TMI Blog2020 (12) TMI 836X X X X Extracts X X X X X X X X Extracts X X X X ..... y of services in terms of Section 7 of the GST Act? - HELD THAT:- We agree with the applicant that, the charging event under GST law is supply of goods or services for consideration. Any payment will be treated as 'consideration' only if it is made against supply of goods and services. We will therefore discuss, whether the activities undertaken by applicant, in terms of the service contract, constitutes a supply' or not - This argument of the applicant that, the financial assistance to be received, is a mere transaction in money and not against supply of goods or services, is not acceptable. The `develoPPP.de project' intends to promote investments of German companies in India. Accordingly, Prettl Gmbh has asked the applicant to undertake some activities for which financial assistance is provided. Applicant contends that, there is no supply flowing from them to Prettl Gmbh. We do not agree with this view. The activities undertaken by the applicant are in pursuance of a service agreement with Prettl Gmbh and the amount received/to be received is also in pursuance of the same agreement. Further, activities undertaken by the applicant are to promote the investments o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned agreement. We do not agree with the submissions made by the applicant with respect to classification of services rendered by applicant - the applicant has agreed to do acts under the impugned contract and therefore their supply is to be classified under SAC Heading 999792 which pertains to Agreeing to do an Act . Whether the said activity, if considered as supply of service, is covered as Zero Rated Supply and qualifies as export of service under the provisions of IGST Act, 2017 and can be exported without payment of IGST? - HELD THAT:- The clause (e) of Section 97 (2) of the CGST Act, 2017 has got a very wide connotation and would cover all sorts of transactions, where the Advance Ruling on the questions related to the determination of the liability to pay tax can be sought by the Applicant - The subject 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. Whether the subject transaction is taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said activity is to be considered as exempted supply' or 'non taxable supply and accordingly input tax credit is to be reversed in accordance with Section 17 of CGST Act, 2017 / MGST Act, 2017 read with Rule 42 of Central Goods and Services Tax Rules, 2017/ Maharashtra Goods and Services Tax Rules, 2017? 3. If the above activity is considered as supply of service, then whether the same is classifiable under SAC 9997 as other services nowhere else classified under Sr. no 35 of the Notification-11/2017- C.T. (Rate) dated 28th June 2017 / Sr. no 35 of the Notification-11/2017-S.T. (Rate) dated 29th June 2017 / sr. no 35 of the Notification 8/2017- I.T. (Rate) dated 28th June 2017? 4. Where the said activity if considered as supply of service, then whether the same is covered as Zero Rated Supply and qualifies as export of service under the provisions of Integrated Goods and Services Tax Act, 2017 and can be exported without payment of IGST? At the outset, we would like to make it clear 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing activities by the Applicant: a) Construction of a separate 400 sqm training center within a 2,500 sqm production hall, divided into a theory room and a practical training workshop; b) Implementation of training measures for trainers, apprentices, unskilled workers and students or college graduates as well as integration of teaching content at four educational institutes; c) One-year training of 80 vocational students (20 mechanics and 60 electrical engineers from the Industrial Training Institute Pune and Don Bosco) d) Two-year training of 350 unskilled workers to become mechanics, electricians, mechatronics technicians; e) Qualification of 25 college graduates as application and design engineers; f) Qualification of four suppliers to obtain PRETTL certification ; g) All other activities not expressly listed here which are necessary for the successful completion of the develoPPP.de project'. 2.5 Applicant is under no obligation to offer any job to apprentices, unskilled workers and students who are getting training under the develoPPP.de project. 2.6 This outcome of the develoPPP.de project would contribute positively to the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en prescribed under Notification-11/2017- C. T. (Rate) dated 28.06.2017 and corresponding notifications issued under the MGST and IGST Acts. 5.2 Since Applicant will be creating an infrastructure for implementation of training measures for production apprentices; unskilled workers students or college graduates from engineering discipline, Entry Sr. 30 of above referred notification, prescribing for an SAC 9992 - Education Services @ GST 18% may be evaluated. However, Applicant is not running any educational institution also not issuing any degree or diploma certificate to students beneficiaries. Mere selection of educational related project under the said program does not describe the true nature of the activity. 5.3 Beneficiaries like apprentice, unskilled workers, etc. are neither related to nor represent Prettl GmbH. Therefore, such education training activities of the Applicant are not supplied to Prettl GmbH. Applicant has reproduced the definition of the term recipient and stated that, the said definition includes the person who is liable to pay consideration for supply of goods or services or both, or person who pays consideration on behalf of the recipient o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of components and evaluate for accuracy; mark out components for assembling, filing, drilling, riveting, fitting and allied operations ; work on lathe, drilling and other related machine and operate these machine to produce simple components; use appropriate tools and equipment to make gauges, slide fittings and simple jig and fixtures for drilling and also check for accuracy; assemble, re-assemble, dismantle and repair damaged components and check the same for appropriate functioning; Working of welding, soldering, brazing operations using appropriate materials and tools and to perform basic day to day repair and maintenance along with erection of general machine tools like lathe. 7.3 Since the transaction between applicant and the Educational Institutions / Students is not covered as supply of services , the impugned activity cannot be classified under SAC 999293 as 'commercial training and coaching services'. 7.4 If the financial assistance received from the Prettl GmbH is treated as consideration for service supplied by the Applicant, then the recipient of service would be the Prettl GmbH only and not the educational institutions or students in India. 7.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by DEG -(Para 4 of Article 4 of Contract 1 refers). In order to provide the requisite training, a complete infrastructure is required, which includes the training place, the tools, equipments, and machinery and manpower to provide the training (including Trainer's training). These may be supplied by various vendors, including Prettl Germany, for the project. These vendors are liable to pay the taxes, as applicable, on supplies made by them to the project. 3.2.4 The entire project is mandatorily to be treated as a Separate Cost Centre - and all expenses and income, if any, have to be accounted separately. - (Article 2 of Contract 1 refers). The project is, therefore, a completely different vertical, having its own independent existence. 3.2.5 A detailed cost sheet has been provided in Contract 1, wherein every activity is fragmented with respect to its cost and the cost of the entire project has been estimated at 610,000/- Euros, of which the contribution from DEG is 190,000/ Euros. Any increase in the estimated cost shall be borne by Prettl Germany on their own account. Any decrease in the estimated cost will entail reduced contribution of DEG and Prettl Germany. - (Art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Contract 1, the obligations of Prettl India remain the same, as Contract 2 is an extension of Contract 1, with Prettl India entering into the shoes of Prettl Germany for implementing the Project. 3.2.11 The Project is a Public-Private Partnership, which is not a commercial or business venture. The money received by Prettl Germany from DEG towards execution of the Project is for establishing and implementing a non-commercial project. The Project in India, being the same as devised and contracted by DEG and Prettl Germany, will also hold the same position. Hence, the entire project in India will acquire the same colour and is therefore a non-commercial / non-business venture. 3.2.12 Defining the Scope of Supply , Section 7(a) of the CGST Act, 2017 includes all forms of supply of goods or services or both made or agreed to be made for a consideration by a person in the course or furtherance of business. The money received / to be received by Applicant from Prettl Germany for implementation of the Project cannot be regarded as consideration received in the course or furtherance of business - as the Project is non-commercial / non-business, and consequently, there is no suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upplies of goods / services required to implement the Project shall become a cost at the hands of Prettl India (Prettl Automotive -Training Unit) and the same would be factored in the cost of project implementation, for which they are receiving 540,000/- Euros. 3.2.15 The Project (Prettl Automotive -Training Unit) being a non-business enterprise, with no outward supply, will not be required to obtain registration under the GST laws. It will be an unregistered entity for all purposes of the GST laws. 3.3. In view of the factual and legal position emerging out of the above discussion, the considered stand of the Department on the point wise issues raised in the Advance Ruling Application No. 20 dated 23.5.2019 is as under: Point No. as per Application Question on which ruling is required Department s stand 14.1 Whether the financial assistance to be received by the Applicant are covered as consideration for supply and the activity is covered under the meaning of supply of services in terms of Sec. 7 of the CGST Act, 2017 MGST 2017. The financial assistance is infusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring it was found that there are no documents to substantiate the nature of activities carried out by the applicant. The Authorized Representative requested for another date to submit the documents which was accepted. Jurisdictional Officer Shri Vikas Kumar Nigum, Supptt, Range-III, Division-V, from office of Asstt. Commissioner of COST, Pune-I, appeared and made written submissions. 4.3 Applicant submitted relevant documents and was called on 28.01.2020 for hearing. Shri Deepak Naik, AR, appeared. We heard both the sides. 4.4 Online hearing was conducted on 10.11.2020. Applicant's authorized representative and Jurisdictional officer, both attended the hearing. Applicant submitted agreement copy between Prettl GMBH and the German Government and has submitted that, they are not supplying 'Commercial Coaching Training Services'. The jurisdictional officer requested for time to make submissions in light of the agreement copy submitted by the applicant. 05. OBSERVATIONS 5.1 We have gone through the facts of the case, documents on record and submissions made by both, the applicant as well as the jurisdictional officer. 5.2 Subject application has been fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the applicant that, since there are no services rendered in the subject case, the financial assistance to be received by them is not covered as consideration for supply of goods or services and therefore no GST is payable. While the agreement entered into is a service agreement, the contention of the applicant is that they are not rendering any service, which appears to be a contradiction in itself. 5.4.2 We agree with the applicant that, the charging event under GST law is supply of goods or services for consideration. Any payment will be treated as 'consideration' only if it is made against supply of goods and services. We will therefore discuss, whether the activities undertaken by applicant, in terms of the service contract, constitutes a supply' or not. 5.4.3 This argument of the applicant that, the financial assistance to be received, is a mere transaction in money and not against supply of goods or services, is not acceptable. The `develoPPP.de project' intends to promote investments of German companies in India. Accordingly, Prettl Gmbh has asked the applicant to undertake some activities for which financial assistance is provided. Applicant contends ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lling to provide training to such specialists through the Service Provider, (in this case, the applicant), at its own expenses. 3 Under the clause Services of the Service Provider , in the said agreement, Prettl Gmbh has entrusted to the applicant, a gamut of services, which have been mentioned in para 5.3 above. Under this clause it is also mentioned that the exact content of the services provided by the applicant is listed in the contract dated 23.02.2018 between DEG and Prettl Gmbh. 5.4.7 In the entire agreement it is seen that, the said agreement is for provision of services. Prettl Gmbh is treated as a Service Recipient and the applicant is treated as a service provider. We also find, from the agreement that, applicant has agreed to provide certain services for which they will be paid some amounts. The applicant is terming these amounts as financial assistance whereas it is very clear from the agreement that the said amounts must be treated as consideration since they are being given to the applicant in lieu of certain supply of services to be effected by the applicant on the directions of Prettl Gmbh, i.e. the holding company. We also reiterate that in the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Laws. However, the Hon'ble Supreme Court while deciding the matter in the case of Loka Shikshana Trust vs. CTT = 1975 (8) TMI 1 - SUPREME COURT defines 'Education' as a process of training and developing knowledge, skill and character of students by normal schooling. 5.6.3 In the subject case it cannot be said that the applicant is involved in education per se since the element of normal schooling is absent. Further, the Applicant has also agreed that it is not imparting any classroom training, knowledge lessons thereby not running any educational institution also not issuing any degree or diploma certificate to students beneficiaries. In fact, the applicant has submitted that they are not providing any Education services to anyone. 5.6.4 We find that, the applicant is required to supply a gamut of services under the terms of the subject contract. The subject services are agreed to be undertaken by the applicant under the terms of the contract with Prettl GMBH. Thus, it is seen that the activities undertaken by the applicant, in India is as per the requirements of Prettl GMBH. Applicant has submitted that it is not supplying any goods and servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 019 (11) TMI 476 - APPELLATE AUTHORITY FOR ADVANCE RULING MAHARASHTRA . 5.7.2 However, in the case of Sutherland Mortgage Services INC Vs Principal Commissioner = 2020 (3) TMI 186 - KERALA HIGH COURT , the Hon'ble Kerala High Court has observed that even though the issue relating to determination of place of supply is not expressly enumerated in any of the clauses as per clauses (a) to (g) of Section 97(2) of the CGST Act, the said issue relating to determination of place of supply, would come within the ambit of the larger issue of `determination of liability to pay tax on any goods or services or both' as envisaged in clause (e) of Section 97(2) of the CGST Act. 5.7.3 The said decision in the case of Sutherland Mortgage Services INC has been cited and referred to by the Appellate Authority for Advance Ruling, Maharashtra in the case of appeal filed by M/s Portescap India Private Limited against the order passed by the Advance Ruling Authority, Maharashtra vide Ruling No. GST-ARA-93/2019-201B-31 dated 12.03.2020 = 2020 (7) TMI 83 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA . The said Appellate Authority observed as under: Thus, it is evident from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned Service Contract requires the applicant to; construct a training center; implement training measures for trainers, apprentices, unskilled workers, students or college graduates as well as integration of teaching content at four educational institutes; train vocational students from the Industrial Training Institute Pune and Don Bosco; train unskilled workers to become mechanics, electricians, technicians; etc. 5.7.9 As per Section 13 (5) of the IGST Act, the place of supply of services supplied by way of admission to, or organisation of a cultural, artistic, sporting, scientific, educational or entertainment event, or a celebration, conference, fair, exhibition or similar events, and of services ancillary to such admission or organisation, shall be the place where the event is actually held. 5.7.10 It is found from the submissions and as mentioned above that, the entire gamut of supply as per the agreement between the applicant and Prettl GMBH, will be performed in India and therefore we have no hesitation in holding that the place of supply, being event based in the subject case, is in India. The subject transaction does not satisfy the condition mentioned in clau ..... X X X X Extracts X X X X X X X X Extracts X X X X
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