LIABILTY TO PAY INTEGRATED TAX

[Mr. M. GOVINDARAJAN]

Levy and collection of integrated tax

Section 5(1) of the Integrated Goods and Services Tax  Act, 2017 (‘Act’ for short)  provides that subject to the provisions of sub-section (2), there shall be levied a tax called the integrated goods and services tax (‘integrated tax’ for short) on all inter-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 of the Central Goods and Services Tax Act and at such rates, not exceeding 40% as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. 

Integrated tax on imports

The integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 on the value as determined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962.

Tax on the supply of petroleum etc.,

Section 5(2) of the Act provides that the integrated tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council.

Reverse charge

Section 5(3) provides that the Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

Section 5(4) provides that the Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to such supply of goods or services or both.

Tax on electronic commerce operation

Section 5(5) provides that the Government may, on the recommendations of the Council, by notification, specify categories of services, the tax on inter-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services. 

Where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax.

Where an electronic commerce operator does not have a physical presence in the taxable territory and also does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax.

Advance Rulings on levy and collection of integrated tax

Lottery schemes

• IN RE: ECOOL GAMING SOLUTIONS PRIVATE LIMITED - 2018 (11) TMI 886 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA the applicant is acting as distributor or marketing agent of lottery schemes organized by the State Government of Mizoram and procure online tickets from organizing State for distribution across Maharashtra.   

The applicant sought ruling on the questions – whether the applicant is liable to pay integrated under section 5(3) of Act and whether Sl. No. 5 of the Notification 04/2017-Integraed Tax (Rate) is applicable on supply received by the applicant. 

The Authority for Advance Ruling ruled that the transactions shall be treated as supply of goods in the course of inter-State trade or commerce and the applicant is liable to pay integrated tax under Reverse charge mechanism as per the provisions and notifications.

Import of iron

• IN RE: M/S. CHOWGULE & CO PVT. LTD. - 2019 (7) TMI 848 - AUTHORITY FOR ADVANCE RULING, GOA, the applicant sought for an advance ruling on the question whether integrated tax @ 5% of assessable value is applicable on import of iron for conversion into pellets and export the resultant product (iron ore pellet) back to the same supplier in view of the fact that import duty is not applicable in view of the exemption under General exemption No. 66 (Exemption Notification No. 32/97 - Customs, dated 01.04. 1997 for job work.

The Authority for Advance Ruling analyzed the provisions of section 5(1) of the Act.  Section 5(1) of the Act provides that subject to the provisions of sub-section (2), there shall be levied a tax called the integrated goods and services tax on all inter-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 of the Central Goods and Services Tax Act and at such rates, not exceeding 40% as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person.   The integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 on the value as determined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962.

The Authority for Advance Ruling observed that according to section 5(1) the applicant is liable to pay integrated tax on ore imported into India in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 on the value determined under the Customs Act, 1962 at the point when duties of customs are levied on the goods under section 12 of the Customs Act, 1962.  Regarding exemption notification referred to by the applicant is not issued under CGST Act or Act. 

Hence the Authority for Advance Ruling ruled that it has no authority to decide this issue.  Similarly the rate of tax is @ 5%.

Imported equipments

• IN RE: M/S. INDIAN INSTITUTE OF SCIENCE EDUCATION AND RESEARCH - 2019 (2) TMI 1526 - AUTHORITY FOR ADVANCE RULINGS, ODISHA, the applicant sought for advance ruling on whether the Notification No. 51/1996 - Custom, dated 23.07.1996 read with Notification No. 43/2017 - Custom, dated 30.06.2017 and minutes of 14^th GST Council decision dated 18/19.05.2017 is applicable for specified imported equipments delivered to the eligible institutions and the applicant is not liable to pay the IGST charged on such imported equipments by the OEM supplies of imported equipment.  

The Authority for Advance Ruling ruled that the Notification No. 51/1996 - Custom, dated 23.07.1996 read with Notification No. 43/2017 - Custom, dated 30.06.2017 and minutes of 14^th GST Council decision dated 18^th/19^th May 2017 is applicable to the applicant for import of specified equipments as listed under column (3) of the aforesaid notifications and the said notifications are not applicable to the OEM supplies of imported document.

The applicant filed appeal before the Appellate Authority for Advance Ruling against the ruling given by the Authority for Advance Ruling [IN RE: M/S. INDIAN INSTITUTE OF SCIENCE EDUCATION AND RESEARCH - 2019 (7) TMI 47 - APPELLATE AUTHORITY FOR ADVANCE RULING, ODISHA]. 

The Appellate Authority for Advance Ruling dismissed the appeal filed by the appellant and upheld the decision taken by the Authority for Advance Ruling.

Advisory & Management Fees

• IN RE: M/S. MULTIPLES ALTERNATE ASSET MANAGEMENT PVT. LTD. - 2019 (6) TMI 719 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA, the applicant sought for advance ruling on the following questions-

• Whether tax is applicable on the Advisory & Management fees received in Indian Currency from domestic contributors located in India for the services rendered by the applicant?
• Whether tax is applicable on the Advisory & Management fees received in foreign currency from overseas contributors located outside India for the services rendered by the applicant?

The Alternative Investment Fund is any fund established or incorporated in India and privately pooled investment vehicle which collects funds from investors, whether Indian or foreign, for investing in accordance with a defined investment policy.  The location of both the applicant and the Alternative Investment Fund are in India.  The place of supply is within the taxable territory.  The Authority for Advance Ruling ruled that the services rendered by the applicant to the Alternative Investment Fund is taxable and the tax is payable thereon.

In the second case the services are rendered by the applicant in India and the contributors to the fund are located outside India.  Services are provided to Alternative Investment Fund, a separate entity and which is liable to pay consideration for such services received but consideration is paid by the foreign investors on behalf of Alternative Investment Fund.  The receipt of fees by the applicant from the investors is probably an internal arrangement which cannot be used to say that services have been rendered to the investors.  The transactions also do not qualify to be an export of service and therefore it was not a zero rated supply.  The applicant cannot be treated as a financial institution because no deposit is made with the applicant. 

The Authority for Advance Ruling ruled that the tax is applicable on advisory and management fees received in foreign currency from overseas contributors located outside India for the services rendered by the applicant under section 12(12) of the Act.

Goods supplied to DTA from FTWZ

• IN RE: M/S. THE BANK OF NOVA SCOTIA - 2019 (2) TMI 195 - AUTHORITY FOR ADVANCE RULING, TAMILNADU, the applicant is a leading multinational financial service provider in India. 

The applicant sought for advance ruling on whether integrated tax is payable on goods warehoused in FTWZ and supplied to DTA Unit, in addition to the customs duty payable (i.e., Basic Customs Duty +IGST) on removal of goods from the FTWZ unit. 

The Authority for Advance Ruling observed that the supply of goods before their clearance from warehouse would not be subject to the levy of integrated tax and the same would be levied and collected only when warehoused goods are cleared for home consumption from Customs Bonded Warehouse, under the provisions of Customs Act, 1962.  The said circular is applicable for supply of warehoused goods, while being deposited in customs bonded warehouse on or after 01.04.2018. 

The Authority for Advance Ruling ruled that for supply of warehoused goods, while being deposited in FTWZ on or after 01.04.2018 the applicant is not liable to pay integrated tax at the time of removal of goods from FTWZ to DTA in addition to customs duties on removal of goods from FTWZ unit. 

The Authority for Advance Ruling further ruled that the Circular No. 46/2017 - Customs, dated 24.11.2017 is not applicable.

• IN RE: M/S. SADESA COMMERCIAL OFFSHORE DE MACAU LIMITED - 2019 (2) TMI 194 - AUTHORITY FOR ADVANCE RULING, TAMILNADU, the applicant is a leather manufacturer producing quality crust and finished leather in its industrial facilities.  The applicant operates a global network of offices and commercial alliances in 18 countries across five continents.   

The applicant sought for an advance ruling on whether the sale of tanned bovine leather stored in FTWZ by a foreign supplier which is cleared to DTA customer in India would result in supply subject to levy under section 5(1) of Act or under the provisions of CGST Act or TNGST Act and the rules made there under.

The Authority for Advance Ruling ruled that for supply of warehoused goods, while being deposited in FTWZ on or after 01.04.2018, the applicant is not liable to pay integrated tax at the time of removal of goods from the FTWZ to DTA under the provisions of IGST Act in addition to the duties payable under Customs Tariff Act, 1975 on removal of goods from FTWZ unit.

Testing services                       

• IN RE: BEHR-HELLA THERMOCONTROL INDIA PVT. LTD. - 2018 (11) TMI 887 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA, the testing services provided by the applicant are in relation to the prototype goods supplied by the overseas group entities to determine whether the products so tests function in accordance with the requisite standards based on certain identified parameters such as temperature, environment, durability etc.  The tests are directly carried out on the prototype goods provided by the overseas group entities. 

The applicant sought for an advance ruling as to whether in the facts and circumstances of the case, the applicant is liable to pay the integrated tax on the testing services provided to its overseas group entities, being a zero rated supply.

The Authority for Advance Ruling ruled that the prototypes made are physically available by recipient of services (the overseas clients) to the supplier of services (the applicant) and testing activities being carried out in India, it attracts the provisions of Section 13(3) (a) of Act and cannot be treated as zero rated supply even if test reports are sent to overseas client.  The supplier of service being in India and receiver of service being outside India, as per section 7(5) of Act the case shall be treated as a supply in the course of Inter-State Trade.

Supply of bearings

• IN RE: M/S. INA BEARINGS INDIA PRIVATE LIMITED - 2018 (12) TMI 226 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA, the applicant is engaged in supply of bearings and tools.  The applicant supplies bearings to a wide range of customers which inter alia include original equipment manufacturers (OEM).  For manufacture of bearings for specific customer, a specific type of tool is required.  These tools are developed on the basis of the requirements of the customers.   

The applicant sought for advance ruling on whether the sale of goods, which are located outside India, would be liable to tax in India under section 7(5)(a) of Act.  If the answer is yes then whether the recipient, to whom   such goods are sold is eligible to avail input tax credit of such goods.

The  Authority for Advance Ruling observed that the applicant is receiving purchase orders from the customers and it in turn places purchase orders for manufacture of tools by German manufacturer, on tools being developed, the German manufacturer raise invoice on the applicant at Pune and as corollary of ownership of tools transferred to the applicant without physical movement of tools in India and thereby the ownership of tools is transferred to customer under the possession of German manufacturer.  In respect of the second transaction the supplier of the goods was in India and the place of supply of goods was out of India.  The goods would be imported goods if brought from outside of the country into India and it was clear that when the location of supplier was in India and the said goods were delivered from a place outside India to a place outside India, these goods have not crossed the customs frontiers of India, thus clearly the transaction in these goods are in nature of inter-State supply as per sections 7(2) and (5)(a) of the Act as inter-State trade and commerce and liable to tax in terms of section 5.  However goods sold in subject transaction are non taxable supply as no tax is leviable on them till time of customs clearance in accordance with and compliance of section 12 of Customs Act, 1962 and section 3 of the Customs Tariff Act, 1975.

Goods not crossing customs frontiers of India

• IN RE: M/S. ENMAROL PETROLEUM INDIA PVT. LTD. - 2018 (12) TMI 144 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA, the applicant is engaged in the business of the trading in marine fuel additive chemicals.  The applicant is an authorized dealer of Innospec Limited, a company registered in England and Wales.  The applicant sells the marine fuel additive chemicals of Innospec Limited to shipping lines in India and outside India. 

The applicant sought for an advance ruling as to whether the applicant is liable to pay integrated tax on the supply of goods located outside India to customers within India without physically bringing the goods to India and whether the out and out supplies will be considered as export supplies or exempted supplies for the purpose of integrated tax.

The Authority for Advance Ruling observed that the goods being delivered/supplied from a place outside India to a place outside India has not crossed the customs frontiers of India.  This is the transaction in the nature of inter-State supply as per section 7(2) of the Act. 

The Authority for Advance Ruling ruled that the liability to pay tax in respect of such goods would be as per section 5 to be levied at the time of import into India only after they clear the customs frontier in compliance with section 12 of the Customs Act, 1962 and section 3 of the Customs Tariff Act, 1975.  Therefore import goods sold from to a non taxable territory, though they clearly in the nature inter-State supply would come in the category of ‘exempt supply’ as no duty is leviable on them except in accordance with the proviso to section 5(1) of Act.

Inter-State movement of tier

• IN RE: M/S. SANGHVI MOVERS LIMITED - 2018 (10) TMI 1242 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA , there is an inter-State movement of tier mounted cranes and crawlers from one GST registered office of the applicant to another registered office of the applicant for further supply on hire charges to customers.  The business entity having its branches in multiple States will have to take separate State wise registration for branches located in different States.  Each such registrant is to be treated as distinct person.  The activity is to be treated as ‘supply’ even without consideration and taxable as inter-State supply. 

The Authority for Advance Ruling ruled that integrated tax would be leviable on inter-State movement of both types of cranes from the applicant’s head office to branch offices registered in another State for further supply on hire charges to customers.

Trading in spices

• IN RE : M/S SYNTHITE INDUSTRIES LTD., ERNAKULAM - 2018 (4) TMI 583 - AUTHORITY FOR ADVANCE RULING - KERALA, the applicant is in the business of trading in spices and spice products.  The applicant is having two modes of transactions.  The applicant receives orders from a customer in USA for the supply of spice products.  They place a corresponding order to a supplier in China for supplying the goods ordered by the Customer in USA.  The supplier in China, based on the request of the applicant, ships the goods directly to the customer to the USA.  The Chinese supplier issues invoice to the applicant for whom payment will be made by the applicant in due course.  Subsequently the applicant will raise invoice on the customer in USA and collect the proceeds.

In the second mode of transaction, the applicant is availing storage facility in the form of a presidential warehouse in Netherlands for storing their products and subsequent delivery to their customers in and around Netherlands.  The applicant wants to buy materials from a China company in bulk and store it in the presidential warehouse in Netherlands for subsequent delivery to various customers in and around the country as small and medium lots based on demand. 

The applicant sought for advance ruling on the following questions-

• Whether on procuring goods from China, in a context where the goods purchased are not brought into India, is integrated tax payable by them?
• On the sale of goods to the company in USA, where goods sold are shipped directly from China to USA without entering into India, is integrated tax payable by them?
• On procuring goods from China not against specific export order, in a context when the goods purchased are not brought into India, is integrated tax payable by them?
• On the sale of goods from Netherlands warehouse to their end customers in and around Netherlands, without entering India, is integrated tax payable by them?

The Authority for Advance Ruling observed that according to the provisions of Act, Customs Tariff Act, 1975 and Customs Act, IGST on import of goods into India is leviable and collectable at point when duties of customs are levied on said goods.  The Circular No. 33/2017 - Customs, dated 01.08.2017 with regard to levy of integrated tax on high sea sales of imported goods and point of collection thereof, clarified similarly.  In the instant case the goods have been shipped from one foreign country to another foreign country, no import of goods has been taken place in India at any time.

The Authority for Advance Ruling ruled that the integrated tax is not leviable on aforesaid transactions of the applicant.

Supply from Customs area

• IN RE : M/S FAIRMACS SHIP STORES PRIVATE LIMITED - 2018 (6) TMI 623 - AUTHORITY FOR ADVANCE RULING - ANDHRA PRADESH, the Authority for Advance Ruling  observed that the goods which are received by the applicant are within the Customs area as defined under Section 2(11) of the Customs Act, 1962.  Accordingly the goods cleared/supplied by the applicant are to be treated as supply of goods in the course of inter-State trade.  Hence integrated tax at appropriate rate is to be levied. Further the goods supplied by the applicant is also not an exempt supply as per the definition under section 2(47) of the CGST Act as it is neither NIL rated or being exempt by notification.

Bill-to-ship transactions

• IN RE: M/S. T AND D ELECTRICALS - 2020 (4) TMI 693 - AUTHORITY FOR ADVANCE RULING, KARNATAKA, the applicant has  been awarded a contract by Shree Cement Limited, Rajasthan for electrical, instrumentation and IT jobs (works contract) at township, Karnataka Cement Project (a unit of Shree Cement Ltd.).

The applicant had sought advance ruling, on the same questions and same issues that have been raised in the instant application, before the Authority for Advance Ruling, Rajasthan, Jaipur, who have not passed any ruling on the grounds that the questions pertain to GST registration in Karnataka which are beyond the purview of the said authority. In view of this, the applicant filed the instant application, as an unregistered person, seeking advance ruling in respect of the following questions-

• Whether separate registration is required in Karnataka State? If yes, whether agreement would suffice as address proof since nothing else is with the applicant and service recipient will not provide any other proof?
• If registration is not required in Karnataka state and if we purchase goods from dealer of Rajasthan and want to ship goods directly from the premises of dealer of Rajasthan to township at Karnataka then whether CGST & SGST would be charged from us or integrated tax  by the dealer of Rajasthan ?

If registration is not required in Karnataka State and if we purchase goods from dealer of Karnataka to use the goods at township at Karnataka then whether IGST would be charged from us or CGST & SGST by the dealer of Karnataka?

• What documents would be required with transporter to transit/ship material at Karnataka site from dealer/supplier of Rajasthan and in case of dealer/supplier is of Karnataka. Advance ruling may kindly be issued in case of registration is required or not required in both the situation?

The Authority for Advance Ruling ruled that-

• The applicant need not obtain a separate registration in Karnataka, to execute the project in Karnataka. However, they are at liberty to obtain the said registration, if they are able & intend to have a fixed establishment at the project site in Karnataka.
• The dealer in Rajasthan has to charge CGST & SGST when the goods, purchased by the applicant, are shipped to project site in Karnataka, under bill to ship to transaction in terms of Section of the Act.

The dealer in Karnataka has to charge integrated tax when the goods, purchased by the applicant, are shipped to project site in Karnataka, under bill to ship to transaction in terms of Section 10(1)(b) of the Act.

• No ruling is given on this question as it does not cover under Section 97(2) of the CGST Act 2017.

Sale of cement

• IN RE : M/S. PENNA CEMENT INDUSTRIES LIMITED - 2020 (6) TMI 162 - AUTHORITY FOR ADVANCE RULINGS, HYDERABAD TELANGANA, the applicant is manufacturer of cement having two cement plants in Telangana.  They occasionally make inter-State sale of cement on ex-factory/works basis from their plants in Telangana.

The applicant sought for advance ruling on what tax should be charged on ex-factory inter-State supplies made by them

The Authority for Advance Ruling observed that in case of ex-factory inter-State sales effected by the applicant, the goods are made available by the supplier to the recipient at the factory gate, but this is not the point where movement terminates since the recipient subsequently assumes the charge for transportation of the goods up to the destination in another state. Thus, termination of the movement of goods evidently takes place at the location (in a different state) to which the goods are consigned/destined and such movement is effected by the recipient or by any other person such as transporter authorized by the recipient.

The place (in the other state) where the goods are destined turns out to be the ‘place of supply’ in terms of Section 10(1) (a) ibid. Consequently, the ‘location of supplier’ and the ‘place of supply’ fall under different states and the supply qualifies as inter-State supply.

The Authority for Advance Ruling ruled that IGST is chargeable on ex-factory inter-State supplies.