In Re : Habufa Meubelen B.V.
GST
2018 (7) TMI 883 – AUTHORITY FOR ADVANCE RULING – RAJASTHAN – 2018 (14) G. S. T. L. 596 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING – RAJASTHAN – AAR
Dated:- 16-6-2018
RAJ/AAR/2018-19/05
GST
Nitin Wapa (Member) and Sudhir Sharma (Member)
Present for the applicant : Sh. Keshav Malloo, CA (Authorised Representative)
RULING
(A) SUBMISSION OF APPLICANT:
M/s. Habufa Meubelen B.V. (hereby referred to as HO), is a company originally incorporated in Netherlands.
1.1 The applicant is the Indian Office of M/s. Habufa Meubelen B.V.(HO) which is established as a Liaison Office at C-36, Raghu Marg, Main Hanuman Nagar, Vaishali Nagar, Jaipur (Raj.) w.e.f. 18.12.2007, with the prior permission of RBI subject to various conditions.
1.2 The conditions of Indian Office of M/s. Habufa Meubelen B.V. are:-
a. Except proposed liaison work, the office in India shall not undertake any activity of a trading, commercial or industrial nature n
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office.
e. All the liabilities in India including arrears of gratuity and other benefits to employees etc. of the branch/ office will be met or adequately provided for by HO.
1.3 The liaison office does not have any independent revenue or clients. The office has been established for the purpose of liasoning with the suppliers with regard to quality control of goods. The purchase order or contracts are entered with the clients with the HO and liaison office does not enter into any contract with the clients. Payments for the supplies are made by HO directly to the account of supplier and all the expenses incurred by liaison office is claimed from HO as per clear instructions of RBI.
1.4. The salaries of the employees are remitted by the HO to such office which further pay the same to the employees working there. The HO also reimburses the other expenses incurred by the office for their operation The expenses are in the nature of rent, security, electricity, travelling etc Since
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e of supply of such service?
(C) SUBMISSION BY THE APPLICANT
3. The applicant has submitted the following submissions in their support.
3.1 There is no flow of services and there is no consideration flowing between HO and Liaison Office, as per Section 9 of the CGST Act 2017 GST is not applicable on any transaction which is not covered under the scope of the term supply' as defined in Section 7 of CGST Act. 2017.
3.2 In order to be a supply' liable to GST, an activity has to fall under Section 7 of the CGST Act, 2017 which reads as under:
7.(1) For the purposes of this Act. the expression “supply ” includes,-
(a) all forms 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:
(b) import of services for a consideration whether or not in the course or furtherance of business;
(c) the activities specified in Sched
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;supply' in harmony, a conclusion can be drawn that a supply of service can be liable to GST only if a separate consideration is charged If there is no consideration then it would not be liable to GST. In the present context, there is no consideration charged by applicant from the HO in foreign country for any services There is no amount received form HO except the funds for payment of salary, reimbursement of expenses like rent, security, electricity, travelling, etc., therefore the same is not a supply of service under GST law in absence of charging of consideration.
3.6 As mentioned in the facts itself that the liaison office does not have any independent revenue or clients. The office has been established for the purpose of liaising with the suppliers for quality control. Further the liaison office is set up only to represent the interest of the head office in Netherlands. Therefore, they are not separate person. The liaison office as such is prohibited to undertake any other
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Since, HO and Liaison Office cannot be treated as separate person, there cannot be any flow of services between them as one cannot provide service to self and therefore, the reimbursement of expenses made by the HO cannot be treated as a consideration towards any service.
3.8 As regards the requirement of getting registered under GST, the requirement of registration under that Act is governed by the provisions of Section 22 of the CGST Act. 2017 which provides that
“every supplier shall he liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his turnover in a financial year exceeds twenty lakh rupees.
And the liaison office is strictly prohibited to undertake any activity of a trading, commercial or industrial nature nor it is entering into any business contracts in its own name. Further, the reimbursement claimed by them from their HO is also falling out of
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ch service?
(E) Personal Hearing:
5.1 Personal hearing in the matter was given to the applicant on 18/05/2018 wherein Mr. Keshav Malloo ,CA and authorised representative appeared on behalf of the applicant and he reiterated the submissions already made vide their Advance Ruling application dated 22/03/2018.He requested for decision on the case as per his submissions.
(F) Findings:
6.1. As submitted by the applicant, they are working as the Indian Office of M/s. Habufa Meubelen B.V. which is established as a Liaison Office with the prior permission of RBI. Except proposed liaison work, this office in India would not undertake any activity of trading, commercial or industrial nature nor would they enter into any business contracts in its own name without RBIs prior permission. There is no commission/ fees being charged or any other remuneration being received/ income being earned by the office in India for the liaison activities/ services rendered by it.
6.2 The HO, Netherlands reim
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of trading, commercial or industrial nature or entering into any business contracts in its own name. Also the reimbursement claimed by them from their HO is also falling out of the purview of supply of service. As there are no taxable supplies made by the Liaison office, they are not required to get registered.
6.5 In view of the submissions made by the applicant and as discussed in above paras, when the applicant/liaison office is working as per the terms and conditions as mentioned under para 1.1 to 1.5 above, the reimbursement of expenses and salary paid by M/s Habufa Meubelen B.V to the liaison office, is not liable to GST, as no consideration for any services is being charged by the liaison office. Further, the kind of reimbursement claimed by them from their HO is also falling out of the purview of supply of service and as there are no such taxable supplies made by the Liaison office, they are not required to get themselves registered under GST.
In view of the foregoing, we rul
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