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TMI Blog2024 (2) TMI 1121X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts paid by their clients are paid through Pay Pal Account in US Dollars and Paypal being a payment gateway receives the amount in US Dollars and the same gets credited to CITI bank (Paypal's bankers) and CITI bank transfers the amount to HDFC bank, which is the Appellant's bank in INR after deduction of their service charges. 6(i).In this regard, the amended Para 2(k) of the Board's Circular No. 88/07/2019-GST,dated 01-02-2019 is reproduced below: 3.2 Amended Para 2(k) Realization of export proceeds in Indian Rupee : Attention is invited to para A(v)Part-I of RBI Master Circular No. 14/2015-16, dated Ist July, 2015 (updated as on 5th November, 2015), which states that "there is no restriction on invoicing of export Contracts in Indian Rupees in terms of the Rules, Regulations, Notifications and Directions framed under the Foreign Exchange Management Act, 1999. Further, in terms of Para 2.52 of the Foreign Trade Policy (2015-2020), all export contracts and invoices shall be denominated either in freely convertible currency or Indian rupees but export proceeds shall be realized in freely convertible currency. However, export proceeds against specific exports ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scertained to establish that the recipient of the services are located outside India and thus the condition number (ii) mentioned in Section 2(6) ibid has not been established in these cases. Thus, in the absence of invoices, the claims can certainly not be entertained. 7(i).The Appellant themselves have stated that they had submitted the following documents before the Respondent viz. RFD-01A, LUT, Letter of declaration, proof of ITC (invoice copies), copy of GSTR2A, copy of electronic credit and debit ledgers, copy of Statement 3 and copy of FIRC advice from CITI bank. Thus, it is clear that they had not provided copies of tax invoices, if any, raised by them. Also they had not produced any FIRC or BRC copies since no invoices had been raised by them. The copies of FIRC advice submitted by them from CITI bank cannot be considered as a valid document in lieu of the FIRC since it is only an FIRC advice and cannot be treated as FIRC. In fact, the bank themselves have given this declaration clearly stating that "This is an Advice and Not to construed as an FIRC". The copies of ITR/Balance sheet filed by the Appellant also, unfortunately does not come to their rescue in these cases. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equity and futures market, trading stocks, options based on stock and share markets. 4. The petitioner has remitted Goods and Service Tax (GST) for the services rendered to its clients/customers. According to the petitioner, predominantly all the clients/customers of the petitioners are from the U.S and the neighboring countries. 5. Under these circumstances, the petitioner has treated the above supply of services rendered to its clients/customers as "export of service" within the meaning of Section 2(6) of the Integrated Goods and Services Tax Act, 2017. Section 2(6) of the Integrated Goods and Services Tax Act, 2017 reads as under:- 2. In this Act, unless the context otherwise requires,-- (6) "export of services" means the supply of any service when,-- (i) the supplier of service is located in India; (ii) the recipient of service is located outside India; (iii) the place of supply of service is outside India; (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; and (v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clear that Paypal was authorized as the agent of the petitioner to collect the money in foreign exchange. This is clear from the Paypal User Agreement which states as follows: "Paypal acts as an intermediary for receipt of funds from buyers by sellers and does not act as a repository or custodian with respect to such funds. For Export Payment Services, Paypal is only responsible for depositing the export proceeds with the authorised dealer bank. For Domestic Payment Services, PayPal is only responsible for depositing the payments with your designated bank." In this user agreement, "Paypal Service" means the payment gateway processing services offered by PayPal to its users who are resident in India to facilitate receipt of payments from a buyer (either domestic or foreign) for credit into their bank accounts." 10. It is further submitted that the payments were received by the petitioner in accordance with the provisions of the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016 vide Notification No.FEMA 14(R)/2016-RB dated 02.05.2016 issued under Section 47 of the Foreign Exchange Management Act, 2000. A specific reference is made to Regulation 3 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or residence of the buyer. (b) Any other mode of receipt of export proceeds for an export from India in accordance with the direction issued by the Reserve Bank of India to authorized dealers from time to time. (3) Authorised dealers have been permitted to allow receipts for export of goods/software to be received from a Third Party (a party other than the buyer) as per the guidelines issued by the Reserve Bank." 11. The petitioner is a startup company and is in the process of expanding and growing its business. In such circumstances, the petitioner is relying on the tax refund as one of the source of recycling funds in the business. With the limited capital, the petitioner intricately manages its finances. 12. It is submitted that the 1st respondent has erroneously stated that the petitioner has not submitted the invoices pertaining to the said period and dismissed the appeal filed by the petitioner on mere technical ground that the petitioner did not submit export invoices and thereby violated Section 2(6) of the IGST Act, 2017. 13. It is submitted that the petitioner has proven beyond reasonable doubt that the service recipient is outside the country and that the money w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on export of services made on payment of tax under Section 16(4) of Integrated Goods and Services Tax Act, 2017 read with Section 54 of the CGST Act, 2017. 21. The refund claims of the petitioner were rejected by the second respondent vide orders dated 06.11.2019 & .............. on the following two broad categories:- (i) The export proceeds in these cases were received by the petitioner in Indian rupees which was not in accordance with the RBI directions wherein it is stated that export proceeds against specific exports may be realized in rupees provided it is through a freely convertible Vostro account of a non resident bank situated in any country other than a member country of Asian Clearing Union, Nepal or Bhutan. In these cases the petitioner had failed to establish that the amount received in Indian Rupees was through freely convertible Vostro account as stated in the RBI directions. (ii) The petitioner had not produced any export invoices, whereas Section 31 of the CGST Act, 2017 provides that a registered person shall issue a tax invoice and also in case of export of goods or services, the invoice shall carry the requisite endorsements. However, since the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted Goods and Services Tax Act, 2017, the Central Government may specify on the recommendation of GST council and subject to such safeguards and procedures, (i) a class of persons who may make "zero rated supply" on payment of integrated tax and claim refund of the tax so paid; (ii) a class of goods or services which may be exported on payment of integrated tax and the supplier of such goods or services may claim the refund of tax so paid. 29. Section 16(4) of the Integrated Goods and Services Tax Act, 2017 is similar to mechanism prescribed under Rule 18 of the Central Excise Rule, 2002. 30. Section 16 of the Integrated Goods and Services Tax Act, 2017 are reproduced below:- Section 16 of the Integrated Goods and Services Tax Act, 2017 (1) "Zero-rated supply" means any of the following supplies of goods or services or both namely:- (a) export of goods or services or both; or (b) supply of goods or services or both [for authorised operations] to a Special Economic Zone developer or a Special Economic Zone unit. (2) Subject to the provisions of Sub-Section (5) of Section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zero-rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 49 , may claim such refund in [such form and] manner as may be prescribed. (2) A specialised agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947), Consulate or Embassy of foreign countries or any other person or class of persons, as notified under section 55 , entitled to a refund of tax paid by it on inward supplies of goods or services or both, may make an application for such refund, in such form and manner as may be prescribed , before the expiry of 1 [two years] from the last day of the quarter in which such supply was received. (3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period: Provided that no refund of unutilised input tax credit shall be allowed in cases other than- (i) zero rated supplies made without payment of tax; (ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue the order under sub-section (5) within sixty days from the date of receipt of application complete in all respects. (8) Notwithstanding anything contained in sub-section (5), the refundable amount shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to- (a) refund of tax paid on [export] of goods or services or both or on inputs or input services used in making such [exports]; (b) refund of unutilised input tax credit under sub-section (3); (c) refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued, or where a refund voucher has been issued; (d) refund of tax in pursuance of section 77 ; (e) the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person; or (f) the tax or interest borne by such other class of applicants as the Government may, on the recommendations of the Council, by notification, specify. [(8A) The Government may disburse the refund of the State tax in such manner as may be prescribed.] (9) Notwithstanding anything to the contrary cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be paid to an applicant, if the amount is less than one thousand rupees. Explanation.- For the purposes of this section,- (1) "refund" includes refund of tax paid on zero-rated supplies of goods or services or both or on inputs or input services used in making such zero-rated supplies, or refund of tax on the supply of goods regarded as deemed exports, or refund of unutilised input tax credit as provided under sub-section (3). (2) "relevant date" means- (a) in the case of goods exported out of India where a refund of tax paid is available in respect of goods themselves or, as the case may be, the inputs or input services used in such goods,- (i) if the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded, leaves India; or (ii) if the goods are exported by land, the date on which such goods pass the frontier; or (iii) if the goods are exported by post, the date of despatch of goods by the Post Office concerned to a place outside India; (b) in the case of supply of goods regarded as deemed exports where a refund of tax paid is available in respect of the goods, the date on which the return relating to such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tablishments of a distinct person in accordance with Explanation 1 in Section 8." 34. There is no dispute that the petitioner is providing services of its clients through its online portal to customers/client. The payments for the services provided by the petitioner are routed through an intermediary namely Paypal with whom the petitioner has an arrangement. 35. As an intermediary, Paypal directly credits the amounts received in Indian currency directly into the petitioner's account. As far as export proceeds, the amounts are received in convertible foreign exchange by the said intermediary namely Paypal. The amounts are first credited into its account with CITI Bank of the said intermediary namely Paypal. Thereafter, amounts in Indian currency are transferred from the intermediaries CITI Bank account to the petitioner's account with HDFC Bank after deduction of its service charges. 36. The routing of the payment by the intermediary viz., Paypal from its account in CITI Bank to the petitioner's own account with HDFC Bank in Indian Rupees is in accordance with the provisions of the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016 as notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from India, receipt shall be made in a currency appropriate to the place of final destination as mentioned in the declaration form irrespective of the country or residence of the buyer. (b) Any other mode of receipt of export proceeds for an export from India in accordance with the direction issued by the Reserve Bank of India to authorized dealers from time to time. (3) Authorised dealers have been permitted to allow receipts for export of goods/software to be received from a Third Party (a party other than the buyer) as per the guidelines issued by the Reserve Bank." 37. Regulation 3(2) of the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016 makes it clear that in respect of an export from India, receipt shall be made in currency appropriate to the place of final destination as mentioned in the declaration form. 38. As per Regulation 3(2)(b) of the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016 any other mode of receipt of export proceeds for an export from India in accordance with the directions issued by the Reserve Bank of India to authorized dealers from time to time. 39. Thus, if payments are routed through ..... X X X X Extracts X X X X X X X X Extracts X X X X
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