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TMI Blog2019 (6) TMI 1307X X X X Extracts X X X X X X X X Extracts X X X X ..... lear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST Act. 2. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- Statement of relevant facts having a bearing on the question raised Background of the operations undertaken by CRL (i) The Applicant CRL (formerly known as B.A. Research India Limited), a global Clinical Research Organization, providing comprehensive range of clinical research and support services by performing technical testing and analysis on the Drug/lnvestigational Product provided by sponsors located outside India and submits final the report to such foreign sponsors. (ii) In India, the Applicant is registered as a public limited company under the Companies Act, 1956. The Applicant provides Clinical Research services to the sponsors located outside India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Applicant would like to make the submissions before this Hon'ble Authority for Advance Ruling on the following grounds, amongst others, each of which is requested to be taken as the alternative and without prejudice to each other: A. The clinical Research services provided by the Applicant would amount to export of service : (i) The Applicant would like to submit that the clinical research services provided by them to the foreign sponsors would amount to export of service for the reasons detailed below. (ii) The term export of service has been defined under Section 2(6) of the Integrated Goods and Services Tax Act, 2017 (IGST Act) to mean: "export of services" means the supply of any service when, - (i) the supplier of service is located in India; (ii) the recipient of service is located outside India; (iii) the place of supply of service is outside India; (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange I [or in Indian rupees wherever permitted by the Reserve Bank of India); and (v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 13(3)(a) of the IGST Act will be applicable only in those cases where a service in the nature of repair, testing etc.) is performed on the goods sent by the recipient to the supplier of service and not to those cases where the service is provided using the goods provided by the recipient or in cases where the goods sent by the recipient are altered (consumed) while providing the service. (x) The Applicant would like to rely on the decision of Hon'ble Mumbai Tribunal in the case of Principal Commissioner of C. Ex. Pune - I v Advinus Therapeutics Ltd. 2017 (51) S.T.R. 298 (Tri, - Mumbai) = 2016 (12) TMI 34 - CESTAT MUMBAI which has been decided specifically in the context of research and drug development using information provided by the recipient. Hon'ble Tribunal while detailing the applicability of Rule 4 of the Place of Provision of Service Rules, 2012. Has held: "It has been noted by the first appellate authority that the applicant for refund is in the business of rendering 'scientific or technical consultancy services' and has earned convertible foreign currency by rendering these services during the relevant periods. Contention of Revenue is that place of provision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t', that payment is received in convertible foreign exchange and that the provider and recipient are not covered by the fiction in Explanation 2(b) of Section 65B(44) of Finance Act, 1994, are applicable to the service rendered by the respondent is common ground. The cavil is that the activity does conform to the provisions of Rule 4 of Place of Provision of Services, Rules, 2012 because the service is allegedly. 4 . ...provided in respect to goods that are required to be made physically available by the recipient of service to the provider of service, or to a person acting on behalf of the provider of service, in order to provide the service..' rendering the location of performance of service, i.e. India, to be pertinent to the activity of respondent. It is an admitted fact that the respondent had been rendering services that were, in the erstwhile pre-negative list regime, taxable but for the provider being an Export Oriented Unit under the entry in Section of Finance Act, 1994. In the scheme of Export of Service Rules, 2005, the various taxable services had been categorized as object-based performance-based and recipient-based for the purpose of exemption under Section 93 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zation or the territory in which it exists. The satisfaction of the customer occurs upon an outcome which is possessed by the recipient. Hence, even if some of the activities are carried out in India, by no stretch can it be asserted that the fulfilment of the activity is in India. Therefore, the inescapable conclusion is that the location of the actual performance of the service is outside India and, even with the special and specific provision of Rule 4 of Place of Provision of Services Rules, 2012, the performance of service being rendered outside India would render it to be an export. In this context, the legislative intent of incorporating a special and specific provision in Rule 4 may yield further insights. The special provision, which may be seen as an exception to the general Rule 3, deals with services in respect of goods as well as those provided to individuals. Not unnaturally, the services that require the physical presence of the person is taxed where the consumer receives the service and not at his location which as per Rule 2(i)(iv) would be his usual place of residence. In what can be considered as a most telling example of the scope of this portion of Rule 4, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds imported temporarily for repairs from taxability which would, by default, be predicated by the intent in Rule 3. Consequently a recipient in India would be liable to tax on such temporary imports for repairs while service to a recipient located abroad would not be taxable. This is in consonance with the privilege of exemption afforded to export of services. The special and distinct role of Rule 4 becomes clearer. Not intended to tax the activity of altering goods supplied by the recipient of service or for repairs on goods, Rule 4(1) of Place of Provision of Services Rules, 2012 would appear, by elimination of possibilities, to relate to goods that require some activity to be performed without altering its form. The exemplification in the Education Guide referred supra renders it pellucid. Certification is an important facet of trade and such certification, if undertaken in India, will not be able to escape tax by reference to location of the entity which entrusted the activity to the service provider in India. This is merely one situation but it should suffice for us to enunciate that Rule 4(1) is intended to resorted when services are rendered on goods without altering its f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reiterated as above, the appeal is devoid of merits and is accordingly rejected. The stay petitions are also disposed of." (xii) The Applicant would like to submit that the provisions contained in Section 13(3)(a) of the IGST Act is in pari materia with the provision contained in Rule 4 of the Place of Provision of Services Rules. Therefore the principles enunciated in the above judgements can be relied for understanding the scope of Section of 13(3)(a) the IGST Act. Relevant portion of Rule 4 of the lace of Provision of Services Rules, 2012 is reproduced for easy reference; "Place of provision of performance based services- 4. The place of provision of following services shall be the location where the services are actually performed, namely: (a) services provided in respect of goods that are required to be made physically available by the recipient of service to the provider of service, or to a person acting on behalf of the provider of service, in order to provide the service: (xiii) Applying the above judicial precedents to the facts of the present case, as detailed in Exhibit II above, the Applicant is providing service of clinical research which requires the Applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the concept of destination based tax on consumption? Ans: The tax would accrue to the taxing authority which has jurisdiction over the place of consumption which is also termed as place of supply." [Emphasis Supplied] (ii) It is a settled principle of law that when the service is consumed outside India, tax is not leviable in India. Reliance in this regard can be placed on the following cases wherein it has been specifically held that even though the test has been conducted in India and the test reports were prepared in India, the service will be treated as export of service as the service is consumed outside India: a. Commissioner v B.A Research India Ltd 2010 (18) S.T.R. 439 = 2009 (11) TMI 213 - CESTAT, AHMEDABAD b. KSH International Pvt. Ltd. v. Commissioner 2010 (18) S.T.R. 404 = 2010 (1) TMI 143 - CESTAT, MUMBAI c. Commissioner of Central Excise Pune - I Vs. Sai Life Sciences 2016 (42) STR 882 (Tri-Mum) = 2016 (2) TMI 724 - CESTAT MUMBAI- Post introduction of Place of Provision of Service Rules 2012 d. Principal Commissioner of C. Ex. Pune - I v Advinus Therapeutics Ltd. 2017 (51) S.T.R. 298 (Tri, - Mumbai) = 2016 (12) TMI 34 - CESTAT MUMBAI - Post introduction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviding clinical research and support services to its clients located within India and outside India,. The clinical research services provided by the applicant involves conducting bio-equivalence studies, bio-availability studies, drug reactions, drug interactions etc. for newly developed drug formulations or for the existing ones. The applicant enters into agreement with the foreign clients and is needed to submit the product investigation report as per the terms and conditions of the agreement. The clinical trials and investigation studies are performed by the applicant on the individuals in India at their facilities. The products under investigation i.e. drug in capsule, tablet etc. forms are supplied by the foreign based clients as per the terms of agreement. The output of this business activity is a product investigation report that is sent to the clients based outside India in digital format. For these services the applicant raises invoices to their foreign clients in foreign currency and receives the consideration in foreign currency. The applicant has raised following query: Sr.No. Questions raised by the applicant Submission as per ACT & RULE 1. Whether the clinic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er repairs without being put to any other use in India, than that which is required for such repairs. (Refer Annexure Il) Comment: In case of the applicant the place of supply service is determinable as per Section 13 (3) (a) which clarifies that the place of supply of service in cases where the material used or consumed in the performance of service is supplied by the recipient of the service. In case of the applicant the materials consumed or used in the clinical trials is supplied (in physical form) by the recipients of the service moreover the applicant provides only service i. e. product investigation report in digital form electronically to the recipient. Section 13(3)(a) mentions that in such cases the place supply of the services shall be the location where service is actually performed. 04. HEARING Preliminary Hearing in the matter was held on 27.02.2019. Sh. Shivrajan C.A, of Price Waterhouse Coopers Pvt Ltd appeared and requested for admission of application. During hearing, Jurisdictional Officer Sh. Manish Palia, State Tax Officer (C-006), Raigad Division, Navi Mumbai appeared and also made written submissions. The application was admitted and called for final hear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , provided by sponsors located outside India and submits final analyses report to such foreign sponsors. The Research (study) will be conducted on human subjects. Thus we find that the Research is for conducting a study of the effect of such Investigational Product/drug. It has also been submitted that the goods/ Investigational Product given by the sponsor will get consumed during the process of the study and is not returned back to the sponsor. After the completion of study, the applicant will supply the Sponsor with a copy of a detailed report containing the analysis of the study conducted by them. We agree with the applicants submission that their transaction satisfies the conditions mentioned in clauses (i), (ii), (iv) and (v) of Section 2(6) of the Integrated Goods and Services Tax Act, 2017 (IGST Act). However to be considered as Export of Services as per the GST Laws clause number (iii) with respect to Place of Supply of Services should be outside India. Hence we take up the issue of place of supply in the subject case. We therefore refer to the provisions of Section 13 of the IGST Act, 2017 which will be applicable to determine the place of supply since, in this case, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot applicable on the Applicant as he does not provide services listed in subsection (3), (4),(5) explained above. 13(8) 8) The place of supply of the following services shall be the location of the supplier of services, namely:--- (a) services supplied by a banking company, ..... (b) intermediary services; (c) services consisting of hiring of means of transport, ......................... a. The Applicant does not provide services as stated in Sub Clause (a) and (c) and are also not supplying any intermediary services since their supply if to their sponsor on a P to P basis. 13(9) (9) The place of supply of services of transportation.......... The Applicant does not provide any of the services listed in the Section 13(10) (10) The place of supply in respect of passenger transportation............... The Applicant does not provide any of the services listed in the Section 13(11) (11) The place of supply of services provided on board a conveyance............ The Applicant does not provide any of the services listed in the Section 13 (12) (12) The place of supply of online information and database access....................... The Applicant does not provide any of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the report and not for merely administering the drug and recording the results alone. This contention is flawed inasmuch as it is natural that in such cases the sponsors would like to know the efficacy of their drugs on subject and for which the testing of the drugs themselves are important. The entire administration of the drugs has to take place under controlled conditions and results have to be meticulously taken down. The report is only a culmination of the entire process. Further the applicant has submitted that the case of Commissioner Of service Tax, Ahmedabad Versus B.A. Research India Ltd (supra) in their own case where it was held that the performance of testing and analysis has no value unless and until it is delivered to its client. Thus, delivery of report to its client is an essential part of the service report, which was delivered and used outside India and therefore, it should be construed as export of service. Whilst the applicant is citing the subject decision, they have ignored the same as can be seen from the documents submitted before this authority. The applicant has submitted 3 invoices issued by their Ahmedabad office, Invoice Nos. DEC 18/E/67, JAN 19/E/21 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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