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2021 (4) TMI 618 - AAR - GSTReverse Charge Mechanism - Liability of GST - rate of GST - pure agent services or not - interest on late payment of invoices of imported goods - reimbursement of Stamp tax paid as a pure agent. Whether liability to pay GST on reverse charge arises if amount is paid as interest on late payment of invoices of imported goods? - If yes, then at what rate? - HELD THAT:- The foreign buyer has tolerated the act of receiving payment after a lapse of a period of 120 days from the date of the invoice in respect of the goods supplied by them to the applicant for which interest is to be paid by the applicant. We, therefore, find that the aforementioned act will be covered under the Supply of Services under Entry No.5(e) of the aforementioned Schedule-II which reads as “(e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act”. However, since the payment of interest made by the applicant to the foreign buyer is connected to the goods imported by them and is with regard to the late payment of the value of goods imported by them from the foreign buyer, we find it absolutely necessary to refer to Section 15 of the CGST Act, 2017 which covers the valuation aspect in respect of supply of goods and services - Sub-section (2) of Section 15 pertains to all the things that shall be included in the value of supply. On going through the said sub-section, we find that as per Section-15(2)(d), value of supply also includes “interest or late fee or penalty for delayed payment of any consideration for any supply.” The payment of interest by the applicant will be covered under the supply of services under Entry No.5(2)(e) of Schedule-II of the CGST Act, 2017 and is liable to GST in view of the provisions of Section-15(2)(d) of the said Act. Whether liability to pay GST on reverse charge arises if amount is paid for reimbursement of Stamp tax paid as a pure agent by M/s.Enpay, Turkey on our behalf? - HELD THAT:- In the instant case, the supplier of goods i.e. M/s.Enpay, Turkey has incurred the expenditure on stamp duty/tax on behalf of the applicant against the Corporate Guarantee entered into by them with CITI Bank for which they have raised reimbursement invoice of said payment, to M/s.Enpay, India. After going through the aforementioned provisions and comparing the same to the issue in hand, it is found that, the expenditure or costs incurred by the supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if, and only if, the supplier i.e. M/s.Enpay, Turkey satisfies all the conditions envisaged in Rule 33(i) to (iii) as well as the conditions (a) to (d) envisaged in the Explanation to Rule 33 of the CGST Rules, 2017 - taking into consideration the provisions of Rule 33 of the CGST Rules, 2017, we find that the amount of stamp tax incurred by the supplier on behalf of the applicant, shall be excluded from the value of supply, if, and only if, the supplier i.e. M/s.Enpay, Turkey satisfies all the conditions envisaged in Rule 33(i) to (iii) as well as the conditions (a) to (d) envisaged in the Explanation to Rule 33 of the CGST Rules, 2017. The supplier of the applicant does not fulfil/satisfy all the conditions required for being a ‘Pure agent’ in terms of the provisions of Rule 33 of the CGST Rules, 2017 and therefore, the expenditure or costs incurred by the supplier of the recipient of supply cannot be excluded from the value of supply in terms of the provisions of Rule 33 of the said rules and is liable to GST on reverse charge basis.
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