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TMI Blog2023 (11) TMI 870X X X X Extracts X X X X X X X X Extracts X X X X ..... ficant is however, the proviso to the definition which states that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply. Though the amount ie 75% paid into an escrow account is towards the dispute pertaining to the supply, what brings this particular transaction out of the scope of the consideration is the fact is that it is not paid to the contractor [supplier] but is deposited in an escrow account; that it cannot be withdrawn from the account without the explicit approval of the applicant; that the amount can be withdrawn only subject to the condition that the supplier) [contractor] provides a BG for the said amount - the applicant, though he has deposited the amount in an escrow account, also does not term this as a consideration for the supply since he is agitating his ease, feeling aggrieved by the decision rendered against him. In view of the foregoing, it is held to be outside the scope of 'consideration' as defined under section 2(31) of the CGST Act, 2017. Supply or not - HELD THAT:- The moment the Supplier [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passes an order; in terms of clause 20.X of GCC, DAB is deemed not to be acting as an Arbitrator: if either of the party is not satisfied with the decision of DAB. they may within 28 days after receiving the decision, give notice to the other party of its dis-satisfaction; that if such a notice is not given within stipulated time period, decision of DAB will become final binding upon both the parties; that where either of the party has given notice citing dis-satisfaction, dispute then approaches for Arbitration wherein clause 20.5 states that both parties shall try to settle the dispute amicably before the commencement of arbitration; arbitration may be commenced on or after the 56th day after the day on which notice of dis-satisfaction was given; process of arbitration shall be subject to the provisions of Indian Arbitration and Conciliation Act. 1996 and the rules made thereunder; if either party is aggrieved by the order/award passed by Arbitral Tribunal, such party may move an application for setting aside arbitral award in terms of section 34 of the Arbitration and Conciliation Act. 1996; NITI Aayog vide its OM dated 5.9.2016. for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in accordance with directions of NITI Aayog. 9. The applicant further submitted that in terms of section 7 of the CGST Act, 2017, with respect to the transaction in question, it cannot be said that there is any supply of goods/services since there is no sale, transfer, barter, exchange or disposal made or agreed to be made for consideration by a person in the course or furtherance of business. 10. In view of the foregoing, it is the Applicant's claim that he is in complete control of the amount so deposited in the escrow account since the contractor has to obtain his permission to withdraw; that the amount so withdrawn has to be appropriated as per his instruction. Further to safeguard the Applicant, the contractor is also required to furnish BG of equivalent amount deposited by the applicant. 11. The applicant further submitted that the amount so 'deposited' in the escrow account does not form part of consideration in terms of section 2(31) of the Act; that the subject transaction cannot be considered as 'payment made or to be made' since the amount has been 'deposited' only with the view to revive the construction industry. 12. further, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt deposited in escrow account (as time period of claiming refund under Section 54(1) will also lapse by then. 16. In view of the foregoing, vide the aforesaid application, the applicant has sought advance ruling on the below mentioned question viz,- 1. Whether the amount deposited by the applicant (75%) in escrow account against bank guarantee pending outcome of the further challenge against Arbitral Award or dissatisfaction against DAB decision, is liable to GST under the provisions of CGST Act, 2017? 2. If the answer to first question is in affirmative, then, what shall be the 'time of supply' when tax on such DAB/arbitral award is payable to Government exchequer, i.e., whether tax is payable (a) when part amount (75%) is deposited into escrow account pending litigation, or (b) when complete award amount (100%) is paid to the contractor pursuant to finality of the decision. 3. If answer to Question No. 1 is affirmative, whether the applicant is eligible to claim Input Tax Credit (ITC) thereupon? 17. The applicant vide their additional submission dated 2.6.2023, further stated as follows: that present application is filed not for such cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicant. (c) Comments on Merits : Reply : On the issue of applicability of GST of the amount of deposit of 75 % into escrow account of the applicant, it appears the GST should be applicable on the portion of amount deposited into escrow account till final outcome of the light of Section 7 of GST Act, 2017 within the Scope of Supply; the expression of supply includes - which states as under: (a) all forms of supply of supply of goods or services or both such as Sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. In view of the statutory provisions of the laws, the application of the Advance Ruling sought by the applicant for deposit of 75% amount in to escrow account is not taxable does not appears to be sustainable, both on admissibility ground as well as Merits Discussion and findings 20. At the outset, we would like to state that the provisions of both the CGST Act and the GGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly of activities or transactions inter se shall be deemed to take place from one such person to another;] (b) import of services for a consideration whether or not in the course or furtherance of business; [and] (c) the activities specified in Schedule I made or agreed to be made without a consideration; 3 [****] (c) 4 [****] 5 [(1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II.] (2) Notwithstanding anything contained in sub-section (1),- (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services. (3) Subject to the provisions of 6 [sub-sections (1), (1A) and (2)], the Government may, on the recommendations of the Council, specify, by notification, the transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion' as defined under section 2(31) of the CGST Act, 2017. 26. We now examine whether it is a supply. Supply , in terms of section 7, includes all forms of supply of goods/services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made /agreed to be made for a consideration by a person in the course or furtherance of business. Surely this payment of 75% into an escrow account would not fall within the ambit of supply to be leviable to CGST in view of our finding in respect of consideration as recorded in the previous paragraph. 27. We find that the dispute here is not whether consequent to the DAB/arbitral award, the change, if any, in the value pertaining to the supply, etc., would be leviable to GST. What is in dispute specifically is whether the 75% amount deposited by the applicant qua the O.M. of NITI Aayog, with an intention to help the construction sector, would be leviable to GST. 28. In their additional submissions, the applicant has made it emphatically clear that present application is filed not for such eases wherein invoice has already been issued by the contractor before issuance of DAB/ arbitration award to the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actor] finally succeeds in the dispute/the applicant accepts the adverse decision, this ruling would be rendered infructuous. This finding is in operation only for a limited period when the supplier [contractor] has not succeeded in the litigation/the applicant has not accepted an adverse decision the supplier uses the amount lying in the escrow account subject to his furnishing a BG. It also goes without saying that the department reserves every right to recover any interest due on such amount for the delay in payment of GST, if any, on account of the non acceptance of adverse decision of the DAB/Tribunal. 34. Since on the first question we hold in negative, the second and the third question is rendered infructuous. We therefore propose to give no findings in that regard. In the light of the above, we rule as under: RULING 1. The amount deposited by the applicant (75%) in escrow account against bank guarantee pending outcome of the further challenge against Arbitral Award or dissatisfaction against DAB decision, is not liable to GST under the provisions of CGST Act, 2017. 2. Since the answer to first question is in negative, the second third questions are re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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