West Bengal AAR in the case of M/s IZ-Kartex named after PG Korobkov Ltd

Case Covered:

M/s IZ-Kartex named after PG Korobkov Ltd 

Facts of the case:

The applicant is the local branch of a Russian business entity by the same name (hereinafter „Foreign Company‟), which entered into a Maintenance and Repair Contract (hereinafter called “MARC”) with Bharat Coking Coal Ltd (hereinafter “BCCL”) with respect to the machinery and equipment it had supplied.

The applicant wants to know whether the MARC makes the supplier liable to pay GST (which, for the purpose of this order, includes IGST). More specifically, the applicant wants to know whether the recipient is not liable to pay tax on reverse charge basis in terms of Notification No. 10/2017 – Integrated Tax (Rate) dated 28/06/2017. The question is admissible under section 97(2) (b) & (e) of the GST Act. The concerned officer from revenue submits that question raised in the application is not pending or decided in any proceedings of the GST Act. As such, he does not object to the admissibility of the application. The application is, therefore, admitted.

Observations:

 It is evident from the returns and from the applicant‟s submission that it does not claim that the question is in relation to any supply being undertaken or proposed to be undertaken by the applicant itself. It tries to establish that the supply is made by the Foreign Company, who is located in Russia, and the applicant, although a branch responsible for receiving and making payments on behalf of the Foreign Company, is not the supplier in the context of the MARC. 

This Authority would have rejected the application on the ground that no advance ruling within the meaning of section 95 (a) of the GST Act could be pronounced, the applicant being not the supplier. Instead, we have admitted the application and is going to pronounce a ruling as we are convinced that the applicant is indeed the supplier of services in terms of the MARC. The grounds and reasoning for such a conclusion will reveal themselves from the discussion below.

 The MARC is between the MARC Holder and BCCL. Although clause 9 of the MARC, dealing with „Taxes & Duties‟, distinguishes between a foreign MARC Holder and a domestic MARC Holder, nowhere else in the MARC two such entities exist separately. The contract speaks of the rights, duties, and obligations of the MARC Holder only without any distinction between a foreign MARC Holder and a domestic MARC Holder. The distinction, therefore, is relevant only in the context of any statutory provision requiring the MARC Holder to be located in India.

Ruling:

The supply of service to BCCL in terms of the MARC is not the import of service. The recipient is not, therefore, liable to pay GST on reverse charge basis in terms of Notification No. 10/2017 – Integrated Tax (Rate) dated 28/06/2017. The applicant, being the domestic MARC Holder, is liable to pay tax as applicable in terms of clause 9.2.2 of the MARC.

This Ruling is valid subject to the provisions under Section 103 until and unless declared void under Section 104(1) of the GST Act.

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