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2019 (11) TMI 475 - AAAR - GSTScope of Advance Ruling - Jurisdiction to decide the case - Taxability - Export of services or not - intermediary services - “Commission” received by the Applicant in convertible Foreign Exchange - zero rated tax or not - Whether the “Commission” received by the Applicant in convertible Foreign Exchange for rendering services as an “Intermediary” between an exporter abroad and an Indian importer of an Equipment; is an “export of services” falling under section 2(6) & outside the purview of section 13 (8) (b), attracting zero rated tax under section 16 (1) (a) of the Integrated Goods and Services Tax Act, 2017? - Place of supply of services - challenge to AAAR decision. HELD THAT:- The appellant (MI) is providing services to its principal ‘Carl Zeiss GmbH’ in Germany in terms of procuring orders from customers in India for procurement of advanced laboratory instruments from its principal. The floor price is fixed by the principal and MI negotiates with customers in India for terms of supply and consideration / price above the floor price, for which they receive the commission from principal. After completion of the negotiations, the customers in India arranges for the foreign remittance for imports, and directly place the order to the foreign principal, who in turns directly supplies the instruments (goods) to the Indian customers. In most of the cases where the Indian Customers are entitled for the discounts, in kind (“discount in kind”, like “Free of cost items”, such as: a TV set, a Computer or a Camera etc.) with respect to the material purchased by them, are to be provided by the appellant. The Authority for Advance Ruling while deciding the issue relied upon the tern ‘intermediary’, and held that the appellant is an ‘intermediary’ because they are acting as a broker and the facilitating the process of sale of materials by their foreign principals to the Indian parties because they locate the customer, negotiate the prices and ensure the sale, they also provide for discounts to the customers out of the commission received by them. The advance ruling authority further held since the appellant (the service provider) is located in India and service recipient are located outside India, section 13 (8) (b) of the IGST Act would be applicable in determining the place of supply of such service in the instant case - The contention of the appellant is that though he has been covered under term ‘intermediary’ the services provided are not ‘intermediary services’ has been rejected by the Authority for Advance Ruling for reason being not tenable. The authority for Advance Ruling after rejection of the appellant’s claim of ‘export of service’ held it as an ‘interstate supply’ as per provisions of section 7 (5) (c) of the IGST Act and eligible to levy of IGST. The Advance Ruling authority decided that applicant is an ‘intermediary’ and the place of supply of ‘Intermediary Services’, as per Section 13(8)(b) being the location of the supplier of services, the said intermediary services cannot be treated as export of services under the provisions of the GST Act. Further, the Advance Ruling Authority held that in case the intermediary services are provided to the recipient located outside India, the inter-state provisions as contained under section 7(5)(c) shall be applicable and hence IGST is payable under such transaction. But from the questions posed it is evident that the appellant already holds himself out as an intermediary and has only posed the question as to whether the services given by him qualify to be ‘export of services’ falling under Section 2(6) or whether is a ‘intra-state supply’. Scope of Advance Ruling - Jurisdiction to decide the case - HELD THAT:- The question on determination of the place of supply has not been covered in the above set of questions, on which the advance ruling can be given - Therefore, we cannot give any opinion or verdict on the question which involve the determination of the place of supply of the goods or services or both. As per the law we do not have jurisdiction to determine the place of supply of services or goods or both, and accordingly no ruling on this particular question can be passed by the Advance Ruling Authority. This rationale also holds true in case of the second question asked by the Appellant i.e. whether the said supply could be treated as ‘intra-state supply’ under section 8 (1) of the IGST Act read with section 2(65) of the CGST Act.
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