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TMI Blog2023 (11) TMI 870X X X X Extracts X X X X X X X X Extracts X X X X ..... urs - Conseils) which is an International Standards Organization for Consulting Engineering & Construction Technology]. As per the prevalent Indian practices, applicant has made minor change in sub-clause 20.6 of the bid document dated 14.5.18. 4. A conjoint reading of FIDIC's GCC with applicant's amended sub- clause 20.6, reveals that,- * firstly, it provides for an internal dispute resolution mechanism wherein for any dispute a Dispute Adjudication Board (DAB) is constituted: * DAB after hearing the parties, adjudicates & passes an order; * in terms of clause 20.X of GCC, DAB is deemed not to be acting as an Arbitrator: * if either of the party is not satisfied with the decision of DAB. they may within 28 days after receiving the decision, give notice to the other party of its dis-satisfaction; * that if such a notice is not given within stipulated time period, decision of DAB will become final & binding upon both the parties; * that where either of the party has given notice citing dis-satisfaction, dispute then approaches for Arbitration wherein clause 20.5 states that both parties shall try to settle the dispute amicably before the commencement of arbitrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontractor. 7. In the event where the challenged order/award is passed in favour of the contractor, the Applicant will be liable to pay the remaining 25% of the amount along with any remaining balance in the escrow account. 8. Even though the applicant has parted away with 75% of the disputed amount required to be paid in terms of the DAB decision/arbitral award, it is the applicant's case that the same has not been finally 'paid' to the contractor but only 'deposited' in an escrow account in accordance with directions of NITI Aayog. 9. The applicant further submitted that in terms of section 7 of the CGST Act, 2017, with respect to the transaction in question, it cannot be said that there is any supply of goods/services since there is no sale, transfer, barter, exchange or disposal made or agreed to be made for consideration by a person in the course or furtherance of business. 10. In view of the foregoing, it is the Applicant's claim that he is in complete control of the amount so deposited in the escrow account since the contractor has to obtain his permission to withdraw; that the amount so withdrawn has to be appropriated as per his instruction. Furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the extent of 75% amount deposited in escrow account, in absence of any actual supply and pending final outcome of litigation; * if the applicant succeeds in litigation, say after a period of 3 years, contractor will not be able to either cancel the invoice by issuing credit note (as the time limit for issuance of credit note & consequently; * adjust/reduce GST liability will be lapsed in terms of Section 34(2) of the Act) or seek refund of taxes already paid on 75% amount deposited in escrow account (as time period of claiming refund under Section 54(1) will also lapse by then. 16. In view of the foregoing, vide the aforesaid application, the applicant has sought advance ruling on the below mentioned question viz,- 1. Whether the amount deposited by the applicant (75%) in escrow account against bank guarantee pending outcome of the further challenge against Arbitral Award or dissatisfaction against DAB decision, is liable to GST under the provisions of CGST Act, 2017? 2. If the answer to first question is in affirmative, then, what shall be the 'time of supply' when tax on such DAB/arbitral award is payable to Government exchequer, i.e., whether tax is payabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Application from authorized person of the applicant. (b) Report in terms of proviso to sub-section (2) of Section 98 of the Act. Whether the questions/issues raised in the application arc already pending or decided on any proceedings in the case of the applicant. Reply : As per available records, the questions/ issuers raised in the application are neither already decided nor pending against the applicant. (c) Comments on Merits : Reply : On the issue of applicability of GST of the amount of deposit of 75 % into escrow account of the applicant, it appears the GST should be applicable on the portion of amount deposited into escrow account till final outcome of the light of Section 7 of GST Act, 2017 within the Scope of Supply; the expression of supply includes - which states as under: "(a) all forms of supply of supply of goods or services or both such as Sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business." In view of the statutory provisions of the laws, the application of the Advance Ruling sought by the applicant for deposit of 75% amount in to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration. Explanation -For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another;] (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; 3[****] (c) 4[****] 5[(1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II.] (2) Notwithstanding anything contained in sub-section (1),- (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant, though he has deposited the amount in an escrow account, also does not term this as a consideration for the supply since he is agitating his ease, feeling aggrieved by the decision rendered against him. In view of the foregoing, we hold it to be outside the scope of 'consideration' as defined under section 2(31) of the CGST Act, 2017. 26. We now examine whether it is a supply. Supply, in terms of section 7, includes all forms of supply of goods/services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made /agreed to be made for a consideration by a person in the course or furtherance of business. Surely this payment of 75% into an escrow account would not fall within the ambit of supply to be leviable to CGST in view of our finding in respect of consideration as recorded in the previous paragraph. 27. We find that the dispute here is not whether consequent to the DAB/arbitral award, the change, if any, in the value pertaining to the supply, etc., would be leviable to GST. What is in dispute specifically is whether the 75% amount deposited by the applicant qua the O.M. of NITI Aayog, with an intention to help the construction se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsent of the applicant; and [c] that the amount can be withdrawn subject to the condition that the supplier [contractor] provides a BG for the said amount. 33. The above finding is also subject to a rider that the moment the Supplier [contractor] finally succeeds in the dispute/the applicant accepts the adverse decision, this ruling would be rendered infructuous. This finding is in operation only for a limited period when the supplier [contractor] has not succeeded in the litigation/the applicant has not accepted an adverse decision & the supplier uses the amount lying in the escrow account subject to his furnishing a BG. It also goes without saying that the department reserves every right to recover any interest due on such amount for the delay in payment of GST, if any, on account of the non acceptance of adverse decision of the DAB/Tribunal. 34. Since on the first question we hold in negative, the second and the third question is rendered infructuous. We therefore propose to give no findings in that regard. In the light of the above, we rule as under: RULING 1. The amount deposited by the applicant (75%) in escrow account against bank guarantee pending outcome of the fu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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