IN RE: M\/s. DRS MARINE SERVICES PRIVATE LIMITED
GST
2018 (12) TMI 893 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2019 (20) G. S. T. L. 471 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – AAR
Dated:- 24-8-2018
GST-ARA-34\/2018-19\/B-99
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 Act and MGST Act”] by DRS MARINE SERVICES PRIVATE LIMITED, the applicant, seeking an advance ruling in respect of the following issue.
\n“Whether GST is applicable on Reimbursement of salary on behalf of foreign entity.”
\nAt 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 c<\/p>\n
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Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n Currency Account by Ship Manning\/ Crew Management Agencies. According to the circular the credit to such foreign currency account would be through normal banking channels from the overseas principal and the debits would be towards various local expenses in connection with the management of Ships\/Crew in the ordinary course of business. (A copy of the said RBI Circular is attached herewith for ready reference). = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n India) Regulations, 2000 notified vide Notfn No. FEMA 10\/2000-RB dtd May 3, 2000, as amended from time to time, & A.P. (DIR Series) Circular No. 48 dtd April 30, 2007, in terms of which general permission is available to ship-manning\/ crew managing agencies that are rendering services to shipping\/ airline companies incorporated outside India, to open, hold and maintain non-interest bearing foreign currency account with an AD Category – I bank in India for meeting the local expenses in India of such shipping or airline company. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n be seen thus- = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n urred 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,- = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n e was taken up for Preliminary hearing on dt. 04.07.2018 when Sh. Mukund Pol, C.A. along with Sh. R. S. Bajwa, Director appeared & requested for admission of application as per contentions in their ARA. They were requested to provide copies of contracts that they were having with RMS in respect of recruitment services and salary transfer services or contract of any other nature as applicable. Jurisdictional Officer, Ms. R. S. lyer, State Tax Officer appeared and stated they have made written submissions. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n that, 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. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n At point 2.5 of the said addendum it is mentioned that “a fix fees of LIS$ 1250.00 per month will be charged as service charges towards disbursement of salaries inclusive of GST applicable” = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ses of this rule, the expression “pure agent” means a person who- = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n","protected":false},"excerpt":{"rendered":" IN RE: M\/s. DRS MARINE SERVICES PRIVATE LIMITEDGST2018 (12) TMI 893 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2019 (20) G. S. T. L. 471 (A. A. R. – GST)AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – AARDated:- 24-8-2018GST-ARA-34\/2018-19\/B-99 GSTSHRI B.V. BORHADE, AND SHRI PANKAJ KUMAR, MEMBER PROCEEDINGS (Under section 98 of the Central Goods and Services … Continue reading “IN RE: M\/s. DRS MARINE SERVICES PRIVATE LIMITED”<\/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-15545","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/15545","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=15545"}],"version-history":[{"count":0,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/15545\/revisions"}],"wp:attachment":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=15545"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=15545"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=15545"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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\nIn view of the said RBI Circular, our principal has requested us for disbursal of salary to the crew members from our side. For this the principal would be transferring the sum of total salary to us and we will be disbursing the salary to the crew 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.
\nIn view of Rule 33 of the Central Goods and Service Tax Rules, 2017, the expenditure or costs incurred by a supplier as a<\/p>\n
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\n2. With a view to ensuring strict compliance, our guidelines on the operations in such foreign currency accounts opened with AD Category-I banks by foreign shipping or airline companies or their agents in India are reproduced below:
\na) 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 loca<\/p>\n
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\nThe taxable person M\/S DRS MARINE SERVICES PVT. LTD has approached your good offices for an advance ruling to determine liability to pay tax on a transaction of service. In context of this application it is submitted that-
\nThe applicant DRS MARINE SERVICES PVT. LTD is a company incorporated under the Companies Act, 1956 having its registered office at Mumbai, Maharashtra.
\nThe Applicant's nature of services are Manpower Recruitment Services (HSN Code: 99851).
\nThe applicant was providing services of manpower recruitment to M\/S RMS Ltd, Bermuda. The applicant wef 05-07-2018 by way of addendum provides further services.
\nThe additional Services and Fees are being incorporated as an addendum as follows:
\n2. Fee
\n2.4 Cost related to Training\/ Briefing, Interviews in other Cities etc will be invoiced once approved on actual basis.
\n2.5 A Fix fees of US S 1250.00 per month will be charged as service charges towards disbursement of salaries.
\n2.6 GST as applicable.
\n3. Salary<\/p>\n
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\n(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;
\n(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 agent to the recipient of service; and
\n(iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account. Explanation.-
\nFor the purposes of this rule, the expression “pure agent” means a person who-
\n(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;
\n(b) neither intends to hold nor holds any title to<\/p>\n
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\nThe application was admitted and called for final hearing on 01.08.2018. Sh. Mukund Pol, C.A. along with Sh. R. S. Bajwa, Director appeared and made oral and written submissions. Jurisdictional Officer, Sh. Avinash Shinde, Dy. Commr of SGST appeared and made written submissions.
\n05. OBSERVATIONS
\nWe have gone through the facts of the case, documents on record and submissions made by both, the applicant and the department.
\nThe applicant is a Crew Recruitment and Placement Agency, an<\/p>\n
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\nThe applicant has submitted that as per Regulation 6 of Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2000 notified vide Notification No. FEMA 10\/2000-RB dated May 3, 2000, as amended from time to time, and A.P. (DIR Series) Circular No. 48 dated April 30, 2007, general permission is available to ship- manning\/crew managing agencies that are rendering services to shipping\/ airline companies incorporated outside India, to open, hold and maintain non-interest bearing foreign currency account with an AD Category – I bank in India for meeting the local expenses in India of such shipping or airline company.
\nThe 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 Indi<\/p>\n
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\nFrom a reading of points 2.5 and 3 of the Addendum #5 submitted by the applicant it is clear that 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. Here we find that 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.
\nHere 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 ac<\/p>\n
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\n (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;
\n (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;
\n (c) does not use for his own interest such goods or services so procured; and
\n (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.
\nFrom the above provisions of Rule 33 and the facts of the proposed transaction explained by the applicant, we find that the applicant will 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 f<\/p>\n
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