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TMI Blog2024 (2) TMI 1121X X X X Extracts X X X X X X X X Extracts X X X X ..... xchange by the said intermediary namely Paypal. The amounts are first credited into its account with CITI Bank of the said intermediary namely Paypal. Thereafter, amounts in Indian currency are transferred from the intermediaries CITI Bank account to the petitioner s account with HDFC Bank after deduction of its service charges. As per Regulation 3(2)(b) of the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016 any other mode of receipt of export proceeds for an export from India in accordance with the directions issued by the Reserve Bank of India to authorized dealers from time to time - Thus, if payments are routed through an intermediary to person like petitioner, the intermediary should be an authorised person to receive such payment in convertible foreign exchange. As an intermediary, the petitioner is required to only credit the amounts in convertible foreign exchange into Reserve Bank of India. Merely because the receipts are rooted through the intermediary and received in Indian currency ipso facto would not mean that the petitioner has not exported services within the meaning of Section 2(6) of the IGST Act, 2017. Receipt of payment by an interm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icing of export Contracts in Indian Rupees in terms of the Rules, Regulations, Notifications and Directions framed under the Foreign Exchange Management Act, 1999. Further, in terms of Para 2.52 of the Foreign Trade Policy (2015-2020), all export contracts and invoices shall be denominated either in freely convertible currency or Indian rupees but export proceeds shall be realized in freely convertible currency. However, export proceeds against specific exports may also be realized in. rupees, provided it is through a freely convertible Vostro account of a non- resident bank situated in any country other than a member country of Asian Clearing Union (ACU) or Nepal or Bhutan". Further, attention is invited to the amendment to section 2(6) of the IGS]Act. 2017 which allows realization of export proceeds of services in INR, wherever allowed by the RBI. Thus, from the above Circular it is clear that the export proceeds can be realized in rupees provided it is through a freely convertible Vostro account of a non-resident bank. Apparently, in this case, the Appellant has not realized the amount according to the above terms and conditions. 6(ii). This apart, as per Section 2(6)(i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opies since no invoices had been raised by them. The copies of FIRC advice submitted by them from CITI bank cannot be considered as a valid document in lieu of the FIRC since it is only an FIRC advice and cannot be treated as FIRC. In fact, the bank themselves have given this declaration clearly stating that "This is an Advice and Not to construed as an FIRC". The copies of ITR/Balance sheet filed by the Appellant also, unfortunately does not come to their rescue in these cases. 7(ii).Thus, in view of the fact that no invoices were raised by the Appellant nor were they able to submit FIRC/BRC in these cases, the refunds require to be rejected in as much as none of the conditions mentioned in Section 2(6) of the IGST Act, 2017 have been established to have been satisfied. 8. In an identical situation, the Advance Ruling Authority under GST, Rajasthan, in the case of Thinklab Edusoft LLP reported in 2020 (37) G.S.T.L. 106 (A.A.R GST - Raj.) had held as follows: BEFORE THE AUTHORITY FOR ADVANCE RULING UNDER GSI, RAJASTHAN S/Shri J.P. Meena, Member (Central Tax) and Hemant Jain, Member (State Tax) IN RE: THINKLAB EDUSOFT LLP Advance Ruling No. RAJ/AAR/2019- 20/35, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rwise requires,-- (6) "export of services" means the supply of any service when,-- (i) the supplier of service is located in India; (ii) the recipient of service is located outside India; (iii) the place of supply of service is outside India; (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; and (v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8; 6. It is further submitted that the export of service effected by the petitioner to its clients/customers also qualifies as "zero rated supply" within the meaning of Section 16 of the Integrated Goods and Services Tax Act, 2017 and therefore the petitioner filed application under Section 54 of the IGST Act read with Rule 89(2) of the Central Good and Services Tax Rules, 2017 for refund. 7. It is submitted that the petitioner has complied with all the requirements of the aforesaid provision as there was an export of service within the meaning of Section 2(6) of the Integrated Goods and Services Tax Act, 2017. 8. The transactions of the petitioner is captured in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs who are resident in India to facilitate receipt of payments from a buyer (either domestic or foreign) for credit into their bank accounts." 10. It is further submitted that the payments were received by the petitioner in accordance with the provisions of the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016 vide Notification No.FEMA 14(R)/2016-RB dated 02.05.2016 issued under Section 47 of the Foreign Exchange Management Act, 2000. A specific reference is made to Regulation 3 of the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016:- "Regulation 3 - Manner of Receipt in Foreign Exchange:- (1)Every receipt in foreign exchange by an authorized dealer, whether by way of remittance from a foreign country or by way of reimbursement from his branch or correspondent outside India against payment for export from India, or against any other payment, shall be as mentioned below: (A)Members of the Asian Clearing Union (i) Bangladesh, Myanmar, Pakistan, Sri Lanka & Republic of Maldives:- (a) Receipt for export of eligible goods and services by debit to the Asian Clearing Union Dollar account and / or Asian Clearing Union Eur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er intricately manages its finances. 12. It is submitted that the 1st respondent has erroneously stated that the petitioner has not submitted the invoices pertaining to the said period and dismissed the appeal filed by the petitioner on mere technical ground that the petitioner did not submit export invoices and thereby violated Section 2(6) of the IGST Act, 2017. 13. It is submitted that the petitioner has proven beyond reasonable doubt that the service recipient is outside the country and that the money was infact received in foreign exchange. In any event, mere technical breaches assuming without admitting did exist cannot be the reason for denial of the claim. 14. It is submitted that as on date, there is no appellate Tribunal to file appeal against the Impugned Order. The Impugned Order is contrary to the well established principles of law and prayed for allowing the Writ Petition. 15. The learned Senior Standing Counsel for the respondents would submit that the assessee did not provided proof to establish that the amount received in Indian Rupees is through freely convertible Vostro account of a non-resident bank situated in any country other than a member country of Asia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untry of Asian Clearing Union, Nepal or Bhutan. In these cases the petitioner had failed to establish that the amount received in Indian Rupees was through freely convertible Vostro account as stated in the RBI directions. (ii) The petitioner had not produced any export invoices, whereas Section 31 of the CGST Act, 2017 provides that a registered person shall issue a tax invoice and also in case of export of goods or services, the invoice shall carry the requisite endorsements. However, since the petitioner had not produced the tax invoices, the location of the service recipient could not be ascertained to establish that the recipient of the services are located outside India thereby not satisfying the condition number(ii) mentioned in Section 2(6) of the IGST Act, 2017. 22. The decision of the 2nd respondent has been affirmed by the 1st respondent vide impugned Order dated 27.08.2020 bearing reference No.A.No.03-10/2020(GSTA-I)(CN)(ADC). 23. Issue that arises for consideration is whether the petitioner is entitled for refund of the tax borne on input and final service exported to its overseas customers. 24. Export of service is a "zero-rated supply" within the meaning of Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow:- Section 16 of the Integrated Goods and Services Tax Act, 2017 (1) "Zero-rated supply" means any of the following supplies of goods or services or both namely:- (a) export of goods or services or both; or (b) supply of goods or services or both [for authorised operations] to a Special Economic Zone developer or a Special Economic Zone unit. (2) Subject to the provisions of Sub-Section (5) of Section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply. (3)A registered person making zero rated supply of goods shall, in case of nonrealisation of sale proceeds, be liable to deposit the refund so received under this sub-section along with the applicable interest under section 50 of the Central Goods and Services Tax Act within thirty days after the expiry of the time limit prescribed under the Foreign Exchange Management Act, 1999 (42 of 1999) for receipt of foreign exchange remittances, in such manner as may be prescribed. Provided that the registered person making zero rated supply of goods shall, in case of non-realisation of sale proceeds, be liable to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period: Provided that no refund of unutilised input tax credit shall be allowed in cases other than- (i) zero rated supplies made without payment of tax; (ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council: Provided further that no refund of unutilised input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty: Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies. (4)The application shall be accompanied by- (a) such documentary evidence as may be prescribed to establish that a refund is due to the applicant; and (b) such documentary or other evidence (including the documents referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax in pursuance of section 77 ; (e) the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person; or (f) the tax or interest borne by such other class of applicants as the Government may, on the recommendations of the Council, by notification, specify. [(8A) The Government may disburse the refund of the State tax in such manner as may be prescribed.] (9) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any court or in any other provisions of this Act or the rules made thereunder or in any other law for the time being in force, no refund shall be made except in accordance with the provisions of sub-section (8). (10) Where any refund is due to a registered person who has defaulted in furnishing any return or who is required to pay any tax, interest or penalty, which has not been stayed by any court, Tribunal or Appellate Authority by the specified date, the proper officer may- (a) withhold payment of refund due until the said person has furnished the return or paid the tax, interest or penalty, as the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) if the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded, leaves India; or (ii) if the goods are exported by land, the date on which such goods pass the frontier; or (iii) if the goods are exported by post, the date of despatch of goods by the Post Office concerned to a place outside India; (b) in the case of supply of goods regarded as deemed exports where a refund of tax paid is available in respect of the goods, the date on which the return relating to such deemed exports is furnished; [(ba) in case of zero-rated supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit where a refund of tax paid is available in respect of such supplies themselves, or as the case may be, the inputs or input services used in such supplies, the due date for furnishing of return under section 39 in respect of such supplies;] (c) in the case of services exported out of India where a refund of tax paid is available in respect of services themselves or, as the case may be, the inputs or input services used in such services, the date of- (i) receipt of payment in convertible forei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt with CITI Bank of the said intermediary namely Paypal. Thereafter, amounts in Indian currency are transferred from the intermediaries CITI Bank account to the petitioner's account with HDFC Bank after deduction of its service charges. 36. The routing of the payment by the intermediary viz., Paypal from its account in CITI Bank to the petitioner's own account with HDFC Bank in Indian Rupees is in accordance with the provisions of the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016 as notified by Notification No: FEMA 14(R)/2016-RB dated 02.05.2016. Regulation 3 prescribes the manner of receipt of foreign exchange. Regulation 3 of the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016 reads as under:- "Regulation 3 - Manner of Receipt in Foreign Exchange:- (2) Every receipt in foreign exchange by an authorized dealer, whether by way of remittance from a foreign country or by way of reimbursement from his branch or correspondent outside India against payment for export from India, or against any other payment, shall be as mentioned below: (A)Members of the Asian Clearing Union (i) Bangladesh, Myanmar, Pakista ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent) Regulations, 2016 makes it clear that in respect of an export from India, receipt shall be made in currency appropriate to the place of final destination as mentioned in the declaration form. 38. As per Regulation 3(2)(b) of the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016 any other mode of receipt of export proceeds for an export from India in accordance with the directions issued by the Reserve Bank of India to authorized dealers from time to time. 39. Thus, if payments are routed through an intermediary to person like petitioner, the intermediary should be an authorised person to receive such payment in convertible foreign exchange. As an intermediary, the petitioner is required to only credit the amounts in convertible foreign exchange into Reserve Bank of India. 40. Thus, there is no dispute with on the services provided by the petitioner to its foreign clients. The petitioner has provided the export services within the meaning of Section 2(b) of the IGST Act, 2017. The Paypal merely acts as an intermediary who receives the remittances in freely convertible foreign exchange and in as much required to comply with the requirements of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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