Home Case Index All Cases GST GST + AAR GST - 2020 (1) TMI AAR This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (1) TMI 571 - AAR - GSTServices provided to foreign client - export of services - zero-rated or not - pure services or not - amounts received from the foreign clients and passing it on to the Local Research Institutions - scope of advance ruling authority - HELD THAT:- The Applicant is providing service to AKAP, USA in the instant case. The location of the recipient of the service is outside India. The Applicant is supplying service in respect of the goods i.e. new drugs, which are physically made available to the investigator / institution who conducts the clinical trials on behalf of the applicant, in order to provide the service - In order to decide whether the said services amount to export or not, place of supply of service need to be determined. Section 97 (2) of the CGST Act, 2017 empowers the Authority to give a Ruling on time and value of Supply. However it does not empower the Authority to examine the place of supply. In the absence of this provision the Authority is constrained to answer whether the activity undertaken by the applicant amounts to export or not. Whether the applicant acts as a Pure Agent while receiving the amounts from foreign client and passing on the local Reseach Institutions or not? - HELD THAT:- The Applicant is the licence holder for conducting clinical trial through any of the approved Investigator of an institution and also mandatorily obtain a licence to import the goods i.e new drugs meant for clinical trial in India, Therefore the applicant is the responsible person for the said clinical trial, being carried out through the investigator. The total contract value is paid to the Applicant on the basis of progress in the work i.e. clinical trial and the applicant pays the relevant amounts to the investigator / institute on the basis of completed work assessed by the applicant and approved by the AKAP, USA. In the instant case, at clause 3.2 of the Master Service Agreement it is clearly mentioned that in no sense the Applicant shall be considered as an employee or agent of AKPA, USA. Therefore it seems that the first condition only is not fulfilled and hence the applicant is not liable to be considered as a pure agent of the recipient of the service i.e AKPA, USA - A pure agent actually incurs the expenditure under the contractual agreement and then gets the reimbursement of the same. In the instant case the applicant is not incurring any expenditure but disbursing / paying the charges to the investigator / institution on the basis of the work progress assessed by the applicant and approved by the AKPA, USA. It is evident that the Principal Investigators and the Institutions are selected by the applicant and they are ratified by the Sponsor. What follows is the agreement between the Sponsor, Principal Investigator, Institution and the applicant and there is a contract for provision of service by the Principal Investigator and Institution to the Sponsor. The payment for the services is made by the Sponsor to the Principal Investigator and the Institution through the applicant. The applicant is only a pass through for the sponsor to make payments to the Principal Investigator and Institution as per the agreement - In case of the services of clinical trial, the applicant is holding the money of the sponsor as advance and money is paid as per the milestones on the strength of invoices issued by the Principal Investigators and Institutions. The applicant issues invoices against the sponsor and collects the money and maintains a required balance project wise and makes the payments out of this fund as a pass-through, after approval of the sponsor. On examination of the agreement of Clinical Trial Services since the applicant satisfies all the conditions laid down in the Explanation to Rule 33, the applicant qualifies as pure agent of the recipient of service, i.e. the Sponsor. He also satisfies all the conditions prescribed in rule 33 of the CGST Rules and hence the value of invoice raised by the applicant on the sponsor for making payment to the principal investigator and the institution would be excluded from the value of supply, However this ruling has a caveat that this ruling is not a ruling on the nature of the supply of services by the principal investigator and the institution to the sponsor. The first question whether the services provided by the applicant to the foreign client amount to export of service cannot be answered as Section 97 of the CGST Act, 2017 does not empower the Authority to give Ruling on the Place of Supply of Goods or Services In respect of question 2 it is Ruled that the applicant qualifies to be a Pure Agent in receiving amounts from the foreign clients and passing it on to the Local Research Institutions, as provided in the agreements placed before the Authority.
|