TMI Blog2022 (12) TMI 507X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Company). Thus the applicant has submitted that it was eligible to quote for the tender/contract. There is a contradiction in the submissions made in as much as in para 2D it has been submitted that the applicant was eligible to quote for the tender/contract on the basis of the credentials of IVL Sweden whereas in para 8 a it has been made clear that it was IVL Sweden which has bid for the project and the applicant, as a wholly owned subsidiary, was only supposed to execute the project - the applicant would execute the project only on the credentials and expertise of the IVL Sweden which would further imply that, without the transfer of the expertise by IVL to Sweden, the contract could not be performed. The application is silent as to how such expertise is transferred from IVL Sweden to the applicant without any supply of services or goods or both. The applicant is the one which is performing the service at the ground level and the entire support for such service is being provided by IVL Sweden who has obtained the contract on the basis of its own credentials and work experience and it is a fact that the applicant cannot provide the services under the contract without rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Background of the Applicant: 2.1 IVL Sweden is a foreign company incorporated under the laws of Sweden and IVL India Environmental R D Pvt Ltd. ('IVL India'/'The Applicant') is a company incorporated under the laws of India. 2.2 The Municipal Corporation of Greater Mumbai ( MCGM ) had invited bids for contract of Project Management Consultancy Services for four locations which are Versova and Malad Influent Pumping Station under MSDP Stage -II, Mithi River Rejuvenation Project (Package I, II, III IV), Bandra WWTP under MSDP Stage - II, Worli WWTF under MSDP Stage - II pursuant to which IVL Swedish Environmental Research Institute Limited (IVL Sweden) applied on the basis of their credentials, work experience and various certifications received from different government organizations as required in the bidding el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al site conditions suggest modifications, if required or deemed appropriate. If any realignment, redesign/modification, any additional design for completion of the project is required, it will be done by the Contractor under the guidance of PMC. PMC shall also review, vet and approve the construction, health and safety Programmes submitted by the contractor. Scrutinize the contractor's detailed work program, suggest modifications, if any, to the program after a careful study and ensure the contractor complies with the program; and the same shall be vetted and approved by PMC. Scrutinize and/or review contractor's superintendence, personnel and suggest modifications, if any; Scrutinize mobilization of the Contractor's Equipment to ensure the nominated plant equipment is delivered to the site in accordance with the contractor's program and that permits where necessary, are obtained in a timely manner including testing of the equipment based on best international/national practices in conformity with Indian or international codes as specified in the contract; Scrutinize the construction methods proposed by the contractor for carrying out th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyer's Requirement. The construction will commence only on the receipt of Good for Construction certificate from the PMC. Review all concrete mix designs proposed by the contractors approve/ suggest modifications, if any; in the mix design, laying methods, sampling, testing procedure, quality control measures, to ensure required standard and consistency in quality during the commencement of work; Supervision and Contract Management (On Civil, Mechanical/ Electrical/ Instrumentation work etc.) including techno legal advice in connection with the work. Monitor closely and regularly the progress of work and advice the contractor about corrective measures and advise the client on progress of work at site on monthly basis. Maintain a day-to-day diary recording all events related to the works. PMC shall assist the Contractor for Coordination with various departments of the corporation, other Government Agencies for any works having bearing on the works under these services. Provide any or all of the supplementary services as per directions of the Employer; PMC shall forward one copy of all the correspondences made with the Contractor, any othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and DLP shall be the responsibility of the contractor and the PMC shall assist the contractor for the same. Study of environmental clearance obtained by the Employer. If any impact is foreseen, guide the Employer in resolving the same. To assist the Contractor during the installation commissioning which includes pre commissioning tests, Site Acceptance tests or any other tests required as per the Conditions of the Contract. All the tests are to be got approved by the PMC before commencement; Prepare, review, approve and recommend the Acceptance Certificates/ Completion Certificate/ Taking-Over Certificate to the Employer for issue of these certificates; Determine deficiencies in works during DB and O M period; prepare, approve and issue the final acceptance document to the Contractor; Review and approve 'as-built' drawings prepared by the contractor to be submitted to the Employer for issue; Conduct training of MCG M's personnel on O M; It shall be mandatory on PMC to follow all the instructions given by Employer. Minimum Qualifying condition Joint ventures Sole Proprietary firms are not permitted. However, wholly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach non-key staff shall be submitted monthly. STATEMENT CONTAINING APPLICANT'S INTERPRETATION OF LAW AND/OR FACTS Relevant Legal Provisions and Notifications: In order to elucidate the levy of GST upon the instant transaction, reference shall be drawn to relevant statutory provision(s) and notification(s). Relevant portions/extracts of such provision(s) and notification(s) have been reproduced here under for ready reference: 1. The levy of tax under the GST regime comes from Section 9 of the Central Goods and Services Tax Act, 2017 ('CGST Act') upon all intra-states supplies and Section 5 of Integrated Goods and Services Act, 2017 ('IGST Act') upon all inter-state supplies. 2. It is imperative to note here that under Section 20 of the IGST Act, the specific provisions of CGST Act, such as scope of supply, time and value of supply etc. have been made applicable to IGST Act as well. 3. 'Service' is defined under Section 2(102) of the CGST Act as anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the 'Project Management Service' on its own capacity. The aforesaid contract is awarded to IVL India, on the basis of credentials/expertise of the Parent Company. Thereby, as mandated by MCGM, both IVL India and the IVL Sweden have jointly signed the contract with MCGM. 3. Therefore, it is evident that IVL India is not receiving any services from IVL Sweden. IVL Sweden is providing services to the ultimate recipient i.e. MCGM through IVL India. 4. Hence, in the absence of the underlying service being provided by IVL Sweden to IVL India The question of paying IGST under reverse charge in the hands of IVL India does not arise; The question of evaluating applicability of para 4 of Schedule 1 to the CGST Act does not arise. 5. The entire crux of the aforesaid transaction is triggered on account of fulfilling various conditions stipulated by MCGM. The fulfilment of the aforesaid conditions lead to creating an entity in India i.e. IVL India. MCGM was always aware that the actual service provider or in other words the person who has the expertise to provide 'Project Management Service' is IVL Sweden. IVL India was acting as a sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e required to be imported for smooth execution of the project, then IVL Sweden shall be solely responsible to import those goods, which is impossible for IVL Sweden since Import export license/code is only issued to Indian residents or establishments those are registered in India. Hence, IVL Sweden had to incorporate the Indian entity to mitigate the risk of delays if a requirement of any small spare would arise in future and the project can be smoothly executed. d. Requirement of GSTIN: The contract clearly mentions that PAN card, Bank details GST number shall be provided to MCGM in order to get registered obtain a Vendor code. Further, if IVL Sweden had to execute the project itself, it would not have been able to obtain this vendor code execution of contract would have been impossible without obtaining this number. Hence, IVL Sweden had to incorporate IVL India in order to obtain GST number and further obtain the MCGM Vendor code number. e. Back office support requirement: As per clause i) Contract Administration under ii) Miscellaneous activities of the general conditions of the contract, there is a specific requirement that the consultants should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded solely on the basis of the credentials and work experience of IVL Sweden. This further reiterates the fact that the main consultant of this contract is IVL Sweden not IVL India. Hence, the benefit of the exemption notification should also reach to IVL India. d) BG by IVL Sweden: As per the SI.No. 1 of clause 8 'Mode of Payment' of the bidding documents, the bidder is required to submit an advance bank guarantee of 10% to claim the advance payment. IVL Sweden furnished/submitted the advance bank guarantee to MCGM in order to fulfil the requirement and claim the advance payment. Although advance was paid to IVL India due to various other clauses, but guarantees were given by IVL Sweden which means that the ultimate responsibility of the performance of this contract shall remain with IVL Sweden. This also construes that the main consultant to this contract is IVL Sweden. e) Work to be performed by IVL Sweden: The project has been granted on the credentials, work experience and various certifications from different organisations of IVL Sweden and hence, ultimate execution also lies with IVL Sweden, either by IVL India or by executing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bills make it clear that the services are for UNICEF though the bill is raised through M/s Lintas India (P) Ltd. We find in such situation, denial of exemption under Notification 16/2002-ST will not be sustainable. Accordingly, the claim of the appellant is accepted for such exemption. In present case IVL India is only performing their duty which is limited to raising the invoice to MCGM and collect payments of that invoice and pay back to the IVL Sweden. Hence, IVL India is not performing the contract, it is in fact, IVL Sweden who is performing the contract. b) The Maharashtra appellate Authority for advance ruling for goods and services tax in the case of M/s Shree Construction 2019 (3) TMI 1567 - APPELLATE AUTHORITY FOR ADVANCE RULING MAHARASHTRA, has held that: There is no relevance for the provider or recipient of the services in this case. If the services fulfil the criteria of the activities/services having description contained in the above item (v), then it is immaterial who is providing the services to whom c) The authority of advance rulings in Karnataka Goods and service tax in the case of M/s QUATRO RAIL TECH SOLUTIONS LIMITED - 2019 (10) TM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to maintain its financial books of accounts in a manner which would reflect a true any fair view of the business of the Company in India. Thus, in order to keep record of the expenses of salary cost of Expat employees working from India, the Project Office makes an accounting entry in its financial books of accounts in India for the salary cost of the Expat employees even though the salary is paid by the Head Office. We also observe that the PAN and TAN has been allotted to the Project office in the name of the Head Office situated abroad, by the Income Tax Authorities. Hence we find that a project office in an extension of the foreign Head Office, and as in the subject case shall carry on all activities relating and incidental to execution of the Project in India. Thus we find that the expat employees are employees of the employer i.e. the Head Office and since the Project Office is an extension of the Head Office, there is a relation of employer and employee between the Project Office and the expat employees. 5.9 For GST to be applicable on the accounting entry made for the purpose of Indian accounting requirements in the books of accounts of Project Office for sala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ironmental R D Pvt Ltd., has submitted that it is a company incorporated under the laws of India and is also a wholly owned subsidiary of a foreign company incorporated under the laws of Sweden, namely, IVL Swedish Environmental Research Institute Limited (hereinafter referred to as IVL Sweden ). 5.2.2 As per their submissions IVL Sweden was successfully awarded the tender for 'Project Management Consultancy Services', by the Municipal Corporation of Greater Mumbai (MCGM), for projects at four locations in Mumbai as mentioned in the subject application. The tender was awarded on the basis of their credentials, work experience and various certifications received from different government organizations as required in the bidding eligibility criteria 5.2.3 Since as per the bidding eligibility criteria, the contract could only be executed by a wholly owned subsidiary (WOS) of IVL Sweden, the applicant company was incorporated in India in order to execute the said contract and MCGM issued the Letter of Award ('LoA') in the name of the 'IVL Sweden'. 5.2.4 The applicant has submitted that, alongwith IVL Sweden it has executed a contract (as required und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xecute the project only on the credentials and expertise of the IVL Sweden which would further imply that, without the transfer of the expertise by IVL to Sweden, the contract could not be performed. The application is silent as to how such expertise is transferred from IVL Sweden to the applicant without any supply of services or goods or both. 5.4 In para 9 of the submissions it has been stated that IVL India has only been incorporated to meet the contractual obligations and without IVL Sweden's support, it would not have been possible for it to execute the contract. The importance of IVL Sweden is clearly underlined and stated by the applicant, who on its own can not provide service to MCGM. 5.5 In para 10 it has been submitted that even after incorporation of IVL India by IVL Sweden, the entire obligation, performance, and responsibility shall still remain in the hands of IVL Sweden. 5.6 The entire submissions made by the applicant points out to the fact that the ultimate responsibility of the performance of the contract shall remain with IVL Sweden. It has been submitted that the main consultant to this contract is IVL Sweden. The applicant has concluded by stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant from IVL to further perform its services under the contract, for which monetary proceeds flow from the applicant to IVL Sweden. 5.10.1 As per Section 2(11) of the Integrated Goods and Service Tax Act, 2017, Import of services means the supply of any service, where: The supplier of service is located outside India; The recipient of service is located in India; and The place of supply of service is in India. 5.10.2 We find that in the subject case other than the service provided by the applicant to MCGM, there is a very definite service being provided by IVL Sweden, located outside India - on account of its experience, credentials and expertise - to the applicant, located in India that enables the applicant to perform under the contract. Further, there is no doubt that the services are being supplied in taxable territory i.e. in India. Therefore, in view of Sr. No. 1 of Notification No. 10/2017 Integrated Tax (Rate) dated June 28, 2017, since support services are being supplied by IVL Sweden, located in a non-taxable territory to the applicant the whole of integrated tax leviable under section 5 of the Integrated Goods and Services Tax Act, shall be paid on rever ..... X X X X Extracts X X X X X X X X Extracts X X X X
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