In re 63 Ideas Infolabs Private Limited (GST AAR Gujarat)
M/s 63 Ideas Infolabs Private Limited, a GST-registered company based in Ahmedabad, Gujarat, operates a wholesale business in agricultural produce and staples across 16 states and UTs in India. The company has developed a supply chain management (SCM) platform accessible via its website and mobile app, connecting farmers, producers, and brands with retailers to facilitate bulk sales of agricultural products. The applicant proposed to enter into an agreement with an overseas client to customize its SCM platform to meet specific requirements and grant a perpetual license for the client’s use, while retaining ownership of the proprietary platform. The consideration for the transaction would primarily be received in foreign exchange, and, in the event of any failure, the applicant would have the option to receive non-voting, irredeemable preference shares of the foreign entity instead of cash.
The applicant sought clarification from the Gujarat Authority for Advance Ruling (AAR) on whether the receipt of such preference shares qualifies as “receipt of consideration” under Section 2(6)(iv) of the IGST Act, 2017. This question was consequential because it would determine whether GST liability arises on the supply of services, including platform customization and licensing, to the overseas client. The applicant relied on various regulatory frameworks to support their position. They cited the Foreign Exchange Management Act (FEMA), 1999, and the Overseas Investment (OI) Rules, 2022, which permit Indian entities to receive foreign equity capital, including preference shares, subject to certain conditions. Rule 2(e) of the OI Rules explicitly defines ‘equity capital’ to include irredeemable or fully convertible instruments, covering the type of preference shares proposed to be received.
