9911796707
TMI Blog2021 (4) TMI 618X X X X Extracts X X X X X X X X Extracts X X X X ..... arantee issued by holding company Enpay Endustriyel Pazarlama ve Yatirim A.S. and they have paid Stamp tax in Turkey as per their land rules and they have raised reimbursement invoice of said payment to ENPAY India; that as mentioned above, the company is importing goods on CIF basis(cost including freight) and the invoice that is raised by the seller is clearly showing the amount of Sea freight and it is also noted that at the time of Bill of Entry, the assessable value calculated for payment of IGST includes the value of Sea Freight, hence, IGST is already paid on the value of sea freight at the time of customs clearance. 2. The applicant has asked the following questions seeking Advance Ruling on the same: (i) Whether liability to pay GST on Reverse charge arises if amount is paid as interest on late payment of invoices of imported goods? If yes, then at what rate? (ii) Whether liability to pay GST on Reverse charge arises if amount is paid for reimbursement of Stamp tax paid as a pure agent by M/s. Enpay, Turkey on our behalf? (iii) Whether Entry No.10 of Notification No.10/2017 issued under IGST is applicable, if import of goods is made on CIF(Cost including Freight bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicant has given additional submission vide letter dated 09.01.2021(received vide email on 11.01.2021) wherein they have stated that during hearing they were asked to furnish details of Stamp tax paid and clarification regarding whether any markup/profit had been charged by Enpay Endustriyel Pazarlama ve Yatirum A.S.(Enpay, Turkey) from Enpay Transformer Components India pvt.ltd. while making payment of stamp tax on their behalf at the time of documentation of Corporate Guarantee Agreement executed on 13.04.2018; that accordingly they have obtained clarification in writing from Enpay Endustriyel Pazarlama ve Yatirum A.S. stating that no mark up (profit) was charged for the reimbursement of stamp tax paid against corporate guarantee issued to CITI bank as security/collateral for funded/non-funded facility used by Enpay Transformer Components India Private Limited and have attached a copy of the same. They have submitted the table for Stamp Tax Collection as under: Particulars BASE TAX (USD) Exchange Rate USD/TL BASE TAX (TL) TAX RATE Stamp Tax Charges (TL) Stamp Tax Charges (USD) CORPORATE GUARANTEE TAX 1,500,000 4,1358 6203,700 0.948% 58,811.08 14,220 The applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... key on due date, M/s.Enpay, Turkey is charging interest on late payment. (ii) The applicant has obtained bank credit facility from CITI Bank based on the Corporate Guarantee issued by M/s. Enpay Endustriyel Pazarlama ve Yatirim A.S. (Enpay, Turkey)and they have paid Stamp tax in Turkey as per their land rules and they have raised reimbursement invoice of said payment to M/s. Enpay India. They have submitted a copy of the said Corporate Guarantee. Based on the above, the applicant has asked the following questions seeking Advance Ruling on the same: (i) Whether liability to pay GST on reverse charge arises if amount is paid as interest on late payment of invoices of imported goods? If yes, then at what rate? (ii) Whether liability to pay GST on reverse charge arises if amount is paid for reimbursement of Stamp tax paid as a pure agent by M/s.Enpay, Turkey on our behalf? 8. We will discuss both the aforementioned questions one by one. As regards the first issue, the applicant is required to pay interest on the goods imported from M/s.Enpay Endstriyel Pzarlama ve Yatirim A.S., if there is delay in payment of more than 120 days from the date of the invoice, on the value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods. 2. Land and Building (a) any lease, tenancy, easement, licence to occupy land is a supply of services; (b) any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services. 3. Treatment or process Any treatment or process which is applied to another person's goods is a supply of services. 4. Transfer of business assets (a) where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for a consideration, such transfer or disposal is a supply of goods by the person; (b) where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business, whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of services, namely:- (a) works contract as defined in clause (119) of section 2; and (b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration. 7. Supply of Goods The following shall be treated as supply of goods, namely:- Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration. 8.2 On going through the above, and comparing the same to the issue in hand, we find that the foreign buyer has tolerated the act of receiving payment after a lapse of a period of 120 days from the date of the invoice in respect of the goods supplied by them to the applicant for which interest is to be paid by the applicant. We, therefore, find that the aforementioned act will be covered under the Supply of Services under Entry No.5(e) of the aforementioned Schedule-II which reads as "(e) agreeing to the obligation to refrain from an act, or to tolerate an act or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y linked to relevant invoices; and (ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply. (4) Where the value of the supply of goods or services or both cannot be determined under sub-section (1), the same shall be determined in such manner as may be prescribed. (5) Notwithstanding anything contained in sub-section (1) or sub-section (4), the value of such supplies as may be notified by the Government on the recommendations of the Council shall be determined in such manner as may be prescribed. Explanation.-For the purposes of this Act,-- (a) persons shall be deemed to be "related persons" if-- (i) such persons are officers or directors of one another's businesses; (ii) such persons are legally recognised partners in business; (iii) such persons are employer and employee; (iv) any person directly or indirectly owns, controls or holds twenty-five per cent. or more of the outstanding voting stock or shares of both of them; (v) one of them directly or indirectly controls the other; (vi) both of them are directly or indirectly controlled by a third person; (vii) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited and have attached a copy of the same. The applicant has also stated that they have submitted a copy of receipt of stamp tax issued by the Stamp Tax office for reference along with copy of invoice raised by M/s.Enpay, Turkey. We have gone through the letter dated 09.01.2021 issued by M/s. Enpay,Turkey to M/s.Enpay Transformers Components India pvt.ltd. stating that no mark up(profit) was charged for the reimbursement of stamp tax paid against corporate guarantee issued to CITI Bank as security/collateral for funded/non-funded facility used by Enpay Transformers Components India pvt.ltd. Other than this, we find that the applicant has submitted certain documents which are in foreign language(perhaps Turkish), which is not understandable to us. Further, since no English translation of the same has been made available to us, we are not able to make out whether any of these documents pertain to receipt of stamp tax issued by Stamp Tax Office, Turkey or otherwise, as stated by the applicant. 9.1 Now, the applicant wants to know whether liability to pay GST on reverse charge arises if amount is paid for reimbursement of Stamp tax paid as a pure agent by M/s.Enpay, Turkey on thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax on behalf of the applicant against the Corporate Guarantee entered into by them with CITI Bank for which they have raised reimbursement invoice of said payment, to M/s.Enpay, India. After going through the aforementioned provisions and comparing the same to the issue in hand, we find that, the expenditure or costs incurred by the supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if, and only if, the supplier i.e. M/s.Enpay, Turkey satisfies all the conditions envisaged in Rule 33(i) to (iii) as well as the conditions (a) to (d) envisaged in the Explanation to Rule 33 of the CGST Rules, 2017. We are, therefore, required to examine as to whether the supplier i.e. M/s.Enpay, Turkey satisfies all the conditions mentioned hereinabove and satisfies the conditions of a pure agent. But, before doing that, we find it necessary to refer to refer to Section 2(31) of the CGST Act, 2017, which defines 'consideration'. Section 2(31) of the said Act reads as under: (31) "consideration" in relation to the supply of goods or services or both includes-- "(a) any payment made or to be made, whether in money or otherwise, in respect of, in response ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upplier on behalf of the applicant, shall be excluded from the value of supply, if, and only if, the supplier i.e. M/s.Enpay, Turkey satisfies all the conditions envisaged in Rule 33(i) to (iii) as well as the conditions (a) to (d) envisaged in the Explanation to Rule 33 of the CGST Rules, 2017. We, therefore, proceed to examine as to whether the supplier i.e. M/s.Enpay, Turkey satisfies all the conditions mentioned hereinabove and satisfies the conditions of a pure agent, which are enlisted hereunder: (i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorisation by such recipient; No such document, agreement or contract has been produced by the applicant which proves that they have authorised the supplier to make payment to the third party. In view of absence/non-submission of any such documents in this regard, we conclude that this condition is not satisfied. (ii) the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; In this regard, the applicant themselves have submitted that the supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... title to the goods or services or both so procured or supplied as pure agent of the recipient of supply; The applicant has submitted that the stamp duty paid by the supplier M/s.Enpay, Turkey is neither intending to hold any title for it and not for the use of his own interest. However, they have not provided any documentary evidence to prove that the supplier neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply. Hence, this condition is not satisfied. (c) does not use for his own interest such goods or services so procured; In the instant case, the services procured by the supplier are used for his own interest only as the Bank Guarantee entered into by them with the CITI Bank on behalf of the applicant is in direct relation to the business connection/link that they are having with the applicant by way of supply of goods to the applicant. Hence, we conclude that this condition is not satisfied. (d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply, he provides on his own account.: The applicant has submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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