TMI Blog2021 (4) TMI 618X X X X Extracts X X X X X X X X Extracts X X X X ..... th 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlama ve Yatirim A.S. and they have paid Stamp tax in Turkey as per their land rules and they have raised reimbursement invoice of said payment to ENPAY India; that as mentioned above, the company is importing goods on CIF basis(cost including freight) and the invoice that is raised by the seller is clearly showing the amount of Sea freight and it is also noted that at the time of Bill of Entry, the assessable value calculated for payment of IGST includes the value of Sea Freight, hence, IGST is already paid on the value of sea freight at the time of customs clearance. 2. The applicant has asked the following questions seeking Advance Ruling on the same: (i) 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? (ii) 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? (iii) Whether Entry No.10 of Notification No.10/2017 issued under IGST is applicable, if import of goods is made on CIF(Cost including Freight basis) where the supplier is charging sea/ocean f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditional submission vide letter dated 09.01.2021(received vide email on 11.01.2021) wherein they have stated that during hearing they were asked to furnish details of Stamp tax paid and clarification regarding whether any markup/profit had been charged by Enpay Endustriyel Pazarlama ve Yatirum A.S.(Enpay, Turkey) from Enpay Transformer Components India pvt.ltd. while making payment of stamp tax on their behalf at the time of documentation of Corporate Guarantee Agreement executed on 13.04.2018; that accordingly they have obtained clarification in writing from Enpay Endustriyel Pazarlama ve Yatirum A.S. stating that no mark up (profit) was charged for the reimbursement of stamp tax paid against corporate guarantee issued to CITI bank as security/collateral for funded/non-funded facility used by Enpay Transformer Components India Private Limited and have attached a copy of the same. They have submitted the table for Stamp Tax Collection as under: Particulars BASE TAX (USD) Exchange Rate USD/TL BASE TAX (TL) TAX RATE Stamp Tax Charges (TL) Stamp Tax C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted at Turkey namely M/s.Enpay Endstriyel Pzarlama ve Yatirim A.S. (Enpay, Turkey) for which the payment terms is 120 days from the date of invoice for import of goods and if the company M/s.Enpay Transformer located at India does not pay to M/s. Enpay, Turkey on due date, M/s.Enpay, Turkey is charging interest on late payment. (ii) The applicant has obtained bank credit facility from CITI Bank based on the Corporate Guarantee issued by M/s. Enpay Endustriyel Pazarlama ve Yatirim A.S. (Enpay, Turkey)and they have paid Stamp tax in Turkey as per their land rules and they have raised reimbursement invoice of said payment to M/s. Enpay India. They have submitted a copy of the said Corporate Guarantee. Based on the above, the applicant has asked the following questions seeking Advance Ruling on the same: (i) 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? (ii) 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? 8. We will discuss both the aforementio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The same reads as under: ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES 1. Transfer (a) any transfer of the title in goods is a supply of goods; (b) any transfer of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of services; (c) any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods. 2. Land and Building (a) any lease, tenancy, easement, licence to occupy land is a supply of services; (b) any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services. 3. Treatment or process Any treatment or process which is applied to another person's goods is a supply of services. 4. Transfer of business assets (a) where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entation of information technology software; (e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; and (f) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration. 6. Composite supply The following composite supplies shall be treated as a supply of services, namely:- (a) works contract as defined in clause (119) of section 2; and (b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration. 7. Supply of Goods The following shall be treated as supply of goods, namely:- Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration. 8.2 On going through the above, and comparing the same to the issue in hand, we find that the foreign buyer has tolerated the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsidy shall be included in the value of supply of the supplier who receives the subsidy. (3) The value of the supply shall not include any discount which is given (a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and (b) after the supply has been effected, if- (i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and (ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply. (4) Where the value of the supply of goods or services or both cannot be determined under sub-section (1), the same shall be determined in such manner as may be prescribed. (5) Notwithstanding anything contained in sub-section (1) or sub-section (4), the value of such supplies as may be notified by the Government on the recommendations of the Council shall be determined in such manner as may be prescribed. Explanation .-For the purposes of this Act, (a) persons shall be deemed to be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they have raised reimbursement invoice of said payment to M/s.Enpay, India. The applicant, vide their additional submission dated 09.01.2021(received vide email on 11.01.2021) have stated that they have obtained clarification in writing from M/s.Enpay Endustriyel Pazarlama ve Yatirum A.S. (Enpay, Turkey) stating that no mark up (profit) was charged for the reimbursement of stamp tax paid against corporate guarantee issued to CITI bank as security/collateral for funded/non-funded facility used by M/s.Enpay Transformer Components India Private Limited and have attached a copy of the same. The applicant has also stated that they have submitted a copy of receipt of stamp tax issued by the Stamp Tax office for reference along with copy of invoice raised by M/s.Enpay, Turkey. We have gone through the letter dated 09.01.2021 issued by M/s. Enpay,Turkey to M/s.Enpay Transformers Components India pvt.ltd. stating that no mark up(profit) was charged for the reimbursement of stamp tax paid against corporate guarantee issued to CITI Bank as security/collateral for funded/non-funded facility used by Enpay Transformers Components India pvt.ltd. Other than this, we find that the applicant has sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure or costs in the course of supply of goods or services or both; (b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply; (c) does not use for his own interest such goods or services so procured; and (d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account. 9.2 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, we find 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CGST Act, 2017 mentioned at para-8.2 above which covers the aspect of valuation and find that reimbursements are not covered in the excluded clauses of value as appearing in sub-section(3) of Section-15. Therefore, the amount of stamp tax, which is paid as reimbursement by the applicant will undoubtedly form a part of the consideration i.e. the value of the supply of goods provided by the supplier to the applicant and GST is liable on the same. However, 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. We, therefore, proceed to examine as to whether the supplier i.e. M/s.Enpay, Turkey satisfies all the conditions mentioned hereinabove and satisfies the conditions of a pure agent, which are enlisted hereunder: (i) the supplier acts as a pure agent of the recipient of the supply, when he makes the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both; No such document, agreement or contract has been produced by the applicant which proves that they have entered into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both. In view of absence/non-submission of any such documents in this regard, we conclude that this condition is not satisfied. (b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply; The applicant has submitted that the stamp duty paid by the supplier M/s.Enpay, Turkey is neither intending to hold any title for it and not for the use of his own interest. However, they have not provided any documentary evidence to prove that the supplier neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply. Hence, this condition is not satisfied. (c) d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.4 In view of the above discussions, we conclude that 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. 10. In light of the above circumstances, we rule, as under R U L I N G Question-1: 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? Answer: The applicant M/s.Enpay Transformers Components India pvt.ltd. Plot No.112, Alindra, Manjusar GIDC, Savli, Vadodara is liable to pay GST on reverse charge basis for amount paid as interest on late payment of invoices of imported goods for the reasons discussed hereinabove. The rate of GST will be the same as the rate of IGST leviable on the imported goods for the reasons discussed hereinabove. Question-2: Whether liability to pay GST on reverse char ..... X X X X Extracts X X X X X X X X Extracts X X X X
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