TMI Blog2022 (5) TMI 964X X X X Extracts X X X X X X X X Extracts X X X X ..... th the Manager and Place of Supply both being in non-taxable territory, subject transaction is not an import of service as place of supply is outside India. GST is not leviable on subject transaction under RCM by AGEL. - GUJ/GAAR/R/2022/30 - - - Dated:- 11-5-2022 - ATUL MEHTA AND ARUN RICHARD, MEMBER Present for the applicant : Shri Ankit Shah, Vice President (Finance), Shri Gopal Chosla, General Manager, Shri Sachin Agarwal, Associate Manager, Shri Vishal Agarwal, Advocate Brief facts: 1. M/s. Adani Green Energy Ltd. (for the sake of brevity referred to as AGEL ) submitted that it requires substantial working capital to undertake its supplies and for this purpose it has raised USD 750 million by issuing Senior Secured Notes (Notes) carrying interest coupon of 4.375% due for redemption in 2024 in terms of Subscription Agreement dated 1st September 2021 entered into with Axis Bank Limited, Singapore and others for acting as Managers. All the Managers do not have any establishment in India and have been incorporated outside India and undertake business from their establishment outside India. A copy of the Subscription Agreement was submitted. 2. AGEL submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es the process of book building by informing potential investors about the coupon rate at which the issuer intends to offer the Notes. For this purpose, the Managers undertake a gamut of activities viz. scheduling meetings between the issuer and the investors, arrange road shows for prospective investors, liasoning between investors and the issuer, communicate with investors, collect proceeds of the subscription and transfer the same to the Note Trustee for payment to the issuer etc. The Manager also solicits counter offers from investors who are willing to invest in the issue. The offers and counter-offers are recorded in Bloomberg and then aggregated and negotiated by the Manager between the investors and the issuer. On basis of the offers received, the issuer communicates the final coupon rate. After which, the Manager seeks the final offer from potential investors and then the issuer issues a Term Sheet. The Manager proceeds to confirm the subscription amount on basis of the confirmations from the investors. Only after such confirmation, the Subscription Agreement between the Manager and the issuer is signed. 6. AGEL submits that it is only to comply with the SEC requirement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tends to offer the Notes for subscription, solicit counter offers from investors who are willing to invest in the issue, record the offer on Bloomberg, aggregate the offers and counter-offers and negotiate between the investors and the issuer for finalizing the coupon rate. The Managers were also to schedule meetings between the AGEL and the investors, arrange road-shows for prospective investors, liaison between investors and the AGEL, communicate with investors, collect proceeds of the subscription and transfer the same to the Note Trustee for payment to the AGEL, ensure that the Notes are issued by the Note Trustee to the investor, etc. These activities fall squarely within the definition of intermediary qua the services of arranging for potential subscribers to the Notes issued by the AGEL. b. It is submitted that CBIC has also issued Circular No. 159/15/2021-GST dated 20.09.2021 clarifying the scope of intermediary in terms of which the activity undertaken by the Managers clearly falls within the ambit of an intermediary. 10. AGEL submits that for there to be a supply leviable to tax under Section 5 of the IGST Act, there has to be an inter-state supply of goods or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AGEL under the reverse charge mechanism. 18. AGEL submits that though the real purport of the transaction is one as explained in the facts above, however, only with a view to comply with the provisions of SEC, the Managers technically purchase the securities and resell the same to the investors. Accordingly, if one does not go by the substance of the transaction, then the same is a transaction for purchase and sale of securities, which is outside the scope of GST. Consequently, the amount nomenclated as fee, paid to the Mangers, is nothing but a discount offered to the Mangers on the face value of the security, for their agreeing to initially purchase the Notes, on which no GST is leviable. Question on which Advance Ruling sought 19. Whether the Applicant is liable to discharge GST under the reverse charge mechanism in respect of the services of arranging for subscription supplied to the Applicant, by the Managers located in the non-taxable territory? Personal Hearing 20 Shri Ankit Shah, Vice President (Finance), Shri Gopal Chosla, General Manager, Shri Sachin Agarwal, Associate Manager, Shri Vishal Agarwal, Advocate attended the Virtual Hearing on 22-3-22 and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efer to Section 2(13) IGST Act, 2017, reads as follows: 2(13) intermediary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account; 25.1 The words facilitate/ arrange are not defined in CGST Act. We refer to Merriam Webster Dictionary for meaning of words facilitate and arrange: Facilitate: to make (something) easier, to help cause (something); to help (something) run smoothly and effectively. Arrange : to bring about an agreement or understanding concerning; to make preparations, to move and organise (things) into a particular order or position, to organise the details of something before it happens, to plan (something). 26. We find that AGEL issues Notes which are subscribed by Investors. We find that the Senior Secondary Notes issued by AGEL are in the nature of securities. The main supply of Notes is between AGEL and investors both acting as Principals and the Manager is supplying ancillary supply of arranging the mai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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