In Re: Mrs. Vishakhar Prashant Bhave, M\/s. Micro Instruments
GST
2018 (12) TMI 227 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2019 (20) G. S. T. L. 494 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – AAR
Dated:- 10-8-2018
GST-ARA-23\/2018-19\/B-87
GST
SHRI B.V. BORHADE, AND SHRI PANKAJ KUMAR, MEMBER
\nPROCEEDINGS
\n(Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
\nThe 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 Mrs. Vishakar Prashant Bhave, the applicant, seeking an advance ruling in respect of the following issue.
\n(i) Whether the “Commission” received by the Applicant in convertible Foreign Exchange for rendering services as an “Intermediary” between an exporter abroad receiving such services and an Indian importer<\/p>\n
= = = = = = = =<\/p>\n
Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n oned as being under the “GST Act”. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n itled to have some “discount in kind”, like getting some items Free of cost such as a TV set, a Computer or a Camera etc.; which is to be provided by Micro as a necessary charge on the “commission” it receives in convertible Foreign Exchange. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n be claimed: = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n neral section which provides that the place of supply of service' is the location of recipient of service, except the services specified in sub-sections (3) to (13). = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n 's services may fall in the expression of “Intermediary services” appearing in clause (b) of sub-section (8) of Section 13 of the IGST Act, 2017. If it were to be true interpretation, the registered place of the Supplier (Micro) being in India \/ in Taxable Territory, the place of supply becomes 'India \/Taxable Territory' and hence CGST + SGST may get attracted. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n st but one clause uses “and”, to make it clear that all the clauses must be fulfilled concurrently and coextensively & then alone it will qualify as an “export of services”. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n s been a paradigm shift in taxation Policy, now, adopting the destination based tax. The basic difference between the Destination based tax and origin based tax lies in the fact that origin based taxation seeks to levy and collect tax on the basis of location of production and destination based taxation seeks to levy and collect tax on the basis of location of consumption. Further, a fundamental proposition under the new GST regime is that the concept of “place of consumption” also called and known as the “Place of supply”, merely determines that the tax would accrue to the State of consumption (jurisdictional aspect). = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n trade or commerce. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n CGST\/SGST in unavailable, being “forward charge”. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ort\/ import of goods simpliciter, which under the GST regime is 'tan inter-state supply, covered by the IGST Act, 2017; and if that be the true position in law, the role of intermediary cannot be dissected and separately treated for GST law. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ribed, without payment of integrated tax and claim refund of unutilised input tax credit; or = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n same as now bodily lifted and placed in its new GST 'avatar' as section 13 (8) (b) of the IGST Act. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n es a provision of a service(hereinafter called the 'main service') between two or more persons (it doesn't include a person who provides service on his own account). = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the main' service) or a supply of goods, between two or more persons, but does not include a person who provides the main service or supplies the goods on his account = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n s Punjab National Bank and Others (CASE NO. Appeal (civil) 5634 Of 2006 Decided on 6 December, 2006 = 2006 (12) TMI 479 – SUPREME COURT OF INDIA = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n to be inferred that it did not want to convey the same meaning. It may also be noted that the Legislature does not use any surplusage or superficial words or phrases. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n anted to have wider meaning of “services”, it would have used the phraseology “services of intermediary” rather than “Intermediary services” = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n the Legislature uses a particular phraseology, full meaning must be given by following the rules of English grammar. In that sense, the word: “intermediary” being an adjective of services, in section 13(8) (b), the defined word: = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n SED = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n defined in Section 2(13) of the IGST Act: = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n , vide Swedish Match AB vs. Securities and Exchange Board, India, AIR 2004 SC 4219 = 2004 (8) TMI 389 – SUPREME COURT OF INDIA. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n doctrine of reading down is applied where the provisions of the statute are vague and ambiguous and it is possible to gather the intention of the legislature from the object of the statute, the context in which the provision occurs and the purpose for which it is made. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n , the language of a taxing statute should ordinarily be read understood in the sense in which it is harmonious with the object of the statute to effectuate the legislative animation. A taxing statute should be strictly construed; common sense approach, equity, logic, ethics and morality have no role to play. Nothing is to be read in, nothing is to be implied; one can only look fairly at the language used and nothing more and nothing less. (J. Srinivasa Rao v. Govt. A.P. and Anr. 2006(13) SCALE 27 = 2006 (11) TMI 620 – SUPREME COURT OF INDIA, Raja Jagadambika Pratap Narain Singh v. C.B.D.T., (1975) 100 ITR 698 (SC)) = 1975 (7) TMI 1 – SUPREME COURT. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n l sense only: = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n India; = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n er point No. vi and vii, dealer has quoted that – “legislature is presumed to have made no mistakes and legislature intends to say, what it has said.” = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n plication was admitted and called for final hearing on 24.07.2018, Sh. D. P. Bhave, Advocate along with Sh. Ajay Wadke, C.A. appeared and made oral and written submissions. The Jurisdictional Officer, Sh. Rishikesh Wagh, Asstt. Commr. of S.T. (D-906), Mumbai appeared and stated that they would be making submissions immediately. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n y Equipment from Germany, is liable to GST either under CGST\/SGST Act, 2017 or the IGST Act, 2017? = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n is received by them, in this case, in freely convertible currency. We agree with this contention of the applicant that they are providing taxable services in the instant case. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n mediary service, which states that inter-state supply of goods or services or both in the taxable territory shall be treated to be a supply of goods or services or both in the course of inter-state trade or commerce, however, the same should not be an intrastate supply and should not be covered elsewhere in section 7 of the IGST Act. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n with provisions of section 12, the same cannot be made applicable in case the recipient of service is located outside India. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n","protected":false},"excerpt":{"rendered":" In Re: Mrs. Vishakhar Prashant Bhave, M\/s. Micro InstrumentsGST2018 (12) TMI 227 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2019 (20) G. S. T. L. 494 (A. A. R. – GST)AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – AARDated:- 10-8-2018GST-ARA-23\/2018-19\/B-87 GSTSHRI B.V. BORHADE, AND SHRI PANKAJ KUMAR, MEMBER PROCEEDINGS (Under section 98 of the Central Goods and … Continue reading “In Re: Mrs. Vishakhar Prashant Bhave, M\/s. Micro Instruments”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-15339","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/15339","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=15339"}],"version-history":[{"count":0,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/15339\/revisions"}],"wp:attachment":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=15339"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=15339"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=15339"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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\n02. FACTS AND CONTENTION – AS PER THE APPLICANT
\nThe submissions, as reproduced verbatim, could be seen thus-
\nSTATEMENT OF THE RELEVANT FACTS HAVING A BEARING ON THE QUESTIONS
\n1. The facts relevant for the purposes of this application, briefly stated, are as under:
\nThe Applicant, M\/s. Micro Instruments, Mumbai, (for brevity: “Micro”) is a sole Proprietary Concern, duly Registered under the CGST\/SGST and IGST Acts ( Reg. no. 27AHSPB0847K1Z2), having its registered Office at 15, Shri Kripa, Ramakrishna Society, Ram Mandir Road, Kherwadi, Bandra (E), and is carrying on trading business in Laboratory Instruments, its spare parts, Laboratory Equipment, and other related activities such as servicing, repairs and maintenance of Laboratory Equipment\/Instrument.
\n2. One of the activities of Micro relates to providing services to its Principals at Germany, by way of procuring Purchase Orders (P.O.) from the parties desirous of purchasing advanced type of L<\/p>\n
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\n(d) Accordingly, Micro arranges, at its own cost such articles to be given free, in the nature of “discount in kind”, and hands over to the same to the Purchasing Party in India in fulfillment of the accepted terms of sale \/ purchase Agreement between the Principals at Germany and the Indian Purchasing Party.
\n(e) The P.O. also states that during the Guarantee period, say, one year the seller\/supplier at Germany will give “free service”, if required (but that would not include any replacement of parts etc.). Micro, however, has no contractual obligation to give such “free Service”.
\n(f) Once the P.O. is completed, the Principals at Germany issue a “Credit Note”, for the “Commission”, which is remitted in freely convertible Foreign Exchange, norma<\/p>\n
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\n (a) Deducting “expenditure” on free supplies, which is a “charge on the commission amount” under the Contractual Terms as per P.O.
\n (b) Deduction of tax element treating amount of “net Commission” (as per (a) above) as inclusive of CGST\/SGST Act or IGST Act as the case may be.
\n4. For the purposes of examining the issues involved one needs to go through the labyrinth of new G5T Laws.
\n5. The conspectus of various provisions gives the following picture:
\n(i) Services provided by the Commission Agent (located in the Taxable Territory) to the Principal Seller (located in Non-Taxable Territory\/ Abroad) in respect of procurement of order\/s from the Customers located in the Taxable Territory on behalf of the foreign supplier of goods, would be termed as “taxable services” under the GST Regime, because the intermediary (Micro) does some activity for which monetary consideration, that is, “Commission” amount is received in freely convertible currency. These activities would fal<\/p>\n
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\n * It means the general principle in Sub-section (2) is displaced i.e. not applicable to sub-section (3) to (13), which needs to be examined individually & separately.
\n * Sub-section (8) covers the case on hand; and the same is reproduced here below –
\n“(8) The Place of supply of the following services shall be the location of the supplier of the services, namely:
\n(a) Services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders;
\n(b) Intermediary services;
\n(c) Services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month.”
\n(v) The term “Intermediary” is defined in Section 2(13) of the IGST Act, which says:
\n “(13) 'intermediary' means a broker, an agent or any other person, by wh<\/p>\n
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\n6. Though Micro is providing the service to the foreign supplier of goods as an integral part of the international\/cross-border transaction of export\/import, and also receiving valuable consideration' in freely convertible foreign exchange, but still it is not considered as Export of service' for the reason given in the definition of “Export of Service', quoted below, read with section 13(8) (b) of the IGST Act as all the conditions of “export of service” are not met in the case on hand:
\nConditions precedent for treating the service as 'export of service' (as per Section 2(6) of the IGST Act] – All conditions have to be met.\n<\/p>\n
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\n * On the superficial or flash reading, it may appear that in the present case, the condition No. (iii) in section 2\/6) is not getting fulfilled because of the terminology used in section 13(8) (b) of the IGST Act, (“intermediary services”) read with section 2(13) defining “intermediary” to include broker or agent who arranges or facilitates the supply of goods or services, and consequently the “place of supply” gets coincided with “the place of supplier”, both in the taxable territory, India, and rendering the transaction taxable under the CGST\/SGST Act, by denying the benefit of “export of services” or IGST Act legitimately due by virtue of the “recipient of Services” being in non-taxable territory, abroad. In the light Of the above discussion, one may consider that the supply of services by Micro would fall in <\/p>\n
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\n10. Now, look at another case, in which Micro procures the P.O. from the Customer at Vadodara (formerly known as Baroda), in the State of Gujarat, for purchase of Laboratory Equipment from the same Germany-seller. By virtue of section 13 (8) (b) read with 2(13) of IGST Act, the place of supply” remains the same i.e. “the place of Supplier”, State of Maharashtra. But the<\/p>\n
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\n(3) Subject to the provisions of section 12, supply of services, where the location of the supplier and the place of supply are in
\n (a) two different States;
\n (b) two different Union territories; or
\n (c) a State and a Union territory,
\nshall be treated as a supply of services in the course of inter-State trade or commerce.
\n(4) Supply of services imported into the territory of India shall be treated to be a supply of services in the course of inter-State trade or commerce.
\n(5) Supply of goods or services or both,
\n (a) when the supplier is located in India and the place of supply is outside India;
\n (b) to or by a Special Economic Zone developer or a Special Economic Zone unit; or
\n (c) in the taxable territory, not being an intra-State supply and not covered elsewhere in this section,
\nshall be treated to be a supply of goods or services or both in the course of inter-State trade or commerce.
\n13. It is manifestly clear from the conjoint reading of section 7 (5<\/p>\n
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\n16. However, there is another way to look at this integrated & composite international -cross-border transaction in which the Applicant plays a pivotal role as an intermediary by virtue of which the “import of goods” is occasioned, gets effectuated.
\n17. Now, for this new approach two definitions are important:
\n * Section 2(13) of the IGST Act, 2017
\n(13) “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;
\n * Section 2(5) of the CGST Act,2017
\n(5) “agent” means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services <\/p>\n
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\n19. All the analysis & discussion above, finally boils down to and depends on the true meaning and purport of the expression: “intermediary services” in section 13 (8) (b) of the IGST Act. If it is not the same thing as “Intermediary”, the provisions of section 13 (8) (b) will not apply; and consequently, provisions of section 7 (5) (a) Of the IGST Act will get attracted, as can be seen from the quoted provision:
\n(5) Supply of goods or services or both, –
\n(a) when the supplier is located in India and the place of supply is outside India;
\nIn that case, Section 16 of IGST Act will apply and there would be two options available:
\n(i) export the services under bond\/LOU without payment of IGST Act and claim refund of un-utilized input tax credit; <\/p>\n
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\n (b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and 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.
\n20. Now, the crucial question is: what is the true meaning & purport of the expression “intermediary services” appearing in section 13 (8) (b) of the IGST Act. It may be added that the term “intermediary” has been defined in section 2(13) of the IGST Act, but the expression '”intermediary services.” appearing in section 13 (8) (b) has not been defined.
\n21. What is the significance of use of the two terms\/ expressions, apparently looking similar, by the Legislature in the GST statutes. One thing is clear that they are not synonymous terms or expressions, h<\/p>\n
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\n * The said Rule 9 of the POPS Rules, 2012 and the clarification issued by the Board (C.B.E.C.) on the concept of '”Intermediary Services” appearing Rule 9 (C) is reproduced below:
\n 9. Place of provision of specified services.
\n The place of provision of following services shall be the location of the service provider:
\n (a) Services provided by a banking company, or a financial institution, or a non-banking financial I company, to account holders;
\n (b) Online information and database access or retrieval services;
\n (c) Intermediary services;
\n (d) Service consisting of hiring of means of transport, up to a period of one month.
\n24. Clarification and Legal nemesis:
\nAn Education Guide ('Guidance Note') on June 20, 2012 issued by the Central Board of Excise and Customs clarifying the meaning of intermediary states: QUOTE:
\n5.9.6 What are “Intermediary Services”? Generally, an “i<\/p>\n
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\nThus an intermediary service is involved with two supplies at one time. In other words, the expression “intermediary” connotes distinctness\/detachment from the “main” service. The expression “intermediary service” is thus, a nomen juris (“nomen juris,” literally term of law; a technical legal term) and its use is having a specific legal concept and connotation. When that expression is used in any subsequent legislation, it has to be interpreted and understood in the same sense & nothing less or more. (VIDE The Madras General Sales Tax Act, 1939 (Madras Act 9 Of 1939) was enacted in pursuance of the powers contained in entry 48 of List II of Seventh Schedule of the Government of India Act, 1935 which deals with sale of goods. The corresponding entry in the Constitution is entry No. 54 in List 11 of Seventh Schedule. It was<\/p>\n
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\n * Therefore, the definition of “intermediary” was then amended to include the intermediary of goods in its scope.
\n * Accordingly, with effect from 1.102014, an intermediary of goods, such as a commission agent or consignment agent shall be covered under rule 9 (c) of the Place of Supply of Services Rules.
\n27. When this modified version of “intermediary” as of 01-10-2014, was re-bottled in the GST law, two changes happened:
\n(i) the original and basic distinction as to the “main” service and “intermediary” in the context of two co-existing services did not figure in the new definition in 2(13) IGST Act;
\n(ii) And the definition of Consignment Agent was shifted to Section 2(5) of th<\/p>\n
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\n(a) It may be mentioned in this connection that the first and foremost principle of interpretation of a statute in every system of interpretation is the literal rule of interpretation.
\n(b) The other rules of interpretation e.g. the mischief rule, purposive interpretation etc. can only be resorted to when the plain words of a statute are ambiguous or lead to no intelligible results or if read literally would nullify the very object of the statute.
\n(C) Where the words of a statute are absolutely clear and unambiguous, recourse cannot be had to the principles of interpretation other than the literal rule, vide Swedish Match AB vs. Securities and Exchange Board, India, AIR 2004 SC 4219 = 2004 (8) TMI 389 – SUPREME COURT OF INDIA.
\n(d) As held in Prakash Nath Khanna vs: CIT., 2004 (9) SCC 686 = 2004 (2) TMI 3 – SUPREME COURT, the language emplo<\/p>\n
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\n31. If the provisions of section 13 (8) (b) of the IGST Act, were to cover and encompass both the types of Brokers, Agents in relation to goods and services, nothing was simpler than to re-draft section 13 (8) (b) as below and say:
\n * Section 13(8) (b) “services of intermediary”, and
\n * Then the word “intermediary” being defined, it would have covered the services of the Broker \/ Agent in relation to either the “goods” or “services” or even both.
\n(i) Instead, section 13(8)(b) has adopted the expression: “intermediary services” which expression was prevalent prior to 2014-Amendment of POPS Rules, 2012, which distinguishes it from the “main service”,
\n(ii) Another reason is that that the term; Agent, appearing in the definition of “intermediary” has to be understood as excluding “consignment agent”, which stands defined<\/p>\n
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\n(vii) It is not open to inject definition of “intermediary” as Amended in 2014, by interpretative process when the context of Section 13 (8) is specifically restricted & made applicable to specified\/selected services.
\n(viii) When reading “intermediary” as an adjective, one has to give due meaning to it and read that expression to convey those “services” which are contradistinguished from the “main” services.
\n(ix) 'In other words, the clause must be held as applicable if the intermediary is acting as broker \/ agent in the main transaction of supply of services between the service provider and the service recipient; and not where the seller is supplying “goods” to the buyer or recipient of supply \/ goods.
\n(x) Any other interpretation would be against the Legislative mandate expressed from the phraseology used to pin-point its intention.
\n(xi)<\/p>\n
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\n “intermediary” cannot be brought-in to inject the concept of services relating to goods.
\n(C) The expression, “intermediary services” had acquired definite connotation when the POPS Rules, 2012 were brought in to play, namely, the service s differentiated from the “'main services”. Since the term “intermediary services” is nomen juris, the CSI* Law when it uses it, then it must be understood in that sense only.
\n(d) It therefore, follows that the section 13(8) (b) cannot be held as taking away the benefit of export service to Micro as the supplier of service is in the Taxable Territory and the recipient is in the non-taxable territory. Therefore section 7 (5) (a) of the IGST Act:
\n (5) Supply of goods or services or both, –
\n (a) when the supplier is loc<\/p>\n
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\nIV-STATUTORY PROVISIONS:
\n7. Before proceeding to make legal submissions, it is necessary to Review the statutory provisions of law:
\n(i) Section 2 of the IGST Act:
\n“export of services” means the supply of any service when, –
\n (i) the supplier of service is located in India;
\n (ii) the recipient of service is located outside India;
\n (iii) the place of supply of service is outside India;
\n (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; and
\n (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;
\n(ii) Section 13 of the IGST Act is made applicable to determine the 'place of service', where location of supplier or location of recipient of service (either) is outside India.
\n(iii) In the present case, the supplier of service is located in India and customer i.e. recipient of Service is located outside India, Ge<\/p>\n
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\n “(13) '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”.
\n(vi) Consequently, the Applicant being a Broker (or Commission Agent) and facilitator between the German -seller of the goods and the and the Indian-buyer of the goods, shall be covered under the definition of Intermediary” under Section 2 (13) of the IGST Act bringing about a deal for export-import of goods\/equipment, a cross-border transaction in the nature of inter state sale under IGST Act.
\nIV-STATUTORY PROVISIONS: RULES OF INERPRETATION:
\n8. At this stage, it is necessary to refer to well settled Rules of Interpretation of statues:
\n (i) Legislative enactment is an edict. One has to read what is expressly stated in the ena<\/p>\n
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\n(vii) (vi) As held in Prakash Nath Khanna vs. C.I.T. 2004 (9) SCO 686 = 2004 (2) TMI 3 – SUPREME COURT, the language employed in a statute is the determinative factor of the legislative intent. (vii) The legislature is presumed to have made no mistake.
\n(viii) The legislature intends to say, what it has said.
\n(ix) Assuming there is a defect or an omission in the words used by the legislature, the Court cannot correct or make up the deficiency, especially when a literal reading thereof produces an intelligible result, vide Delhi Financial Corporation vs Rajiv Anand 2004 (11) SCC 625 = 2004 (3) TMI 749 – SUPREME COURT OF INDIA.
\nVLEGAL SUBMISSIONS:
\n9. In the light of the aforesaid rules of interpretation, it can be said that when the Legislature has used two un-identical and non-synonymous terms\/ expression, it has to be inferred that it did not want to con<\/p>\n
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\n * In the case on hand. the title of section 13(8) of the IGST Act shows that it is meant to “apply to specified services”, and clauses (a) and (c) relate to “pure services”. Clause (b) cannot take in its fold “services” in relation to “goods”; because the entire CSI* Law maintains dichotomy between the “goods” and “services”. Section 2(102) of the CGSST Act: “services” means anything other than goods, money and securities but includes…
\n(ii) Further, it is well settled that every word or phrase in a clause takes colour from the other related clauses in the same section, namely, sub-section (8), section 13 of IGST Act.
\n(iii) As stated earlier, if the Legislature wanted to have wider meaning of “services”, it would <\/p>\n
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\n(ix) It is settled law that by an interpretative process the legislative edict cannot be altered or re-written to bring out presumed intention.
\n(x) The expression, “intermediary services” had acquired definite connotation when the POPS Rules, 2012 were brought in to play, namely, the services differentiated from the “main services”. Since<\/p>\n
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\n(d) It therefore. follows that the section 13(8) (b) cannot be held as taking away the benefit of export service as defined in section 7 (5) (a) of the IGST Act. Consequently “zero-rated tax” benefit under section 16 would be available.
\nVI-PRAYER:
\n13. In the circumstances, the Applicant most respectfully prays:
\n(a) That it be held that the services of the Applicant as an intermediary are “received & consumed” by the Principals in Germany, and as such “the place of supply is Germany” as per section 13(2) of the IGST Act, and hence all the conditions in section 2(6) are concurrently fulfilled qualifying the impugned services as “export of services”; and hence 'zero rated supply' in terms of section 16 of the IGST Act,
\n(b) If this Honourable Authority holds that either CGST\/SGST or IGST is payable, then the “taxable value”, and net CGST\/ MGST or IGST payable may please be determined specifying the rate of GST & computation methodology.
\n(c) Any other or further relie<\/p>\n
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\n (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; and
\n (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.
\n * As per Section 97(2) of CGST MGST Act 2017, The question on which the advance ruling is sought under this Act, shall be in respect of
\n(a) classification of any goods or services or both;
\n(b) applicability of a notification issued under the provisions of this Act;
\n(c) determination of time and value of supply of goods or services or both;
\n(d) admissibility of input tax credit of tax paid or deemed to have been paid;
\n(e) determination of the liability to pay tax on any goods or services or both;
\n(f) whether applicant is required to be registered;
\n(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 <\/p>\n
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\nB. Without prejudice to above, I further submit that dealer's contention to differentiate intermediary Service for Service and intermediary Services for goods is not correct. The dealer has pointed out dichotomy between goods and Services and has argued that Section 13(8) connotes to Specified Services for Services and not for goods. He has argued to differentiate between Intermediary Services and Services of intermediary.
\nIt must be noted that the constitution (one hundred and first amendment) act, 2016 was passed by Parliament to merge taxation between for goods and Services. Also, the IGST Act categorically defines Nature, place, time and Zero rated supply. Section 13 of IGST Act expressly provides Place of Supply as per location of Suppliers, recipient and nature of Service.
\nIt is an established principle of interpretation that i<\/p>\n
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\n05. OBSERVATIONS
\nWe have gone through the facts of the case, submissions made by the applicant and the documents on record. The applicant, Ms Vishaka Prashant Bhave, is the proprietor of the firm M\/s. Micro Instruments (hereinafter referred to, as 'MI') and had made the subject application in her capacity as a proprietor.
\nBriefly stated, MI is providing services to its Principals at Germany, by way of procuring Purchase Orders (P. O.) from the parties in India who desire to purchase advanced type of Laboratory Equipment from their Principals. A floor price is fixed by the Principals for the said equipments and MI negotiates the terms of supply including fixa<\/p>\n
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\nIn simple terms 'intermediary' can be explained as a firm or a person, etc. Who acts as a link between parties for the conduction of business, etc. We find from the question posed that the applicant is of the opinion that they are providing services as an intermediary. The facts also reveal likewise and therefore we first take up the definition of an intermediary as per GST laws.
\nThe term 'Intermediary' is defined in Section 2(13) of IGST Act, 2017 as:- '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”
\nFrom the above definition we find that an intermediary can be a broker, an agent or any other person who arranges and facilitates the<\/p>\n
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\nSince the applicant, being the supplier of service is located in India and the recipient of Service i.e. supplier of goods is located outside India, Section 13 of the IGST Act, 2017 would be applicable to determine the place of service. As per Section 13 (8) (b) of the said Act, the place of supply of Intermediary Services shall be the location of the supplier of services, in this case, the applicant. Since the place of supply of services in the instant case is in taxable territory, the said intermediary services cannot be treated as export of services under the provisions of the GST laws.
\nIn order to classify as 'export of service', as per section 2(6) of the Integrated Goods and Service Tax Act, 2017, one of the crucial condition as contained under sub-clause (iii) requires that the place of supply of servic<\/p>\n
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\nSection 8 of the Integrated Goods and Service Tax Act, 2017 deals with the provisions of intra-state. Applying the provisions of section 8 (2) which states that 'subject to the provisions of section 12, in case where the location of the supplier and the place of supply of services are in the same state or in the same union territory, the supply of service shall be treated as intra-state supply'.
\nThe above provisions of inter-state supply and intra-state supply have clarity when both the recipient and the supplier of services are located in India. However as in the subject case, when the recipient is located outside India provisions of section 7(5)(c) sha<\/p>\n
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\nThus we find that in case the intermediary services are provided to the recipient located outside India, the inter-state provisions as contained under section 7(5) (c) shall be applicable and hence IGST is payable under such transaction.
\n06. In view of the extensive deliberations as held hereinabove, we pass an order as follows :
\nORDER
\n(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
\nNO.GST-ARA-23\/2018-19\/B-87
\nMumbai, dt. 10\/08\/2018
\nFor reasons as discussed in the body of the order, the questions are answered thus –
\nQuestion :- (i) Whether the “Commission” received by the Applicant in convertible Foreign Exchange for rendering services as an “Intermediary” between an exporter abroad receiving such services and an Indian importer Of an Equipment, is an “export of service” falling under<\/p>\n
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