2018 (12) TMI 893 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2019 (20) G. S. T. L. 471 (A. A. R. – GST) – Levy of GST – Reimbursement of salary on behalf of foreign entity – pure agent or not – Held that:- The applicant is a Crew Recruitment and Placement Agency, and are involved in selecting and recruiting shipping personnel on behalf of their principal/ client who is a Foreign Ship Owner and for which they are charging Administration fees and paying GST on such Administration charges so received.
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The Salary of Crews of RMS will be deposited in the account of the applicant in one go and the same will be transferred from the applicant’s account directly to the bank accounts of the Crews, by the bank, on the directions of the applicant – the entire amount received by the applicant from RMS towards salary of crews is disbursed as such. Hence with respect to this transaction it is crystal clear that the applicant is acting as a pure agent of RMS.
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The applicant will be acti
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t ] by DRS MARINE SERVICES PRIVATE LIMITED, the applicant, seeking an advance ruling in respect of the following issue. Whether GST is applicable on Reimbursement of salary on behalf of foreign entity. At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the GST Act . 02 FACTS AND CONTENTION – AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- STATEMENT OF THE RELEVANT FACTS HAVING A BEARING ON THE QUESTIONS: We are Crew Recruitment & Placement Agency operating from Belapur, Navi Mumbai having GST Regn No.
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member through banking channels into their respective accounts. For this activity we would be charging/ invoicing service charges to the principal and on the said charges we would be discharging our GST liability. In view of Rule 33 of the Central Goods and Service Tax Rules, 2017, the expenditure or costs incurred by a supplier as a Pure Agent of the recipient of supply shall be excluded from the value of the supply. Since the activity would be done on behalf of the Foreign Principal and we would not be deducting any charges from the amount of salary received for disbursement, the amount so remitted towards disbursal of salary would not be taxable under GST in view of provisions of Rule 33 of the CGST Rules, 2017. Therefore we would be carrying out the said activity, after amending our contract with the principal. If anything contrary to the said provisions exists, kindly let us know so that we are able to properly follow the Rules and correctly pay the taxes. STATEMENT CONTAINING APP
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ry-I banks by foreign shipping or airline companies or their agents in India are reproduced below: a) Credits to such foreign currency accounts would be only by way of freight or passage fare collections in India or in ward remittances through normal banking channels from the overseas principal. Debits will be toward Various local expenses in connection with the management of the ships / crew in the ordinary course of business. b) No credit facility (fund based or non-fund based) should be granted against security of funds held in such accounts. c) The bank should meet the prescribed reserve requirements in respect of balances in such accounts. d) NO EEFC facility should be allowed in respect of the remittances received in these accounts. e) These foreign currency accounts will be maintained only during the validity period of the agreement. 3. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned. 4. The directions con
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rporated as an addendum as follows: 2. Fee 2.4 Cost related to Training/ Briefing, Interviews in other Cities etc will be invoiced once approved on actual basis. 2.5 A Fix fees of US S 1250.00 per month will be charged as service charges towards disbursement of salaries. 2.6 GST as applicable. 3. Salary Reimbursement of Crew members. RMS will transfer Salary of Crews to DRS SFC A/C as a single remittance, and DRS will instruct the bank to disburse the Crew Salary as per list provided by RMS to respective bank Accounts of Crew members. 4. Reimbursement of Travel Cost 4.1 DRS will arrange travel for Officers/Crew for RMS subject to fare approval. 4.2 Travel Agency will raise invoice to RMS C/O DRS. 4.3 DRS will pay to travel agencies for and on behalf of RMS. 4.4 Monthly Reimbursement bill towards travel cost will be raised by DRS to RMS. The applicant has raised following query:- Qs. No. Questions raised by the applicant Submission as per ACT & RULE B Whether GST liability is applic
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e, the expression pure agent means a person who- (a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both; (b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply; (c) does not use for his own interest such goods or services so procured; and (d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account. Comments: As per the details provided by the applicants and Rule 33 of the CGST Rule 2017, the salary should not be taxable under GST as the applicant is giving instruction to the bank and acting as Agent only on behalf of their Foreign principal. The applicant in this case does not provide manpower to M/s. RMS Ltd but provides service for recruiting the manpower. The personnel involved a
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e, Dy. Commr of SGST appeared and made written submissions. 05. OBSERVATIONS We have gone through the facts of the case, documents on record and submissions made by both, the applicant and the department. The applicant is a Crew Recruitment and Placement Agency, and are involved in selecting and recruiting shipping personnel on behalf of their principal/ client who is a Foreign Ship Owner and for which they are charging Administration fees and paying GST on such Administration charges so received. The applicant has submitted that their principal has requested them for disbursal Of salary to the crew members from the applicant s side, for which the principal would be transferring the sum of total salary to the applicant who in turn will be disbursing the salary to the crew member through banking channels into their respective accounts. For this activity, the applicant would be charging/ invoicing service charges to the principal and on the said charges they would be discharging their GS
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for meeting the local expenses in India of such shipping or airline company. The question raised by the applicant is connected with their agreement that they have entered into with M/s. Reefership Marine Services Limited (RMS), situated in Bermuda, i.e. outside India. The agreement made on the 01.11.2003 between the applicant and RMS, has been submitted by the applicant and by way of which the applicant would assist RMS to hire officers of Indian Nationality for their vessels. As per the agreement the applicant would assist RMS in the selection of qualified Senior/ Junior officers for employment on board vessels as when required by RMS, for which they would be paid a certain fee to cover the administrative costs and mobilization expenses and they would also be paid communication costs . Vide the proposed Addendum #5 an amendment has been proposed and one of the amendments, under point no. 3 of the Addendum#5 submitted by the applicant at page 11 of their submissions dated 13.07.2018 is
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agent of RMS. Here is to reiterate that the amounts that are to be transferred to this account have to be genuinely in respect of salary of crew as discussed and no other amounts which are not authorized and due as salary can be handled through this account by the applicant. We find that Rule 33 of the GST Rules would cover these types of transactions and is reproduced as under:- Rule 33. – Value of supply of services in case of pure agent.- Notwithstanding anything contained in the provisions of this Chapter, the expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely,- (i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorisation by such recipient; (ii) the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure a
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l be acting as a pure agent of RMS in as much as the entire amount received by them as Crews Salary will be disbursed to the Crew and no amounts from the said receipt will be used by the applicant for his own interest. In fact, for performing as a pure agent they will also be receiving compensation separately in the form of fixed fees to be charged as service charges. In view of the above we are of the opinion that the applicant will not be liable to pay GST on Salary amount received from RMS and disbursed to the Crew. 05. In view of the extensive deliberations as held hereinabove, 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-34/2018-19/B-99 Mumbai, dt. 24.08.2018 For reasons as discussed in the body of the order, the questions are answered thus – Question:- Whether GST is applicable on Reimbursement of salary on behalf of foreign entity. Answer:- Answered in the neg
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