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TMI Blog2020 (10) TMI 764X X X X Extracts X X X X X X X X Extracts X X X X ..... e cards, the applicant has to pay ICU Medical Inc. all the relevant expenses and charges made by its employees - It is evident that this is a separate transaction between the applicant and ICU Medical Inc. for the services of providing the credit cards to the employees of the applicant which are to be used only for business related activities. For this, a payment is made by the applicant to ICU Medical Inc. in response to the services of providing the cards. Therefore, this transaction falls within the definition of services and is for a consideration as defined in Section 2(7) and Section 2(31) of the Act. This transaction is also in the course or furtherance of business as is seen in the Travel 86 Expense Policy- Non-U.S. Based employees issued by ICU Medicals Inc. that the card should be used only for business related expenses and not personal expenses of the card holders - Further, as per Section 2 (84) (h) a person includes any body corporate incorporated by or under the laws of a country outside India, which is ICU Medical Inc. in this case. Therefore, the transaction in question is a Supply as per Section 7 of the Act. ICU Medical Inc., Intermediary or not - HELD THAT:- As p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kkam, Chennai-600006 (hereinafter referred as theapplicant) is registered under the GST Act 2017 vide GSTIN No. 33AAGFI3243M1ZD. The Applicant has sought Advance Ruling on the following questions: 1. Whether GST is leviable on the reimbursement of expenses from the Subsidiary Company to its Ultimate Holding company located in a foreign territory outside India. 2. In case GST is leviable what is the rate of GST applicable to the said reimbursement of expenses? The applicant submitted a copy of challan evidencing payment of application fees of ₹ 5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has stated that they are engaged in the business of software development for the infusion system manufactured by its Ultimate Holding company ICU Medical Inc., hereinafter referred as ICU Inc., having its place of business in USA.; ICU Inc., is one of the world's leading pure-play infusion therapy companies with global operations and a wide ranging product portfolio that includes IV solutions, IV smart pumps, dedicated and non-dedicated IV sets and needle free connectors along with pain management and safety software technology de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have also stated that mere reimbursement of expenses does not come within the meaning of remuneration as per Section 2 (78) of Companies Act 2013, as it is mere reimbursement of the actual expenses by the seconder. They have referred to the case laws of M/s. Kalyani Steels Ltd, Bellary vs Department of Income Tax = 2012 (12) TMI 1153 - ITAT BANGALORE and Bovis Lend Lease(I) Pvt Ltd vs ITO = 2009 (8) TMI 853 - ITAT BANGALORE, wherein ruling has been given on the dividing line between reimbursement and remuneration and essential parameters for considering a payment as reimbursement. The applicant has stated that there shall amount a supply of "Services" only if the conditions as specified under Section 2 (93) of CGST Act 2017, relating to consideration are satisfied. In other words, there shall be no supply in the absence of response or inducement of supply of goods or services. Hence, they have interpreted that consideration agreed upon as recompense for a particular service is taxable, any other receipt has to be evidenced as an additional consideration for a service for the said service to be subject to tax. Also they have stated that absence of consideration is not same as unasc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the absence of a provision in Section 15 of the CGST Act 2017 or in the definition of "consideration" under Section 2(31) of CGST Act 2017, reimbursements cannot be included in the value of supplies, for levy of tax under CGST law. 2.4 The applicant has stated that as per section 2 (13) of IGST Act 2017 the service provider can be termed as intermediary and as per Section 13 (8) (b) the place of supply in case of "intermediary services" shall be the place of the location of service provider. The applicant has submitted that it is observed from the agreement between ICU inc., and Wells Fargo Bank USA as well as cardholder user agreement, it is an arrangement made by ICU Inc., to provide credit card facilities to employees of its group entities globally and as per the user agreement the cardholder is being entrusted with an ICU Medical Inc., travel and expense credit card, issued by Wells Fargo Bank, the card is provided to them based on the need to travel for ICU Medical, Inc. In view of the above submissions, the applicant has stated that it is ICU Inc., which only facilitates the provision of service by Wells Fargo Bank, USA to its group employees globally. Thus, the service prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c use of credit card would amount to double taxation as already GST has been paid on expenses for travel, accommodation, food. In this account, the applicant has referred to the following case laws: * Intercontinental Consultants and Technocrats Pvt Ltd vs Union of India & ANR = 2012 (12) TMI 150 - DELHI HIGH COURT * Jain Brothers Vs Union of India -2002-TIOL-1449-SC-IT-CB = 1969 (11) TMI 1 - SUPREME COURT Hence, in view of all the aforesaid submissions the applicant has interpreted that their services are not related to "import of service" under section 2(11) of IGST Act 2017 and there would be no supply of service under Section 7 of CGST Act 2017, however there would be a supply without consideration as per Schedule I of CGST Act 2017. They have also stated that there would be applicability of GST on late payment charges/interest involved in credit card services and they have referred to SI.No.27 Notification No.12/2017 CT(R) dated 28.06.2017, wherein services by way of(a) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services) is exempted. 3.1 The applicant was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber 2019, hence there would be delay in making payment to the Ultimate Holding company and would result in delay in submission of Forex remittance details of billed amount. The applicant vide their letter dated 19.12.2019 submitted copy of Forex Remittances Statement. 4. The state jurisdictional officer vide their letter dated 08.11.2019 submitted that the said transaction cannot be considered as a pure agent or intermediary or reimbursement of expenses as agreements are entered between the Banks and ICU Inc. and not ICU India. Hence, GST is leviable on the reimbursement of expenses from the subsidiary company to its Ultimate Holding Company located in a foreign territory. They have further opined that the given transaction is a related party transaction the value of taxable supply will be determined by rule 28 to 31 of CGST Rules, 2017 and taxed @18%. 5. The applicant is under the administrative jurisdiction of Central Tax and the said authority vide their letter dated 31.01.2020 offered their comments as under: * As per Section 2(11) of IGST Act 2017, import of services means the supply of services, where i. the supplier of service is located outside India ii. the recipi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods' and by virtue of a deeming fiction, the Act clarifies that 'if a supplier agrees to an obligation to engage in an act, such activity will be construed as a service and contended that reimbursements can be subjected to tax, only if it is established that these are made towards provision of goods or service and that there shall be no supply in the absence of "response or inducement of supply of goods or services". The applicant has further contended that ICU Medical Inc facilitates the provision of service of Wells Fargo bank and is an 'intermediary' as defined under the GST Act and therefore the reimbursements paid to ICU Medical Inc is not chargeable to GST as the 'Place of Supply' is outside India. The applicant has further contended that the place of supply when the card is used 'overseas' is outside India and when used 'Domestic', the same will be the service offered by the employee to the employer and hence exempted. 6.3 In the case at hand, M/s. ICU Medicals Inc., the Ultimate Holding Company of the applicant (referred to as the 'Customer' in agreement), has entered into 'Wellsone Commercial Card Agreement' with Wells Fargo Bank effective from April 21 2008. By this a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cals Inc. on the applicant mentions the applicant as the 'Service Recipient' with the description 'Credit card expenses' with GSTN of the applicant mentioned on it. As per the invoice the billing currency is USD but payment currency is INR with amounts in USD and INR mentioned on the invoice. From the Balance sheet as at March 31 2019 of the applicant, it is seen that ICU Medical Inc. is the Ultimate Holding company of the applicant. It is also seen that the card payments made to the Ultimate Holding company are accounted as Travel and conveyance, Miscellaneous expenses under Administration and Other expenses. Also, the Statement of Credit Card Transaction for September 2019 shows the expenses under GL Descriptions- 'Entertainment & Meal', Office Supplies, Vehicle/Transportation, Utilities-gas, electricity, Airline Expenses, etc. These are shown as expenses against ICU Medicals Inc. 7.1 Having seen the factual position, the relevant statutory provisions are examined as under. Supply is defined under Section 7 of the CGST Act 2017 and the same is reproduced below for reference: 7. (1) For the purposes of this Act, the expression "supply" includes- (a) all forms of supply of go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the applicant. ICU Medical Inc. sends the details of the business related expenses made by the employees of the applicant, as received from Wells Fargo. The employees are issued the credit cards under the logo of ICU Medicals and Wells Fargo. For the privilege of using these cards, the applicant has to pay ICU Medical Inc. all the relevant expenses and charges made by its employees. This is made against the invoice raised by ICU Medical Inc. It is evident that this is a separate transaction between the applicant and ICU Medical Inc. for the services of providing the credit cards to the employees of the applicant which are to be used only for business related activities. For this, a payment is made by the applicant to ICU Medical Inc. in response to the services of providing the cards. Therefore, this transaction falls within the definition of services and is for a consideration as defined in Section 2(7) and Section 2(31) of the Act. This transaction is also in the course or furtherance of business as is seen in the Travel 86 Expense Policy- Non-U.S. Based employees' issued by ICU Medicals Inc. that the card should be used only for business related expenses and not personal exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repayment plans - line-of-credit loan services, that is, loan services based on a commitment to lend funds to a borrower up to a specified amount - consumer loan services, that is, loan services extended for financing consumer purchases of goods or services where the purchased good is generally used as collateral - granting credit when the holder of a credit card uses it to buy a good or a service, regardless of whether the balance is paid in full at the end of the grace period - granting loans to investment dealers and brokers, regulated financial institutions, federal, regional and local governments or non-profit institutions, foreign governments, and other businesses - standby, commitment and other loan services including overdraft services - providing letters of credit - acceptance services, that is, agreements by a bank or other financial institution to pay a draft or a credit instrument issued by an institution - sales financing services - other credit-granting services n.e.c. 7.4. From the above, it is evident that ICU Medicals Inc., the Ultimate Holding Company, is supplying credit-granting services to the applicant where the holder of credit-card uses i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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