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TMI Blog2021 (8) TMI 1020X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicant would be liable to GST in the hands of the Applicant considering that the Applicant is not engaged in any business? (iii) Whether Applicant would be required to obtain registration in India under Section 24 of the Central Goods and Service Tax Act, 2017 with respect to activities carried out by the Applicant's Head office located outside India and rendered to the Applicant considering that the Applicant is not engaged in any business? 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 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 made by the applicant is as under:- 1. The World Economic Forum (WEF) is a public interest, not-for-profit organization set up in 1971 and based in Switzerland, operates as an independent international organiza ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enefits of science and technology for society and has created a global hub of expertise, knowledge-sharing and collaboration in San Francisco to achieve this objective. The Fourth Industrial Revolution is transforming entire systems of production, distribution and consumption, providing opportunities for new value creation through game-changing technologies. In the Centre for the Fourth Industrial Revolution Network, various projects cover the following areas of technological innovation: - Artificial Intelligence and Machine Learning; - Internet of Things and Connected Devices; - Blockchain and Distributed Ledger Technology; - Autonomous and Urban Mobility; - Drones and Tomorrow's Airspace; - Precision Medicine - Fourth IR for the Earth - Data Policy - Digital Trade 5. Applicant is the Indian office of The WEF, established as Liaison Office ('LO) to assist the WEF to undertake the Fourth Industrial Revolution activities in India to encourage, develop and facilitate cooperation activities in the fields of common interest associated with readiness for the said Revolution, pursue research and develop and deploy policy principles & regulatory framework. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations for establishment of a LO in India under the powers Conferred by Section 6(6) of the Foreign Exchange Management Act, 1999. 9. Further, as prescribed by the Master Circular No. 7/2015-16 dated 01 July 2015 and Notification No 22, entire expenses of the Applicant in India will be met entirely through Inward remittances of foreign exchange received from The WEF located outside India. 10. In relation to the remittance received by the Applicant from the WEF located abroad, there is no supply since it is neither engaged in any business activity nor is it permitted to execute any business contracts in its own name without RBI's prior permission. There is no consideration/fees charged or any other remuneration received/earned by the Applicant and the remittance received from the LIO is only for meeting expenses of the Applicant as per master circular no. 7/2015-16 dated 01 July 2015. 11. Further, the Applicant submits that for the purpose of operating the LO in India, the HO outside India assists in support of human resources, recruit employees in India in order to launch the LO operations in India, IT support to set up necessary infrastructure, advise on any accounting, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CGST Act (amended) defines the supply as follows: (1) For the purposes of this Act, the expression "supply" includes (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business, and (c) the activities specified in Schedule I, made or agreed to be made without a consideration;' b. Schedule of the CGST Act provides list of activities which are to be treated as supply even if the same is made without any consideration: 'Activities to be treated as supply even if made without any consideration: 1. Permanent transfer or disposal of business assets where input tax credit has been availed on such assets. 2. Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business: Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person or from any of his other establishments outside India, in the course or furtherance of business. Thus, in view of the facts of the present case, in order to specifically qualify an activity as 'supply' under Entry No. 4 of Schedule 1, the following key conditions are required to be fulfilled: (i) There should be a service imported into India; (ii) The services should be received from a related person' outside India; (iii) The service is provided without consideration, and (iv) The said import of service must be in the course or furtherance of business 3. In applicant's view, the fourth condition as stated above is not being satisfied in the present case because the Applicant does not carry out any business activity in India. 4. Applicant established in India does not conduct 'business' as defined under the CGST Act. 4.1. Under the GST regime, any form of 'supply' is liable to tax provided it qualifies under the meaning of 'supply' prescribed under Section 7 of the CGST Act. One of the essential requirements to be met for any activity to qualify as 'supply' is that the same should be in the course or furtherance of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant are provided below in brief: a. Representing and acting as communication link between the HO and the Indian entities to identify and source potential members; b. To assist the HO in participating in social projects, promote its collaborations with entities in India and globally, and increasing awareness in India about its programs and agendas; c. To carry out activities in connection to the CHIR, such as research, developing and deploying policies and regulatory framework. 4.5 It is clear that the proposed activities of the Applicant do not fall under any of the clauses under the definition of 'business' as explained below: Extract of the definition of business' Submission of the Applicant (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; * As per the meaning of the term 'trade (explained above), it involves an exchange of goods whether or not for any profit. In the case of the Applicant, there are neither any goods, nor any exchange of the same. * The term 'commerce' as provided above means exchange of goods on a large scale which therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cement or closure of business. * The Applicant is not conducting any business in India as submitted above and hence would not be covered under the said clause. (e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members; * Clause (e) of the definition of business does not cover the activities of the Applicant since the Applicant is not a club or an association or a society of members. (f) admission, for a consideration, of. persons to any premises; * Clause (f) of the definition of business does not cover the activities of the Applicant since there is no admission to any premises. (g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation; * Clause (g) of the definition of business is not relevant since the Applicant is not a holder of any office (h) services provided by a race club by way of totalizator or a license to book maker in such club; and * Clause (h) of the definition of business is not relevant since the Applicant is not a race club. (i) any activity or transaction un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome in India. Expenses of such offices are to be met entirely through inward remittances of foreign exchange from the Head Office outside India. The role of such offices is. therefore, limited to collecting information about market opportunities and providing information about the company and its products to the prospective Indian customers. Permission to set up such offices is initially granted for a period of 3 years and this may be extended from time to time by an AD Category I bank." 5.4. Further, the aforementioned regulations of the RBI also prescribes activities permitted to be undertaken by a LO set up in India. We have reproduced the relevant section of the RBI Master Circular no. 7 dated 01 July 2015 below for ease of reference: "A Liaison Office can undertake the following activities in India: i. Representing in India the parent company /group companies. ii. Promoting export/import from/to India. iii. Promoting technical/financial collaborations between parent/group companies and companies in India. iv. Acting as a communication channel between the parent company and Indian companies." 5.5. It is to be noted that the above mentioned activities have also bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of the merchandise on continuous basis until the final inspection of the merchandise & shipment and communicates with the Supplier and the German office f. The Shipping Department coordinates with German office and supplier for opening of Letter of Credit in the supplier's name, submission of document for booking space with the shipping company and send the final documents to German office through the respective supplier after effecting the shipment; g. Admin Department coordinates for the overall administration of Takko; h. All the administrative expenses are met by the German office, (i.e. as per RBI instruction in their approval; the entire expenses of the office in India is met exclusively out of the funds received from abroad through normal banking channels). 6.3 As stated above, the LO of M/s Takko Holding only undertakes the activities as approved by the RBI and does not undertake activity of trading, commercial or industrial nature nor does it undertake any business contract in its own name. There is no separate consideration charged for the liaising services provided by the LO, nor any other remuneration/income is earned by the LO in India. 6.4. The Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. 6.8. Given the above, the Applicant wishes to place reliance on the aforementioned rulings in submitting that the Applicant in the present case cannot be said to be engaged in any business whatsoever, by regulation. 6.9. Based on the above, the Applicant submits that since it is not permitted to conduct business in India and its activities do not qualify as a 'business' as defined under the CGST Act, any support service extended from the HO outside India to the Applicant without consideration would not be covered under the deeming fiction created by Entry No 4 of Schedule I in absence of it being in furtherance of business and thus would not qualify as 'supply' in the first place. 7. Decisions/Rulings of the erstwhile VAT laws bring out the interpretation of the taxing statutes 7.1. The Applicant submits that the definition of the term 'business' under the erstwhile sales tax laws is similar to that of the definition under the CGST Act. The definition of 'business' as defined under Section 2(5A) of the Bombay Sales Tax Act, 1959 has been produced below for your reference: "5A) "business" includes any trade, commerce or manufacture or any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repeated activity resulting in sale or supply of goods that would attract sales tax. If legislature intended to tax every sale or purchase irrespective of the object of the activities out of which the transaction arose, then it was unnecessary to state that the person must "carry on business" of selling, buying etc. 7.4 In view of the same, the Applicant submits that in the present case, its intention is not to conduct any business but to promote the mission and activities of its HO ie global well-being and finding solutions to problems which are a global agenda, which in itself cannot be said to be 'business'. The Applicant merely acts as a communication link between the HO and the stakeholders in India. 7.5 Further, in the case of Deputy Commissioner vs South India Textile Research?, the Hon'ble Madras High Court ruled that: "the definition of the term "business" contained in Section 2(d) of the Act. It is true that the said definition is a wide one. According to the said definition, "business" includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. However, where an organization is constituted solel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 24 of the CGST Act "24. Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act, - (i) persons making any inter-State taxable supply; (ii) casual taxable persons making taxable supply; (iii) persons who are required to pay tax under reverse charge; (iv) person who are required to pay tax under sub-section (5) of section 9; (v) non-resident taxable persons making taxable supply; (vi) persons who are required to deduct tax under section 51, whether or not separately registered under this Act; (vii) persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise; 10. Applicant is not required to obtain registration under Section 24 of CGST Act 10.1. In this relation, Applicant submits that, activities carried by the Applicant for the HO do not constitute as supply liable to tax. Further, in respect of services received from HO, if any, without any consideration, Applicant submits that in view of the explanation provided above, the services shall not be said to be taxable supplies in absence of any busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Forum, globally and in India. * The liaison office cannot carry out any business activity either for the Forum or otherwise nor can enter into contractual arrangements with members, partners or vendors or accept income in any form, such as, service fee, subscription, membership fee; donation, * Liaison office is not a separate legal entity and it only represents its head office at Geneva in India. 4. Services received from the head office by the Liaison office * The head office facilitates running of liaison office in India by providing supervision on information technology infrastructure, support in human resources matters as needed, project knowledge support, and administrative support if required. * Head office does not charge any amount to the liaison office for providing its support. In fact, all the expenses of running the liaison office in India are reimbursed by head office as the liaison office does not and cannot have any source of its income as it is not permitted to carry out any business activity in India as per the RBI permission under which it operates. APPLICANTS SUBMISSION DATED 25.06.2021:- 1. Applicant repeats and reiterates submissions made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y under Entry 4 of Schedule I to the CGST Act, Other States AAR/AAAR held LO not liable to GST 7. The Applicant also relies on the following rulings issued by various Advance Ruling Authorities in other States including that of the Ld, Appellate Authority for Advance Ruling in the State of Karnataka, which has consistently held that liaison office would not be liable to GST and would not be required to obtain GST registration in India: (a) Fraunhofer-Gesellschaft Angewandtenjorschunge V (2021 -VIL 11 AAAR) - Karnataka (b) Wilhelm Fricke SE (2021-V1L-55-AAR) - Haryana 8. While the above rulings are given by the States other than Maharashtra, since one of the authorities to levy GST is the Central government, the principle followed in the said, rulings cannot be ignored or disregarded in other applicant's cases. 9. For the above proposition, Applicant relies on the judgment of the Hon'ble Supreme Court in the case of Amar Bitumen & Allied Products - 2006 (202) E.LT. 213 (S.C.), which has held that, it is not open for the Revenue to accept judgement/order on the same question in the case of one assessee and questions its correctness in the case of some other assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect to any remittance received. It is for the services received, and it is a matter of fact and accepted by the Revenue in its report also that the Applicant does not make any payment to the HO; and c) there is no income reported nor any excess expenses retained by the Applicant as share of profit in India, as was observed in DCCI case. The same is evident from the financial statements and the income tax returns submitted before the Ld. Authority. In view of this, it is respectfully prayed that the ratio of DCCI ruling: will not affect the Applicant's case. 15. Also, in DCCI case it was observed by this Ld Authority that the LO was engaged in "connecting businesses in India with business partners in Dubai". In the present case no such fact exists. In fact, the WEF is not engaged in business at all and hence there is not question of the LO connecting anyone with the HO in relation to business. 16. Further, reference to Intermediary in DCCI case is not relevant in the present case for two reasons. First, in the case, the question is with respect to services received and not services provided so question of Intermediary is not relevant. Second, absent the consideration, even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se as inputs for their work The LO will leverage the access it has to the Forum's knowledge database of various regions to design the policy recommendations based on the needs and regulation in India. It will also support local pilot initiatives implemented by the Indian Authorities and other stake holders. Except for the proposed liaison work, the office in India would not undertake any activity of a trading, commercial or industrial nature nor shall it enter into any business contracts in its own name without RBI permission. No commission/fees will be charged or any other remuneration received /income earned by the office in India for the liaison activities/services rendered by it or otherwise in India. All expenses of the office to be met only out of funds received from abroad. Liaison Office cannot render any consultancy or any services directly/indirectly with/without consideration. 3. For determining the answers to the questions raised by the applicant, the definition of supply needs to be perused. Section 7 of the CGST Act, 2017 reads as under: "(1) for the purposes of this Act, the expression "supply" includes (a) all forms of supply of goods or services or both su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed list of activities which are to be treated as supply even if made without consideration which is as under: "1. Permanent transfer or disposal of business assets where input tax credit has been availed on such assets. 2. Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business: Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both. 3. Supply of goods - (a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or (b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal. 4. Import of services by a person from a related person or from any of his other establishments outside India, in the course or furtherance of business," It appears that since the activities that will be undertaken by the LO is without any consideration and is not in the nature of business, the liaison activities of The World Economic Forum will not be covered as deemed suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies in India; act as a communication channel between The WEF/its'group companies and Indian entities ; identify potential members in India for WEF's programs and facilitate meetings with such potential members/applicants in India assist The WEF's participation in undertaking socially useful projects; promote collaborations between The WEF and entities in India and globally; carry out activities connected to and/or incidental to the Centre for the Fourth Industrial Revolution (C4IR). 5.3 Applicant has also submitted that, it proposes to only undertake liaising activities and act as a communication link between the FIO and the companies in India. Further, except the proposed liaison work, it shall not undertake any other activity of trading, commercial or industrial nature nor shall it will enter into any business contracts in its name in view of 'Master Circular on Establishment of Liaison /Branch/ Project Offices in India by Foreign Entities' bearing reference no. 7/2015-16 dated 01 July 2015 (Master Circular no. 7/2015-16 dated 01 July 2015'). 5.4 In view of the submissions made by the applicant, we take up the three revised questions raised by the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (e) provision by a club, association, society,................. , (f) admission, for a consideration, of persons to any premises, (g) services supplied by a person as the holder of an office .................; (h) services provided by a race club ................., and (i) any activity or transaction undertaken by the Central Government,................. 5.5.3 From the submissions made, we find that that for the purpose of operating the LO in India, the HO outside India assists in support of human resources, recruit employees in India in order to launch the LO operations in India, IT support to set up necessary infrastructure, advise on any accounting, internal control processes, project coordination, and other management guidance for the C4IR India Management team and the said activities are in relation to setting up and administering of the LO office and the RBI permissible activities that the applicant undertakes viz. liaising in nature and does not involve any business activities. 5.5.4 For the said activities undertaken by the Head Office located abroad, no consideration is paid by the applicant to the Head Office. Since the liaison office is restricted under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and approval of the RBI. The applicant has clearly submitted that their activities consists of liaising and acting as a communication link for their Head Office and nothing else. During the course of the personal hearings it was also submitted by Shri Prasad Paranjpe, their authorized representative that, they were not undertaking any business or commercial activities. Further, the said notification also defines a 'Liaison Office' as "a place of business to act as a channel of communication between the Principal place of business or Head Office by whatever name called and entities in India but which does not undertake any commercial /trading/ industrial activity, directly or indirectly, and maintains itself out of inward remittances received from abroad through normal banking channel." 5.5.9 In view of the above we find that the applicant is not undertaking any 'business' as defined under Section 2(17) of the CGST Act and therefore the activities/services received by the applicant from its HO cannot be said to be in the course or furtherance of its business and hence cannot be considered as a supply under Section 7 of the CGST Act, 2017. 5.5.10 In view of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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