Korea are not merely establishments of a distinct person in accordance with Explanation 1 in Section 8. Thus, based on the above submissions, the Applicant is of the view that the above transaction is covered under export of service in terms of Section 2(6) of the IGST Act, 2017. APPLICANT'S SUBMISSION FOR QUESTION - 3 As per company policy, the Applicant recovers 50% of the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods or services. Based on the above Rule, the Applicant is of the view that GST should be levied on the entire amount of premium paid by the Applicant and not just on the premium amount recovered from its employees. Further, as per Section of the CGST Act, 2017, input tax credit is allowed in respect of health insurance only when such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the Same category of goods or services or both or as part of a taxable composite or mixed supply. Since, the Applicant may be liable to pay GST on the recovery from its employees, the Applicant is of the view that the insurance premium is paid by the Applicant to the insurance company to provide output insurance service to its employees. Accordingly, the Applicant should be entitled to 100% input tax credit on the insurance premium paid to the insurance company in terms of Section 17(5)(b)(iii) of the CGST Act, 2017. 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- Brief facts of the case comments on the questions raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. Further, export of service have been defined under the Section 2(6) of Integrated Goods Services Act, 2017. If all 5 conditions of the Section 2(6) are fulfilled, the supply of service would be treated as export of service Question No. 3: Whether recovery of Parents health Insurance expenses from employees in respect of the insurance provided by the applicant amounts to supply of service under Section 7 of the Central Goods and Services Act, 2017? If the said recovery amounts to supply , what will be the time of supply and value of the said supply? Whether the applicant can claim input tax credit of GST charged by the insurance company? Comments on Question No. 3: (i) As per Section 2(102) of the Central Goods and Services Act, 2017, services means anything other than goods. Accordingly, the applicant's act of recovery of 50% of insurance premium from its employees would be treated as consideration against supply of service. As such, GST is applicable on the amount recovered from the employees on accounts of recovery of 50% insurance premium. (ii) For time of supply, as per the Section 13(2) of Central Goods and Services Tax Act, 2017 the time o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from POSCO overseas entity. The MD and the GM are provided accommodation in a hotel and the cost of the same is part of cost to the Applicant and is included as perquisites in the salary as per the provisions of Income Tax Act, 1961. The Applicant would like to know whether they can claim ITC in respect of the GST charged by the hotel on the stay expenses of the MD/ GM as per the provisions of the GST Law. We find that Chapter V (Section 16 to 21) of the CGST Act, 2017, deals with Input Tax Credit (ITC). Section 16 (1) says that Every registered person shall, subject to ..,be entitled to take credit of input tax charged on any supply of goods or services or, both to him which are used or intended to be used in the course of furtherance of his business and .. . Hence it is clear as per this Section that ITC is available on the tax charged on any supply of goods or services or, both to the applicant which are used or intended to be used in the course of furtherance of their business. Now we discuss the provisions of Section 17 of the said Act, which deals with Apportionment of credit and blocked Credits and which will be applicable in the present case. Accordingly, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their MD/ GM which is for the personal comfort of both and therefore in view of the provisions of Section 17(5)(g) we hold that they are not eligible to claim the ITC for the same. 2) Whether invoice for quality claim raised by the Applicant on POSCO Daewoo Corporation located in Korea will be treated as ' export of service ? The applicant has submitted that they had imported goods from POSCO Daewoo Corporation, Korea and upon receipt of the said goods, the Applicant availed input tax credit of IGST paid. Thereafter they sold the said goods to their customer under the cover of Tax Invoice on payment of applicable GST. Subsequently it was found that the said goods were defective, did not meet the customer requirements and therefore, the Applicant raised a Credit Note on the customer and subsequently, the customer also raised Debit Note on the applicant. To make good the loss, as per the terms of the contract with POSCO Daewoo Corporation, Korea, the Applicant was required to charge back the loss incurred in the above said transaction by raising Tax Invoice and the said payment was received in foreign currency. The applicant has made detailed representation in the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low value-added processing function in respect of some of the traded goods based on customer's requirements In view of the above we find that complete details regarding the transaction have not been submitted by them and therefore we refrain from answering this Question No 2 of theirs. 3) Whether recovery of Parents Health Insurance expenses from employee in respect of the insurance provided by the Applicant amounts to supply of service under Section 7 of the Central Goods and Service Tax Act, 2017(CGST Act, 2017) ? --If the said recovery amounts to supply , what will be the time of supply and value of the said supply? --Whether the Applicant can claim input tax credit of GST charged by the insurance company? We find that the applicant provides mediclaim cover to their employees as well as to their parents and initially pays the entire premium along with taxes and then 50% of the premium is recovered from the respective employees on a monthly basis and their query is whether GST is payable on recovery of 50% of the insurance premium from the salary of the employees. According to their submissions if employer provides any services to their employee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oils and also perform low value-added processing function in respect of some of the traded goods based on customer's requirements. The applicant has brought nothing on records to show that they are an Insurance Company and registered with such authorities. Hence it appears that the applicant is creating this fiction of providing health insurance to their employees only to avail 100% ITC of payments made to the insurance companies. Hence we find that they are not rendering any services of health insurance to their employees and hence there is no supply of services in the instant case. Since there is no supply, we do not find the need to answer the second part of this question. In view of detailed discussions above, we find that the Applicant cannot claim input tax credit of GST charged by the insurance company. 05. In view of the extensive deliberations as held hereinabove, we pass an order as follows: ORDER (Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) NO.GST-ARA-36/2018-19/B-110 Mumbai, dt.07.09.2018 For reasons as discussed in the body of the order, the questions are answe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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