In Re: M/s. Esprit India Private Limited
GST
2018 (7) TMI 1334 – AUTHORITY FOR ADVANCE RULINGS HARYANA – 2018 (15) G. S. T. L. 132 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULINGS HARYANA – AAR
Dated:- 11-4-2018
AAR No. HAR/HAAR/R/2018-19/6
GST
SANGEETA KARMAKAR AND VIJAY KUMAR SINGH, MEMBER
Present for the Applicant Sh. Nitin Agrawal.
1. The applicant namely M/s. Esprit India is a subsidiary of M/s. Esprit De Corp. (Far East) Limited, Hong Kong (EDCFE) which in turn is a fellow subsidiary of M/s. Esprit Europe Service GmbH, Germany ('Esprit Germany'). EDCFE is a limited company incorporated in Hong Kong, acts as sourcing service provider for Esprit Germany, EDCFE assists Esprit Germany in sourcing (on a worldwide basis)) of goods which includes wearing apparel, shoe & accessories and fabric.
2. EOCFE has engaged Esprit India as a sub-contractor to provide sourcing services for the goods on a non-exclusive basis in India Esprit Germany. Pursuant to the said a
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Esprit India performs its functions as a sub-sourcing contractor of and does not purchase the goods or trade its own name.
It assists in protection of trademark which includes ensuring that suppliers execute all trademark confirmation letters, comply with the trademark protection procedures and comply with the sourcing principles as adopted by Esprit Germany/EDCFE.
3.
Identification of supplier
EDCFE provide guidelines and instructions to Esprit India regarding vendor selection process
Esprit India responsible for collecting data for the purpose of vendor evaluation, Esprit India undertakes vendor evaluation on various parameters including experience, reputation, quality of product, price etc. based on which the vendor is selected. Esprit India is also responsible for maintaining the existing and new supplier base in India.
4.
Negotiation with the suppliers
Esprit Germany directly negotiate and contract with supplier in respect of goods sourced from India.
Esprit India only
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Esprit Germany into binding contract of purchase of goods.
8.
Involving and payment
Suppliers directly invoice to Esprit Macao and it makes payment directly to the suppliers
No role in the invoicing and payment process as all invoices are sent directly by suppliers to Esprit Germany without any involvement of Esprit India
4. Questions on which ruling has been sought by the applicant. are as under:
(i) Taxability of above stated services provided by Esprit India to its associate concern in Hong Kong EDCFE under GST regime.
(ii) Whether the above stated services provided by Esprit are covered under Export of Services having Zero rated taxability,
(iii) Whether Esprit India is eligible for seeking refund of GST for the taxes paid on input services or goods or both.
RECORDS OF PERSONAL HEARING – 2nd PROVISO TO SECTION 98(2) OF CGST/HGST ACT, 2017
5. Personal hearing in the instant case was conducted on 09.04.2018, which was attended by Sh. Nitin Agrawal Power of Attorney Hold
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rs and advice on the best available combination of price, quality and delivery of the goods for Esprit Germnay.
998371 Market research services. This service code includes market analysis, analysis of competition and the behaviour of consumers, use of research monographs, statistics, econometric models surveys, etc.
Taxable under forward charge @ 18% [S.No.21(ii) of Notification No. 11/2017-Cental Tax (Rate) dt. 28.07.2017]
2.
Purchase of goods and trademark protection
Esprit Germany directly purchases goods from Indian suppliers
Esprit India performs its functions as a sub-sourcing contractor of EDCFE and does not purchase the goods or trade in its own name.
It assists in protection of trademark which includes ensuring that all suppliers execute all trademark confirmation letters, comply with the trademark protection procedures and comply with the sourcing principals as adopted by Esprit Germany/EDCFE.
998599 Other support services n.e.c.
Business services of intermediaries a
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te) dt. 28.07.2017]
4.
Negotiation with the suppliers
Esprit Germany directly negotiate and contract with supplier in respect of goods sourced from India.
Esprit India only communicates the terms and conditions to the extent of instructions and requirements received from Esprit Germany {through EDCEF) but is not involved in negotiation.
998599 Other support services n.e.c.
Business service of intermediaries and brokers;
Taxable under forward charge @ 18% [S.No. 23(ii) of Notification No. 11/2017-Central Tax (Rate) dt. 28.07.2017]
5.
Inspection quality control
Esprit Germany and DCFE, frame guidelines for quality control procedure to be adopted during manufacturing, stock keeping in warehouse and transportation
Esprit India based on the guidelines received from EDCFE conducts quality checks at various to stages of production, it also checks whether the goods meet the specification, quality, delivery time, and other requirement of Esprit Germany.
998311 Management consulting
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e) dt. 28.07.2017]
7. As regards the question of above stated services provided by Esprit India, also being covered under export of services having zero rated taxability, it is observed that “zero rated supply” has been defined under Section 16(1) of the integrated Goods and Services Act, 2017, as under:
“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 be exempt supply.
(3) registered person making zero toted supply shaft 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 Undertakin
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nt of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;
From the above, it is evident that whether a transaction is “export of services” or not, is dependent upon the tact as to whether the place of supply of service is out of India or not. Consequently, if the advance ruling authority proceeds ahead with examination and consideration of this fact, discussions and findings on the aspect of “place of supply” will be inevitable. Whereas, Section 97(2) of the CGST/HGST Act, 2017 empowers the Advance Riding Authority to decide the issues, which are as follows:-
(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 credit of paid or deemed to have been paid;
(e) determination of the liability to pay tax on any goods or services or both;
(f) whethe
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nder is the competent authority for the same.
However, with regard to giving Advance Ruling on this question, it is observed that as the earlier question relating to export of services is dependent upon the definition of “place of supply”, which is out of jurisdiction of the authority, this instant question too, being corollary to earlier question, cannot be taken up for pronouncing any ruling due to lack of jurisdiction.
ADVANCE RULING UNDER SECTION 98 OF THE CGST/HGST ACT, 2017
9.1. The services provided by Esprit India to its associate concern in Hong Kong EDCFE are taxable supplies, as discussed in para 6 above.
9.2. The above stated services being taxable supplies, the question as to whether they qualify as “export of services” and accordingly “zero rated supply”, is out of jurisdiction or this authority, in view above discussions in para 7.
9.3. The same proposition, as discussed in para 9.2 above, applies to the question as to whether Esprit India is eligible for seeking re
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