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TMI Blog2021 (8) TMI 781X X X X Extracts X X X X X X X X Extracts X X X X ..... on the sample goods provided by the recipient i.e. the sample goods have to be made physically available by the recipient to the applicant in order to enable the applicant to provide the services. Therefore, the place of supply of service in the present case will be the location where the services are actually performed. The place of supply of services is therefore, Gujarat. The subject services do not merit to be covered under Section 13(2), IGST Act - The subject services are liable to CGST and SGST. - GUJ/GAAR/R/26/2021 (In Application No. Advance Ruling/SGST&CGST/2021/AR/10) - - - Dated:- 9-7-2021 - SANJAY SAXENA AND ARUN RICHARD, MEMBER Present for the applicant : Shri Jigar Shah, C.A. A. BRIEF FACTS The applicant, M/s. Hilti Manufacturing India Pvt. Ltd., is engaged in the manufacture and supply of diamond cutting tools and other innovative tools required by the construction industry such as Diamond wheels, Diamond core bit drill, Grinding wheels, Grinding plate, Easy cut diamond segments, Flange Barrel and Frame Straw/Gang saw blades. The Hilti Group purchased 80 percent of the India-based Bhukhanvala Diamond Systems private limited, which was founded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaken by the applicant are then provided to the foreign company comprising of findings, performances, parameters, know-how, inventions, developed processes, objects and programs in the form of a report and an illustrative copy of such an R D report has been submitted as Annexure-2. 5. As per the agreement, the testing activities related to the Hilti items, specified in detail by the applicant are as follows: Standard performance test-GCS Grinding cup wheel-4 to 7 . Cutting blades-handheld 4 16 . Slitting blades-handheld 5 7 . Standard performance test-floor saw blades 12 -24 . Standard performance test-bench saw blades 12 20 . Standard performance test-Core bits. Misuse/Robustness test-GCS. Other testing activities as agreed between the parties from time to time. 5.1 Product development and engineering related to Hilti items, specified in detail by the applicant are as follows: Defining the project. Conducting the benchmark testing and feasibility studies. Analyzing data and targets(performance and cost). Designing the product and its requirements. Making prototypes and conducting per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a way, as to include all forms of supply(subject to certain exclusions) of goods or services or both for a consideration made in course or furtherance of business; that as per Oxford Advanced Learner s Dictionary, supply as a verb is defined as to make available for use or to provide something to someone and in the Cambridge dictionary as to provide something that is wanted or needed ; that the activity of scientific research and development carried out by the applicant is not movable property and hence cannot qualify as goods ; that service is defined under Section 2(102) of the CGST Act in such a way to include any activity other than goods, hence the activity of providing scientific research and development would qualify as service under CGST. 6.2 The applicant has submitted that R D services provided by the applicant would qualify as zero-rated supply in terms of Section 16 of the IGST Act, 2017; that Section 7(5) of the IGST Act, 2017 provides that the supply of service shall be treated as a supply of service in the course of inter-State trade or commerce when the supplier is located in India and the place of supply is outside India and that as per Section 2(23) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct person in accordance with Explanation 1 in section 8; 6.4 The terms recipient of service and supplier of service are defined under Section 2(93) and Section 2(105) of the CGST Act, 2017 respectively and read as under: (93) recipient of supply of goods or services or both, means- (a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration; (b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and (c) where no consideration is payable for the supply of a service, the person to whom the service is rendered,and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied; (105) supplier in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. Relevant part of Section 13 of the IGST Act reads as follows: 13. (1) The provisions of this section shall apply to determine the place of supply of services where the location of the supplier of services or the location of the recipient of services is outside India. (2) 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: Provided that where the location of the recipient of services is not available in the ordinary course of business, the place of supply shall be the location of the supplier of services. (3) The place of supply of the following services shall be the location where the services are actually performed, namely:- (a) services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services: Provided that when such services are provided from a remote location by way of electronic means, the place of supply shall be the location where goods are situated at the time of supply of services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders; (b) intermediary services; (c) services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month. Explanation . For the purposes of this sub-section, the expression, (a) account means an account bearing interest to the depositor, and includes a non-resident external account and a non-resident ordinary account; (b) banking company shall have the same meaning as assigned to it under clause (a) of section 45A of the Reserve Bank of India Act, 1934; (c) financial institution shall have the same meaning as assigned to it in clause (c) of section 45-I of the Reserve Bank of India Act, 1934; (d) non-banking financial company means, (i) a financial institution which is a company; (ii) a non-banking institution which is a company and which has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner, or lending in any manner; or (iii) such other non-banking institution or class of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that sub-sections(3) to (13) of Section 13 of the IGST Act are irrelevant in the present case for the purpose of determination of the place of supply of the services provided by the applicant to foreign companies. In the instant case, the applicant has entered into a contract with Hilti Aktiengesellschaft, pursuant to which, the Applicant is carrying out R D services on the sample goods provided by the foreign company which is located outside India and in this regard, Section 13(3)(a) of the IGST Act, inter alia states that place of supply of service shall be the location where services are performed in case service is supplied in respect of goods which are required to made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services. 7.2 The applicant has placed reliance on the decision of Principal Commissioner of Central Excise Pune-I vs. Advinus Therapeutics ltd., 2016-TIOL-3138-CESTAT-MUM, wherein there was a similar issue pertaining to provision of scientific or technical consultancy service to foreign clients by the assessee. It was held therein tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alysis has no value unless and until it is delivered to its client and delivery of report to its client is an essential part of the service, which was delivered and used outside India, therefore it should be construed as export of service. The applicant has further submitted that in the instant case, the samples got consumed in the process of R D and accordingly, in light of the submissions and legal decisions cited hereinabove, the place of supply in case of R D services would be the location of the service recipient in terms of Section 13(2) of the IGST Act and the service recipient being a foreign entity located outside India, the place of supply of service would be outside India. The applicant has stated that there is no dispute that the payment for such service has been received by the applicant in convertible foreign exchange and the applicant and the recipient of service (i.e. foreign company) are not merely establishments of a distinct person in accordance with Explanation 1 in Section 8 of the CGST Act. The applicant has concluded his submission by stating that in light of the above cases and provisions of law, the services provided by the applicant falls under export of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract between the applicant and service receiver, applicant s submissions, even those during the personal hearing, we find that goods were sent by Hilti Aktiengesellschaft (hereinafter referred to as recipient) to the applicant which are required to be made physically available to the applicant, so that applicant conducts various tests and RD activities on the said goods and prepare the results and supply the subject service to the recipient. We find this situation is covered at Section 13(3)(a) of IGST Act. Thus, as per said section 13(3)(a) of IGST Act, the place of supply of the following services shall be the location where the services are actually performed, i.e. location of the applicant. As the services provided by the applicant are in the form of R D activity undertaken on the sample goods provided by the recipient i.e. the sample goods have to be made physically available by the recipient to the applicant in order to enable the applicant to provide the services. Therefore, the place of supply of service in the present case will be the location where the services are actually performed. The place of supply of services is therefore, Gujarat. 11.1. Further, Section 8(2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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