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TMI Blog2023 (6) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... l R&D Private Limited having Address at A808 and 809. Shelton Sapphire. Sector 15 and CBD Belapur, Navi Mumbai, Maharashtra- 400614 (hereinafter referred to as 'the Appellant') against the advance Ruling No. GST-ARA-50 2020-21 B-108 dated 01.12.2022. BRIEF FACTS 3. JVL India Environmental R&D Private Limited ('IVL India' or The Appellant') is a company incorporated under the laws of India and is a wholly owned subsidiary of IVL Swedish Environmental Research Institute Limited ('IVL Sweden') a foreign company incorporated under the laws of Sweden. The Municipal Corporation of Greater Mumbai ('MCGM') is the governing civic body of Mumbai under the Bombay Municipal Corporation Act, 1888. 4. IVL Sweden applied for the bid for all the projects invited by MCGM for the contract of "Project Management Consultancy Services" for four locations which are Versova and Malad Influent Pumping Station under MSDP Stage -II, Mithi River Rejuvenation Project (Package I, II, III & IV), Bandra WWTP under MSDP Stage - II, Worli WWTF under MSDP Stage - II on the basis of their credentials, work experience and various certifications received from different government organizatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereinafter referred to as "IVL Sweden"), without underlying import of service will be liable for payment of Integrated Goods and Service Tax under reverse charge mechanism under entry no. 1 of Notification 10/ 2017 IGST (Rate) dated June 28, 2017. 10. The learned Authority for Advance Ruling (hereinafter referred to as "LAAR") had called for a personal hearing and the authorized representatives of the Appellant attended the personal hearing on various occasions and explained the matter in detail. 11. On scrutiny of the documents, the LAAR has pronounced the Advance Ruling vide order No. GST-ARA-50/2020-21/B-108 dated 01.12.2022 received by the Appellant on 07.12.2022 as follows: In reference to Question above, the LAAR has concluded that the transfer of monetary proceeds by the Applicant to IVL Sweden will be liable for payment of Integrated Goods and Service Tax under reverse charge mechanism under Entry No. 1 of Notification 10/2017 - IGST (Rate) dated June 28, 2017. 12. Aggrieved by the said order of the learned Authority of Advance rulings (the LAAR for brevity) in Maharashtra, the Appellant has preferred this appeal before the Appellate Authority for Advance Ruling, Mahar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orated for the sake of satisfying the condition of MCGM. Further. IVL India does not receive any services from IVL Sweden and the activities undertaken by the IVL Sweden satisfy all of the aforesaid conditions as explained below: * IVL India was incorporated in India merely for the purpose of obtaining the contract from MCGM. * IVL Sweden has the necessary expertise to provide the 'Project Management Service' in its own capacity. * The Letter of Acceptance is awarded to IVL Sweden on his own credentials/expertise. Also, as mandated by MCGM. both IVL India and IVL Sweden have jointly signed the contract with MCGM. 16.6 Therefore, it is evident that IVL India is not receiving any services from IVL Sweden. IVL Sweden is providing services to the ultimate recipient i.e. MCGM. 16.7 Hence, in the absence of the underlying service being provided by IVL Sweden to IVL India - * The question of paying IGST under reverse charge in the hands of IVL India does not arise: * The question of evaluating applicability of para 4 of Schedule 1 to the CGST Act does not arise. 16.8 In light of the discussion, it is evident that services to MCGM is provided by IVL Sweden. However, to obligat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this contract shall remain with IVL Sweden. This also construes that the main consultant to this contract is IVL Sweden. e) Work to be performed by IVL Sweden: The project has been granted on the credentials, work experience and various certifications from different organizations of IVL Sweden and hence, ultimate execution also lies with IVL Sweden, either by IVL India or by executing the part of contract itself. Hence, the above fact means that the main consultant to this contract is IVL Sweden. f) Ultimate beneficiary is IVL Sweden: The entire obligation of the contract performance of the contract and responsibility of the contract lies with IVL Sweden which means that the ultimate beneficiary of the contract and the primary consultant to MCGM is IVL Sweden. It is just to meet the obligations of the contract and the Bidding qualification, that IVL Sweden had to incorporate an Indian entity. 17. Legal recourse for non-performance of contract is against IVL Sweden: The legal recourse in respect of this contract for project management service with MCGM in case of any failure in carrying out, observe or performance or any of the said obligations, duties, undertaking, covena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GM is wholly exempt under serial No. 3 of Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017. Here, it is important to note that the ultimate services provided to recipient (MCGM) is exempt. Given that MCGM is a local authority and the subject services (being project management services which are wholly and purely services) fall within Article 243G of the Constitution of India and the same is wholly exempt from GST. 19.2 The Learned Authority of Advance Ruling (LAAR) has wrongly observed that there is transfer of expertise from IVL Sweden to IVL India in order to execute the contract and thereby concluding that there is supply of service or goods or both, between IVL Sweden and IVL India. The LAAR has drawn a contrary inference where it states that IVL India is receiving the services from IVL Sweden, whereas in fact and in terms of the contract, it is both. IVL Sweden and IVL India, together are executing the work in terms of the contract, for the ultimate recipient i.e. MCGM The Appellant contends that the LAAR has grossly misunderstood the facts of the arrangement and passed an order on the basis of these misunderstood facts and has not made any statements or disting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived from different government organisation: 23.2 That the Letter of Acceptance was also issued by MCGM in the favour of IVL Sweden; 23.3 However, the contract for the said PMC services to be provided to MCGM have been signed jointly by the Appellant, i.e., IVL India, IVL Sweden and the recipient MCGM as per the mandatory requirement of the bidding eligibility criteria documents issued by MCGM in respect of the subject projects which stipulates that the contract can only be executed by the wholly owned subsidiary of the foreign entity who has been awarded the tender under consideration. 23.4 That in compliance to the aforesaid condition, IVL India was incorporated by IVL Sweden under the Indian laws for the purpose of execution of the PMC contract. 2.35 That even though the contract was executed jointly by the Appellant. IVL Sweden and the MCGM, the ultimate responsibilities for the performance and execution of the works lie with IVL Sweden as the tender under question was awarded to IVL Sweden on the basis of their credentials, work experience and various certifications awarded by different government organisations. 23.6 That the IVL Sweden has provided Bank Guarantee and Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried out by the Appellant with the help of IVL Sweden which has got all the expertise, work experience and resources to manage such projects. In other words, it can be said that without the services of IVL Sweden, it would not have been possible for the Appellant to bag the contract from MCGM to carry out project management consultancy work of such measures. In fact, the contract has been awarded to the Appellant based on the credentials and work experience of IVL Sweden. The aforesaid observations are also supported by the Appellant' contentions wherein it has been contended that all the responsibility of the performance of the work lie with IVL Sweden as IVL Sweden have got all the expertise and work experience to handle such massive projects. Thus, it can be safely concluded that the Appellant is availing support services from IVL Sweden to carry out the required PMC work as per the contract entered with MCGM. 27. Now, we proceed to examine place of supply of the aforesaid services received by the Appellant from IVL Sweden. Since in this case the recipient of services is located in India and supplier of the services, namely, IVL Sweden, is located abroad, therefore, Section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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