IN RE: THE MOBILE WALLET PVT LTD.
GST
2019 (3) TMI 593 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2019 (22) G. S. T. L. 549 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – AAR
Dated:- 16-1-2019
GST-ARA-87\/2018-19\/B-8
GST
Shri B. Timothy, Addl. Commissioner of Central Tax, (Member) And Shri B.V. Borhade, Joint Commissioner of State Tax, (Member)
\nPROCEEDINGS
\n(Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
\n1. The 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 The Mobile Wallet Pvt. Ltd., the applicant, seeking an advance ruling in respect of the following questions:
\n1) Whether the portion of the Merchant Discount Rate received by the issuing Bank as 'Interchange Fee' is liable to tax under the Goods and Se<\/p>\n
= = = = = = = =<\/p>\n
Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n perating Pre-paid Payment instruments as Business Correspondent (BC) of Federal Bank. As part of BC arrangement, Applicant has launched Co-branded Pre-paid Cards in India with Federal Bank powered by MasterCard. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n he flow of business transaction can be explained in a detail as under = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n Acquiring bank by the Network (VISA\/ MasterCard \/ Rupay \/ AMEX) = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ng bank: – 1.60% on MASTER Pre-paid Card for online transaction Interchange Fee Sharing- 85%: 15% between Applicant TMW and Issuing Bank = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n (RCM). In this whole simple process of digital payment of MDR of Rs. 180, Gov. collect tax as under at different levels. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ly made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply: = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n o its components and classified as separate service for classification. This is a well-accepted principle of classification. The relevant clause of Section 65 (33a) is reproduced below: “(iii) by any person, including an issuing bank and an acquiring bank, to any other person in relation to settlement of any amount transacted through such card. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n same transaction. In this instant case = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n t; = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n","protected":false},"excerpt":{"rendered":" IN RE: THE MOBILE WALLET PVT LTD.GST2019 (3) TMI 593 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2019 (22) G. S. T. L. 549 (A. A. R. – GST)AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – AARDated:- 16-1-2019GST-ARA-87\/2018-19\/B-8 GSTShri B. Timothy, Addl. Commissioner of Central Tax, (Member) And Shri B.V. Borhade, Joint Commissioner of State Tax, (Member) … Continue reading “IN RE: THE MOBILE WALLET PVT LTD.”<\/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-17285","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/17285","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=17285"}],"version-history":[{"count":0,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/17285\/revisions"}],"wp:attachment":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=17285"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=17285"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=17285"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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\nDefinitions: 1) Merchant Discount Rate (MDR):- Rate charged by Acquiring Bank from Merchant on every Card transaction. This is as per agreement between Acquiring Bank and Merchant Establishment. GST is separately charged by Acquiring Bank from Merchant on MDR.
\n2) Interchange Fee: – Standard Rate as decided by Network as per card type which is payable to issuing bank for each successful transaction. This is charged to acquiring bank.
\n3) Network – Provides the payment infrastructure. Both issuing and acquiring banks are its Members. (VISA, MasterCard\/ Rupay etc.) are referred to as Network.
\nThe nature of transaction arising out of the use of the Debit\/Credit \/Pre-Paid card is as follows. There are six persons involved in a Debit\/ Credit\/ Pre-Paid card transaction, namely:
\n1.<\/p>\n
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\n1) The card holder does a purchase at the merchant establishment (online or offline) and make payment by swiping his\/her debit \/ credit \/ pre-paid card on Point of Sale (POS) machine placed by Acquiring bank in case of card present transaction or by entering his \/ her card details in Payment Gateway (PG) provided by Acquiring Bank in case of Card not present transaction. The card holder need to validate the transaction by ATM PIN (in case of Card present) or by OTP on registered mobile in case of Card not present).
\nIn case of Card present transaction, card is swiped on electronic equipment known as Point of Sale' terminal at the Merchant Establishment for charging the card holder for purchase of goods or services. Such terminals are provided by the 'Acquiring Bank' to the Merchant Establishments which enables validation and acceptance of payment by Debit\/ Credit\/ Pre-Paid card.
\nIn case of Card not pres<\/p>\n
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\n5.Out of MDR earned by the Acquiring bank in (3) above, Interchange fees is paid by Acquiring Bank to Issuing Bank as per settlement file received from concerned Network i.e. VISA\/ MasterCard\/ Rupay\/ AMEX.
\n6) Issuing bank accounts for the transaction for recovery from the cardholder and sends the cardholder a monthly statement.
\nNow in the above process:
\n1) Issuing Bank, Acquiring Bank and the Network play their respective roles to ensure that a transaction is undertaken between the card holder and the Merchant Establishment. Five parties are directly involved in this transaction.
\n2.Acquiring Bank makes payment to Merchant Establishment for the goods and services purchased by the cardholder after deducting a fee known as the 'Merchant Discount Fee' and applicable GST on Merchant Discount Fee. The quantum of Merchant Discount Fee is contractually pre-agreed between Acquiring Bank and Merchant Establishment. It <\/p>\n
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\n1. Merchant Settlement by Acquirer
\nParticulars
\nRupees
\nAmount
\n10000
\nMDR Rate
\n1.80%
\nMDR Amount
\n180.00
\nGST (CGST) @9%
\n16.20
\nGST (SGST) @9%
\n16.20
\nTotal Charge
\n212.40
\nNet payable to Merchant
\n9787.60
\nAcquiring bank to deposit GST (Rs.32.40) with Government after setting off inputs if any.
\n2. Settlement to Acquiring bank by Issuing Bank as per settlement files received From Network
\nParticulars
\nRupees
\nAmount
\n10000
\nInterchange rate
\n1.60%
\nInterchange Amount
\n160.00
\nTotal Charge
\n160.00
\nNet payable to acquiring bank
\n9840.00
\nIt is evident that issuing bank is not able to charge GST on interchange Fee amount (as forward Charge) hence Acquiring Bank is not able to take GST input credit due to lack of information in settlement files shared by Networks.
\nIssuing Bank is again depositing GST on Interchange amount of Rs. 160 and paying GST<\/p>\n
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\n
\nCGST
\nSGST
\nAcquiring bank to ME
\n16.20
\n16.20
\nIssuing bank to Acquiring bank
\n12.20
\n12.20
\nBC to Issuing bank
\n10.37
\n10.37
\nTotal
\n38.77
\n38.77
\nDifferent practice prevails by the Network in the industry
\nBefore making our submission we would also like to highlight the different practice followed by different network on their platforms. As discussed there are 3 main network prevailing in the field of this digital transactions. Master and Visa work differently than the Indian RUPAY platform. The data provided by the MASTER AND VISA is only about the interchange fee to the Acquiring and the Issuing bank and not anything about GST. Whereas RUPAY provide the interchange FEE along with GST.
\nTaking our earlier example of Rs. 10000 transaction, we can present the case as per Rupay and Master\/Visa Network practice prevailing in the system.
\nRUPAY CASE
\nRs.3<\/p>\n
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\nA supply will be regarded as a composite supply if the following elements are present:
\n(a) The supply should consist of two or more taxable supplies;
\n(b) The supplies may be of goods or services or both;
\n(c) The supplies should be naturally bundled;
\n(d) They should be supplied in conjunction (event, time or contract) with each other in the ordinary course of business;
\n(e) One of the supplies should be a principal supply (Principal supply means the predominant supply of goods or services of a composite supply and to which any other supply is ancillary).
\nThe following aspects need to be noted:
\nThe two or more) supplies must appear natural when bundled and presented to the recipient.
\n * The ancill<\/p>\n
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\nExplanation. For the purposes of this sub-clause, “acquiring bank” means any banking company, financial institution including nonbanking financial company or any other person, who makes the payment to any person who accepts such card;”
\nIn fact there is one composite supply under GST, provided by the acquiring bank to the merchant establishment for which gross value of consideration is Merchant Discount Rate (MDR) which includes the interchange fee. Hence, the supply of Service of the issuing bank got subsumed into the supply of service of the acquiring bank to make it a composite supply to the merchant establishment. Merchant establishment doe<\/p>\n
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\nAcquiring bank is paying GST to Government which he is collected from merchant.
\nIssuing bank calculating the GST by reverse charge method and paying the GST to Government.
\n03. CONTENTION – AS PER THE CONCERNED OFFICE
\nthe jurisdictional office has not made any written submissions.
\n04 HEARING
\nThe preliminary hearing in the matter was held on 04.12.2018 and Sh. Majesh Toshniwal appeared and stated that he was the Manager (Finance) in the applicant company but did not produce the letter of authority for representing the applicant. During Preliminary hearing it was pointed out to him that the questions asked were not in respect of matters or questions mentioned in section 97(2) of GST Act and hence not maintainable under the Advance Ruling provisions. The Applicant has asked for one week time to submit fresh submissions and reframe the questions raised. The departmental officer Shri. S. Pardeshi STO was present. We heard both the sides.
\n05. O<\/p>\n
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\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 services or both, within the meaning of that term.
\nBefore we decide the question raised in this application it is essential to find out whether the applicant is the proper person to make this application and whether or not the activities undertaken by the applicant pertains to matters or questions specified in Section 97(2). Applicant has related following question:
\nQuestion: 1) Whether the portion of the Merchant Discount Rate received by the issuing Bank as Interchange Fee' is liable to tax under the Goods and Services Tax?
\nQuestion: 2) Why diffe<\/p>\n
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