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TMI Blog2024 (8) TMI 1453X X X X Extracts X X X X X X X X Extracts X X X X ..... to levy / demand GST under the heading Value of the Credit Grant in Service determined as a service fee @1% is concerned, petitioner is reserved liberty to submit its response / reply to the same within a period of four weeks from today. Petition allowed. - HON'BLE MR JUSTICE S.R. KRISHNA KUMAR For the Petitioner : (By Sri. Ravi Raghavan, Advocate and Ms. Sneha Philip, Advocate) For the Respondents (By Sri. K Hemakumar, AGA) ORAL ORDER In this petition, petitioner seeks the following reliefs: a) Issue a writ in the nature of Certiorari or any other appropriate writ or order or direction quashing the impugned Show Cause Notice No. DCCT/AUDIT/GST/73/2022-23 T.No.490 dated 04.02.2023 issued by Respondent No. 3 at Annexure-A proposing to demand and recover total IGST amounting to Rs. 4,12,17,787/- along with interest and penalty for the period July 2017 to March 2018; b) Hold that the levy of GST on the activity of holding equity capital by the Holding Companies in the Petitioner company and on the ECB received by the Petitioner from AOSH is illegal and without jurisdiction; c) Pass such further order(s) and other reliefs as the nature and circumstances of the case may require. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. State of Karnataka and others W.P. No.25142/2022 dated 14.03.2024. 5. Per contra, learned AGA for the respondents submits that there is no merit in the petition and the same is liable to be dismissed. 6. As rightly contended by learned counsel for the petitioner insofar as the proposal to demand / levy GST in relation to Table No. VII of the Show Cause Notice is concerned, the said issue is directly and squarely covered by the judgment of this Court in Yonex s case supra, which was followed in the subsequent judgment of this Court in Metro s case supra, in which it was held as under: In this petition, petitioner seeks for the following reliefs: a) Issue a writ in the nature of Certiorari or any other appropriate writ or order or direction quashing the impugned Show Cause Notices Nos. ACCT/LGSTO-140/T-336/2022-23 Assignment No. 07/2022-23 dated 15.11.2022, ACCT/LGSTO-140/T-336/2022-23 Assignment No. 08/2022-23 dated 15.11.2022, ACCT/LGSTO-140/T-336/2022-23 Assignment No. 09/2022-23 dated 15.11.2022 and ACCT/LGSTO-140/T-336/2022-23 Assignment No. 10/2022-23 dated 15.11.2022 issued by Respondent No.3 enclosed at Annexure-A, Annexure-A1, Annexure-A2 and Annexure-A3 respectively, pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in the light of the Circulars issued by the Central Government and the State Government. It is therefore submitted that in the light of the Circulars referred to supra, the impugned order dated 02.11.2022 is without jurisdiction or authority of law, and the same deserves to be quashed. Under these circumstances, the learned Senior counsel submits that the petitioner would not press Prayer Nos. A and B sought for in the petition. 5. Per contra, the counsels for the respondents, submit that there is no merit in the petition and the same is liable to be dismissed. However, they do not dispute issuance of the Circulars by the Central Government and the State Government. 6. As rightly contended by the learned Senior counsel for the petitioner, the Central Government has issued Circular dated 17.07.2023, which reads as under: Representations have been received from the trade and field formations seeking clarification on certain issues whether the holding of shares in a subsidiary company by the holding company will be treated as 'supply of service' under GST and will be taxed accordingly or whether such transaction is not a supply. 2. In order to clarify the issue and to ensur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received from the trade and field formations seeking clarification on certain issues whether the holding of shares in a subsidiary company by the holding company will be treated as 'supply of service under GST and will be taxed accordingly or whether such transaction is not a supply. 2. In order to clarify the issue and to ensure uniformity in the implementation of the provisions of law across the field formations, the Board, in exercise of its powers conferred by section 168 (1) of the Karnataka Goods and Services Tax Act, 2017 (hereinafter referred to as KGST Act ), hereby clarifies the issues as under. Sl. No. Issue Clarification Taxability of share capital held in subsidiary company by the parent company 1 Whether the activity of holding shares by a holding company of the subsidiary company will be treated as a supply of service or not and whether the same will attract GST or not Securities are considered neither goods nor services in terms of definition of goods under clause (52) of section 2 of KGST Act and the definition of services under clause (102) of the said section. Further, securities include shares as per definition of securities under clause (h) of section 2 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent No.4 is hereby quashed. The submission made on behalf of the petitioner that Prayer Nos.a and b are not pressed, is placed on record. 6. In the instant case, the parent company is M/s. Metro Cash and Carry International GmbH of which the petitioner herein i.e., M/s. Metro Cash and Carry Pvt. Ltd., is a subsidiary and merely because the parent company M/s. Metro Cash and Carry International GmbH holds shares in its subsidiary i.e., the petitioner herein, the said circumstance cannot be classified, treated or construed as supply of service for the purpose of GST. Under these circumstances, since the issue in controversy involved in the present petition is directly and squarely covered by the judgment of this Court in M/s. Yonex India Private Limited case supra, I am of the view that the impugned Show Cause Notices issued are without jurisdiction or authority of law and the same deserves to be quashed. 7. In the result, I pass the following: ORDER (i) Petition is hereby allowed and disposed of in terms of M/s. Yonex India Private Limited case supra. (ii) The impugned Show Cause Notices at Annexures A, A1, A2 and A3 are hereby quashed. 7. The factual situation obtaining in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is represented only by way of interest or discount, will be treated as a taxable supply of service under GST or not. 1. As per clause (c) of sub-section (1) of section 7 of the CGST Act, read with S.No.2 and S.No.4 Schedule I of CGST Act, supply of goods or services or both between related persons, when made in the course or furtherance of business, shall be treated as supply, even if made without consideration. Therefore, it is evident that the service of granting loan / credit / advances by an entity to its related entity is a supply under GST. 2. Services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services) are exempted under sub entry (a) of entry 27 of Notification No. 12/2017-Central Tax (Rate). Therefore, it is clear that the supply of services granting loans / credit / advances, in so far as the consideration is represented by way of interest or discount, is fully exempt under GST. 3. It is mentioned that overseas affiliates or domestic related persons are generally charging no consideration in the form of processing fee / service fee, other than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required information may already be readily available within the group, or between related persons. The lender may not also take any collateral from the borrower. Accordingly, in case of loans provided between related parties, there may not be the activity of 'processing' the loan, and no administrative cost may be involved in granting such a loan. Therefore, it may not be desirable to place the services being provided for processing the loans by banks or independent lenders vis-a-vis the loans provided by a related party, on equal footing. 6. Even in case of loans provided between unrelated parties, there may not be any processing fee /administrative charges/loan granting charges etc., based on the relationship between the bank/independent lender and the person taking the loan. The lender might waive off the administrative charges in full, based on the nature and amount of loan granted, as well as based on the relationship between the lender and the concerned person taking the loan. 7. Accordingly, in the cases, where no consideration is charged by the person from the related person, or by an overseas affiliate from its Indian party, for extending loan or credit, other tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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