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2023 (7) TMI 868 - AAR - GSTScope of advance ruling application - place of services - services provided by the applicant to the entities located outside India is covered under Section 13(2) of the Integrated Goods and Services Tax Act, 2017 or not - zero rated supply or not - liable to Central Goods and Service Tax and State Goods and Service Tax or Integrated Goods and Services Tax? - HELD THAT:- Ideally, AAR cannot admit an application seeking a ruling on a question pertaining to place of supply, more so since it does not find a mention under section 97(2) of the CGST Act, 2017. We are of the considered view that being a creature of the Act, we cannot go beyond the diktats of what is spelt out in the Act. However, having said so it is also mindful of the fact that in the first round when the application was made before the Authority, the same was entertained and a ruling was given. In-fact we are also aware of the fact that no appeal was preferred against the ruling dated 9.7.2021 challenging the jurisdiction of the AAR to rule on the question of place of supply. The merits of the matter to be decided in the backdrop of the judgement of the Hon'ble High Court of Kerala in the case of M/s. Sutherland Mortgage Services Inc. [WP(C) No. 32634/2019(D) dated 3.2.2020. [2020 (3) TMI 186 - KERALA HIGH COURT]. The applicant develops a prototype. Some of the materials/goods that go into the making of the prototype are supplied by HAG [the recipient]. The prototype is not supplied to the recipient as it gets consumed in the process. After conducting the R&D, testing and engineering activities for developing new products & process, the applicant communicates the result to HAG. It is on this activity that the applicant seeks a ruling from the GAAR. The supply of services would therefore fall under section 13(2), it is already concluded that it would not fall within sub-clauses 4 to 13. However the testing activities related to HAG items, meaning thereby that the R&D service is performed on the goods provided by HAG and hence as far as this portion of the service is concerned, it would fall within the ambit of sub-clause 3 of section 13 of IGST Act. The applicant is on record stating that they are a part of HAG group. Supply of services by a subsidiary/sister concern etc of a foreign company, which is incorporated in India under the Companies Act, 2013 to establishments of the said foreign company located outside India is not barred by section 2(6) of the IGST Act, supra from being considered as export of services since they are not to be treated as supply between merely establishments of distinct persons under explanation I of section 8 of IGST Act, 2017. The service rendered by the applicant would fall under 'export of service', more so in view of the fact that all the five conditions as enumerated under section 2(6) of the IGST Act, 2017, are met viz,- (i) The applicant [being supplier of service] is located in India; (ii) The recipient of service [HAG] is located outside India; (iii) the place of supply is the location of the recipient of service; (iv) The applicant on record has stated in the application that the payment of the supply is received in foreign exchange; (v) The supplier of service and recipient of service are not merely establishment of a distinct person in accordance with explanation 1 of section 8. The services provided by the applicant is eligible to be treated as a 'zero rated supply' under Section 16 of the IGST Act, 2017 in respect of the services mentioned in (B) and (C) under Appendix-I as per para 28. In respect of the service listed in (A) under Appendix-1 of para 28, the subject services are liable to CGST and SGST.
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