In re : VSERVGLOBAL PRIVATE LIMITED
GST
2018 (11) TMI 959 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2018 (19) G. S. T. L. 173 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – AAR
Dated:- 7-7-2018
GST-ARA- 03/2018-19/B- 59
GST
MR. B. V. BORHADE, (MEMBER) AND MR. PANKAJ KUMAR, (MEMBER)
PROCEEDINGS
(Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
The present application has been filed under section 97 of the Central Goods and Services
Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by VSERVGLOBAL PRIVATE LIMITED., the applicant, seeking an advance ruling in respect of the following question.
The Applicant Vserv request this Hon'ble Authority to decide as to whether the aforesaid services proposed to be rendered qualify as 'Zero Rated Supply in terms of Section 16 of the Integrated Goods & Service T
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9;Clients'). Clients are engaged in Trading of Chemicals and other products in International Trade. Vserv will come into picture after finalization of Purchase / Sale order by a Client. Vserv will undertake following activities for and on behalf of Clients.
a) Get SDF (Sales Detail Form) & PDF (Purchase Detail Form) from concerned party
b) Generate order no in VOSS
c) create PO (Purchase Order) & SC (Sales Contract) in VOSS
d) Send SC (Sales Contract) & PI (Proforma Invoice) to customer & get Sl (Shipping Instructions) as
e) Send PO (Purchase Order) to supplier & Seek PI (Proforma Invoice) & Share SI (Shipping Instructions)
f) Liaise with supplier for Cargo Readiness
g) Liaise with inspection authorities if pre-shipment inspection is needed
h) Inform Customer on tentative schedule
i) Process payment request in VOSS
j) send payment request to Client.
k) provide forwarder/ carrier nomination to supplier if FOB (Free on Board)
l) Seek carrier booking details and share with
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ll be done directly by Clients and Vserv will maintain accounting of the same. Vserv will be compensated for its services either on fixed monthly basis or as per the volume of transactions, on mutually agreed terms, in convertible foreign Exchange.
Question-
3. Applicant Vserv request this Hon'ble Authority to decide as to whether the aforesaid services to be rendered qualify as 'Zero Rated Supply in terms of Section 16 Of the Integrated Goods & Service Tax Act, 2017 or not.
Statement containing the applicant's interpretation of law and/or facts. as the case may bet in of the questions(s) on which advance ruling is required
4. As per legal understanding of Applicant, the aforesaid services rendered by the Applicant qualify as “Zero Rated Supply” in terms of Section 16 Of the Integrated Goods & Service Tax Act, 2017 for the reasons stated hereinafter. The provisions contained in Section 16 of the Act, ibid are reproduced below for ready reference.
“16. Zero rated supply
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d claim refund of such tax paid on goods or services or both supplied,
in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder. ”
As per the above stated legal provisions Export of Services is a zero rated supply. The phrase Export of Service' is defined in Section 2(6) Of the Act, ibid and read as under:
“(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 humbly submitted that the services rendered by applicant satisfy all the aforesaid conditions, as explained her
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in India and having its registered office in Mumbai. The Appellant's Mumbai office is registered under GST. The orders for supply of said services are received in its Mumbai office and also services are executed from its office situated in Mumbai. Therefore, the condition that the location of service provider should be in India is met.
8. The recipient of service is located outside India- The phrase 'location of Recipient of service' is defined in Section 2(70) of the CGST Act, 2017 which reads as under.
“(70) “location of the recipient of services” means,
(a) Where a supply is received a place of business for which the registration has been obtained, the location of such place of business;
(b) Where a supply is received a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment;
(c) Where a supply is received at more than one establishment, whether the place of business fixed es
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e of supply of service id outside India – As per sub-section (2) of section 13 of Act, ibid, the place of supply of serviced – other than those specified under sub-section (3) to sub-section 13, will be the location of recipient of services. In simple terms, if the service is not specified under any sub-section (3) to (13) then place of supply will be the location of service recipient. The aforesaid services, are prime-facie not specified under any of the sub-section (3) to (13) of section 13. The government have notified classification scheme of services, section 8 of the said classification scheme covers business and production services. The relevant entries of said section are reproduced below.
Section 8: business and production services
Heading no. 9981
Research and development services
***
Heading no. 9982
Legal and accounting services
Group 99821
Legal services
Group 99822
Accounting, auditing and bookkeeping services
&nb
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and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8. The said Explanation 1 to Section 8 of Integrated Goods and Service Tax Act, 2017 reads as under:
'Explanation 1. – For the purposes of this Act, where a person has, –
(i) an establishment in India and any other establishment outside India;
(ii) an establishment in a State or Union territory and any other establishment outside that State or Union territory; or
(iii) an establishment in a State or Union territory and any other establishment being a business vertical registered within that State or Union territory,
Then such establishments shall be treated as establishments of distinct persons.
11 (a). As already submitted the supplier of service and recipient of services are separate incorporated companies and therefore they are not merely establishment of distinct person in terms of aforesaid statutory provisions. Thus the said condition is also sati
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ersons, but does not include a person who supplies such goods or services or both or securities on his own account;
2. At per the above definition, a person who arranges or facilitates supply of goods or services between two persons is an intermediary. The said definition also contains an exclusion as per which the person who supplies goods or services on his own account is not included.
3. In the instant case, the applicant proposes to maintain accounts of its client, liaison with buyers and sellers of clients with respect to delivery, transportation of goods and payment etc. All the said services are proposed to be provided as a package and are bundled in natural course of business. Therefore, the said services are “Composite Supply' as defined in Section 2 (30) of the Central Goods & Service Tax Act, 2017 and therefore tax would be levied in terms of Section 8 of the Act, ibid. above referred statutory provision are reproduced below for ready reference.
“(30) “composite sup
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ant proposes to supply “Business Support Service' comprising of 'Back Office Support' and “Accounting' which is its Principle Supply. If these services also facilitate supply of goods then it is only an incidental supply to the Principle Supply. As already submitted, the applicant would come into picture only after finalization of Purchase / Sale deals by the clients. They said 'Business Support Services' would be provided by applicant to its client would be on Principle to Principle basis. Therefore, the instant case is covered by exclusion clause in definition of 'Intermediary'
5. It is submitted that the term 'Intermediary' was also defined in aforesaid definition is exactly same, as it was in Service Tax Regime. In Service Tax the term was defined in Rule of the Place of Provision Rules, 2012 which read as under.
(f) “intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provisi
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entical issue to the case in hand came before the Hon'ble Authority for Advance Ruling In Re: GoDaddy India Web Service Private Ltd, reported as 2016 (46) S.T.R, 806 (A.A.R.) (copy enclosed.).
8. In GoDaddy (supra) the applicant proposed to provide support services in relation to marketing, branding, offline marketing, oversight of quality of third party customer care Center and payment processing, on principal to principal basis. Those services were proposed to be provided with the sole intention of promoting the brand GoDaddy US in India and thus augmenting its business in India. Therefore, those services proposed to be provided by the applicant, would support the business interests of GoDaddy US in India. The said service were proposed to be provided as a package. Hon'ble Authority accepted that the said services are bundled in natural course of business. The relevant portion of the said Ruling is reproduced below for ready reference.
“11. Applicant proposes to provide s
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as a package and the payment for the entire package would he a consolidated lump sum payment. Applicant submits that in view of all these indicators, service provided by them to GoDaddy US is a bundle of services, which is bundled in normal course of business. This point has not been controverted by the Revenue. We agree with the submissions of the applicant that proposed services are a bundle of services, bundled in normal course of business and not intermediary service.
19. It observed that business support services are proposed to be provided by the applicant to GoDaddy US on principal to principal basis. It is the main service. Further, applicant is not concerned in respect of services provided by GoDaddy US to Indian Customers, which relates to domain name registration, transfer services, web hosting services, designing services, etc. In case, applicant was providing service to Indian Customers, he would have received “consideration” from Indian Customers. Fact is that no remun
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have already started serving M/s. Vikudha Overseas Corporation Limited, Hong Kong. A copy of Contract was also submitted. The trading business of M/s. Vikudha in more than Twenty Countries and majority of its business is done with the suppliers / customers situated in countries other than India. In GoDaddy (supra) the applicant had to deal with Indian Customers its client. Whereas, in the instant case, the buyers / sellers are not limited to India, but are spread across the Globe. Thus, the case of applicant is at much better footing.
11 It is correct that the Ruling of Authority for Advance Ruling is binding only in respect of Applicant. However, it certainly has persuasive value. It should also be taken into consideration that Authority for Advance Ruling under Service Tax was consisting of very senior Tax Officers and was headed by a retired Supreme Court Judge. Therefore, interpretation of law by such a senior body should be given due regard. Attention is also drawn to the releva
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ies. However, it has also been rightly held by the Authority itself that this does not mean that a principle of law laid down in a case will not be followed in future.
12 From the above, it is clear that the applicant cannot be termed as 'intermediary' and therefore Sub-section (8) of Section 13 Integrated Goods & Service Tax, 2017 have no application. In the instant case, the services being provided is not specified under any of the Sub-section from (3) to (13), Section 13 of the Integrated Goods & Service Tax, Act, 2017. Therefore, place of supply of these services will be determined under Section 13(2) of the Act, ibid and would be the location of Recipient of services which is outside India.
13 In view of the above and submissions already made, the Hon'ble Authority is humbly prayed to rule that the Services being provided / proposed to be provided are 'Zero Rated Supplies'.
3. CONTENTION – AS PER THE CONCERNED OFFICER
The submission, as reproduced verba
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is sought under this Act, shall be in respect of, –
(a) Classification of any goods or services or both;
(b) Applicability of a notification issued under the provisions of this Act;
(c) Determination of time and value of supply of goods or services or both;
(d) Admissibility of input tax credit of tax paid or deemed to have been paid;
(e) Determination of the liability to pay tax on any goods or services or both;
(f) Whether applicant is required to be registered;
(g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.
The issue posed by the applicant before Advance Ruling Authority, is pertains to Zero Rated supply, it means it relates to place of supply, only above stated (a) to (g) questions are sought for Advance Ruling before Hon. Advance Ruling Authority, place of supply is not covered under the above (a) to (g), hence, my
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export of services, to qualify zero rated supply Export of service is The main condition. It means services should be exported.
In the instant case it is not happened, firstly we have to see the definition of Export of services; same has reproduced for ready reference.
As per section 2 (6) Export of services means the supply of any service when, –
* The supplier of service is located in India;
* The recipient of service is located outside India;
* The place of supply of service is outside India.
* The payment for such services has been received by the supplier of service in convertible foreign exchange; and
* The supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation I in section 8.
In this case supplier M/s vservglobal Pvt ltd id private limited company situated at 201, Dhantak plaza, Opp. Waman Center, Makwana road Andheri (E), Mumbai-400059. The said firm located in India.
In this case supp
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(i) the location of the recipient where the address on record exists; and
(ii) the location of the supplier of serviced in other cases.
Section 12 (1) – place of supply of services where location of supplier or location of recipient is within India.
Section 12 (2) – place of supply of services If not prescribed in subsection (3) to (14). This section provides place of supply of services for all supplies of services where the location of supplier and recipient is in India.
1. If the location of supplier of service and the recipient is in India then the place of supply of serviced shall be determined under section 12 of IGST act.
2. when the place of supply of service cannot be determination under section 12(3) to 12(14) i.e. when there is no special provision specified for determination of place of supply then place of supply determined in section 12(2) which is as follows:
a. where the services made to registered person – location of such recipient.
b. where the services
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ted, having registered office at Unit No. 1201-02A, 12th Floor, The Centrum, 60 Wyndham Street, and Central Hong Kong, China. on website of company it is learnt that, company has operated throughout world, and it is operated his business in India. The company has stated in website pertains to his business as under:-
Some content of website http://vvww.vikudha.com/global-presence/ has reproduced for ready reference: – Vikudha India is devoted to sourcing and trading varieties chemical products from India and subcontinent countries. The products are ranging from food & agriculture, pain & coating, water treatment, consumer care products raw materials. India is being a home ground for our well trained and experienced traders, those who are having close relationships with manufacturers. The thorough local chemical industry knowledge makes our India team to know the season, production cycle, market fluctuations, rules and regulations changes in advance and this helps ourselves to put ahead
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Ltd to M/S Vikhudha India Trading Limited, which is operated in India for M/S Vikhudha Overseas Corporation Limited. It means all services provided to M/S Vikudha India Trading Limited by the Applicant. It means location of recipient of service is in India, at 201, Dhantak Plaza, Opp Waman Center Makwana Road, Marol, Andheri (E), and Mumbai.
It is also pertinent to note that, The Applicant of this ARA M/S Vservglobal Pvt Ltd, is private Limited company situated at 201, Dhantak Plaza, Opp. Waman Centre, Makwana Road Andheri (E), and Mumbai-400059
Another condition of location of the recipient of service is located outside India, and the place of supply of service is outside India is not fulfilled. Only mere agreement by foreign company with Indian is not suffice to determine Export of services.
It is also seen from the bank account of the M/S Vservglobal Pvt Ltd, that payment for such service has not been received by the supplier of service in convertible foreign exchange.
The last
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r union territory and any other establishment being a business vertical registered within that state or union territory, then such establishment shall be treated as establishment of distinct person.
Explanation 2. -A person carrying on a business through a branch or an agency or a representational office in any territory shall be treated as having an establishment in that territory.
This section provides certain cases where the supply of goods and services Will be treated as Intra-state supply; we are here restricted up to Supply of services.
Supply will be treated as intra state supply of service, if the location of supplier and place of supply of service (as provided under section 12) is in the same State or union Territory, on such supply CGST and SGST will be payable. Hence Supply of Services to be treated as Intra-state.
Distinct Person-
In the following cases the person will be required to take different registration as per section 25 of CGST Act and will be treated as dist
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alified under “Zero rated supply”, it is Supply of Services to be treated as Intra-state.
If we see the nature and scope of work, the all nature is office work, or we can call it back office work. Co ordination with buyer and sellers, and other parties for execution of purchase and sale contracts entered in to by M/S Vikudha Overseas Corporation Limited.
Explanation 1.-For the purposes of this Act, where a person has,-
(i) an establishment in India and any other establishment outside India;
(ii) an establishment in a State or Union territory and any other establishment outside that State or Union territory; or
(iii) an establishment in a State or Union territory and any other establishment being a business vertical registered within that State or Union territory, then such establishments shall be treated as establishments of distinct persons.
4. HEARING
The case was taken up for preliminary hearing on DT. 15.05.2018, with respect to rejection of the application when Sh. Bharat B
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who is supplier of Services, which is a corporate entity incorporated in India and having its registered office in Mumbai. The orders for supply of said services are received in its Mumbai office and also services are executed from stated in Mumbai.
The applicant has submitted sample copy of service agreement entered into between the paties,Tax invoices issued, bank statements etc. to represent the transactions effected between the parties. The relevant clauses of the agreement for the present purpose are as below:
1. This service agreement is made between the party M/S. Vikhuda Overseas Corporation Ltd. Hong Kong (Herein referred party A) and M/S. Vservglobal Pvt. Ltd. Andheri, (Herein referred party B) -This agreement is executed on 30.122017 of the office of party A situated in Hong Kong. Party A is global firm specializing in trading and distribution of chemical and Agricultural/Consumer products in different geographies. Party B is an India based corporate entity and has start
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will provide access to its software “VOSS” to the Party B for rendering the agreed services. The major service activities to be undertaken by the Party B for and on behalf of party A are mentioned at [( a ) to (x) of the facts of the case at para 2 of this agreement as above.
Article 3: Obligation of parties:
* The party B commits itself carrying out hereby services in accordance with the instruction of party A.
* Party B commits not to disclose business dealing of party A to any third party/ parties.
* The party B commits no to allow access ” VOSS” to anybody except its employees entrusted with the job of working on it.
* Both the parties commit not to represent each other before a third party/ parties as an agent/ principal of the other parties and entered in to any kind of binding agreements.
Article 4: The Service Fee and Invoicing: – In return for the performance of services entrusted on the basis of the terms of this contract, the party B shall receive a remuneration Of
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Limited., having registered office at DHANTAK PLAZA, 201, OPP. WAMAN MAKWANA ROAD, MAROC, ANDHERI EAST Munn bai City MH 400059 IN (AS per website of Ministry of Commerce), and The Applicant of this ATA M/S Vserv Global Pvt Ltd, is private Limited company situated at 201, Dhantak Waman Center, Makwana Road Andheri (E), Mumbai-400059. The officer has information from the website of the client. He has also collected information to the promoters of the client and the sister concern. Based on this information the officer submits that all the above firms are related companies. He further has drawn a conclusion that the applicant is providing services to M/S. Vikudha India Trading Limited, a sister concern located in India and thus the provision of services is in India and not as export of services contended by the applicant.
During the course of final hearing held on 26.06.2018 and having regards to the facts of the case applicant was called on to submit his written contention specifically
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ct are relevant, which are reproduced below for ready reference-
Section 16 of the IGST Act: (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 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 shall be eligible to claim refund under either Of the following options, namely:
(a) He may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; or
(b) he may supply goods or services or both,
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Explanation I in section 8;
In the course of final hearing a reasonable doubt was raised by the members whether the applicant is an 'intermediary' as defined under the act. On this issue the contention made by the and the jurisdictional officer is already reproduced above. It is therefore necessary first to understand the definition of 'intermediary' as defined in the act.
Section 2(13) of the IGST Act:
“intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account;
In the context of definition of 'Intermediary' as mentioned above, we now examine the service agreement as a whole to ascertain whether the applicant is an Intermediary or not. This is necessary because the provisions of place of supply which decide the na
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ce) & Share SI (Shipping Instructions)
* Liaise with supplier for Cargo Readiness
* Liaise with inspection authorities if pre-shipment inspection is needed
* Inform Customer on tentative schedule
* process payment request in VOSS
* send payment request to Client.
* Provide forwarder/ carrier nomination to supplier if FOB (Free on Board)
* Seek carrier booking details and share with supplier & customer
* Follow up for smooth SOB (Shipping on Board) with supplier and forwarder
* Log it in Excel Order Sheet – ETD -ETA(Estimated Date of Arrival -Estimated date of Departure)
* Get draft BL (Bill of Lading) prior to sailing
* Follow up for full shipping documents with supplier
* Raise payment request in VOSS for supplier for balance or final payment
* Send payment request to Group Company for supplier for balance or final payment.
* Arrange inspection certificates if applicable
* Raise payment request for freight and inspection charges as applicable
* Arrange
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taining to place of supply in case of intermediary services as provided in 8 of section 13 are relevant. In the instant case and as per applicants own admission of fact that applicant is supplier of Services, which is a corporate entity incorporated in India and having is registered office in Mumbai. We find that the place of supply in case of services provided by the applicant being intermediary would be the location of the supplier of services i.e. the location of the applicant which is located in the state of Maharashtra, India. 'To qualify transaction of supply of services as export of services that transaction has to satisfy all five ingredients of the definition of export of services simultaneously. In the present case we find that the condition at (iii) of the above definition is not satisfied and hence without examining and getting into the contention of the jurisdictional officer with regards to condition at (v) of the said definition as to distinct person which would requ
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its business. In the present case we find that the activities undertaken by the applicant are for and on behalf of clients to facilitate supply of goods and services between the clients their customers. In view of this we are of the opinion that the judgement cited by the applicant is not applicable to the facts of the present case.
06. In view of the extensive deliberations as held here in above, we pass an order as follows:
ORDER
(Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
NO.GST-ARA- 03/2018-19/B- 59 Mumbai, dt. 07.07.2018
For reasons as discussed in the body of the order, the questions are answered thus –
Question :- The Applicant Vserv request th
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