GST update No 184 on whether determination of place of supply within scope of AAR?

The Advance Ruling under GST laws has been constituted for resolving disputes with respect to specific issues as enlisted in section 97(2) of the CGST Act, 2017. However, at times, certain questions involve examination of points which are indirectly covered under the issues as stated in section 97(2) of the CGST Act, 2017 but it is often observed that AAR refuse to give their ruling on such issues by contending that it is beyond their scope. One such issue was recently raised before hon’ble Karnataka AAR in the case of M/s IBI GROUP INDIA PVT. LTD. wherein AAR held that determination of place of supply is outside the purview of AAR. The outcome of this decision is the subject matter of discussion of our present update. IBI Group India Private Limited “IBI India”, in joint venture with IBI Group Professional Services (Canada) Inc (“IBI Canada”), has entered into a contract with Asian Development Bank, Manilla (“ADB”) for rendering consultancy services (IBI India and IBI Canada are jointly referred to as “IBI” herein. Hence, advance ruling has been sought in respect of the following questions:- a) Whether Consultancy Services rendered to ADB, Manilla would qualify as export of services under section 2(6) of the IGST Act, 2017? b) If the Consultancy Services rendered to ADB, Manilla do not qualify as “export of services”, whether ADB would be required to obtain refund of GST charged on the invoice issued for consultancy services in terms of section 55 of the CGST Act, 2017 or the services would be exempt as per the provisions of the Asian Development Act, 1966? The applicant submitted that they satisfy all the conditions for qualifying the transaction as “export of services” as follows:- • The supplier of service, IBI is located in India. • The recipient of service, ADB is located outside India. • The place of supply of service is outside India if the general provision as stated in section 13(2) of the IGST Act, 2017 is made applicable which states that place of supply shall be CA. PRADEEP JAIN ??www.capradeepjain.com??pradeep@capradeepjain.com??5 location of service recipient. It was contended that as the consultancy services are not directly related to immovable property, the provision contained in section 13(4) stating place of supply to be immovable property would not be applicable. It is worth mentioning that the consultancy services is with respect to transit-oriented development plan in respect of construction of new metro lines in Bangalore. • The payment of such service is received in convertible foreign exchange. • The supplier of service and the recipient of service are not merely establishment of distinct person. It was also pointed that even if it is contended that the place of supply of service is location of immovable property, i.e., India so the transaction cannot be considered as export of service, then too, the refund is available of GST paid on services provided by ADB in terms of section 55 of the CGST Act, 2017 read with notification no. 16/2017-Central Tax (Rate) dated 28.06.2017. Even otherwise, the services provided by ADB are exempted under Article 56 of ADB Act. The applicant also stated that determination of place of supply is essential to decide whether service qualifies as export of service or not which in turn would determine the liability of the applicant to pay taxes on services which is squarely covered within “determination of liability to pay tax on any goods or services or both” in terms of section 97(2)(e) of the CGST Act, 2017. The applicant has also placed reliance on the decision rendered by Hon’ble Kerala High Court in the case of SUTHERLAND MORTGAGE SERVICES INC VERSUS PRINCIPAL COMMISSIONER AND OTHERS [2020 (3) TMI 186] to support their submission. The AAR held that as per section 96 of the CGST Act, 2017, AAR constituted under the State Act shall be deemed to be the authority in respect of CGST Act, 2017 also. Thus, AAR is constituted under the respective State Act and not the Central Act. This means that the ruling given by the said Authority will be applicable only within the jurisdiction of the concerned State and so determination of place of supply cannot be raised before AAR. It was also stated that determination of place CA. PRADEEP JAIN ??www.capradeepjain.com??pradeep@capradeepjain.com??6 of supply is not covered under section 97(2) of the CGST Act, 2017 so cannot be answered by the AAR. Reliance was also placed on the decision given by Karnataka AAR in the case of M/s Eicher Volvo Commercial Vehicles Ltd., Bengaluru and M/s Toshniwal Brothers (SR) Pvt. Ltd., Bengaluru. Therefore, the application filed by the applicant was rejected as beyond the scope of AAR. The above decision depicts the contradictory views of AAR on the same issue and not following the decision rendered by Kerela High Court. It is settled principle of law that judicial discipline needs to be followed by the subordinate authorities but it is often observed that the decisions of High Courts are not applied by stating that the facts and circumstances are different. Such an approach leads to unwarranted litigation.

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GST update No 184 on whether determination of place of supply within scope of AAR?

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