In re M/s. Directorate of Skill Development (GST AAR Madhya Pradesh)
If the service is imported for the purpose of business or commerce even by the Govt then exemption would not be available and Govt need to pay GST under Reverse Charge. This can be further substantiated as per Q No 14 of GST Sectorial Series on Government Service.
Question 14: Would services received by Government, a local authority, a governmental authority from a provider of service located outside India be taxable?
Answer: No tax is payable on the services received by the Government / local authority/governmental authority from a provider of service located outside India. However, the exemption is applicable to only those services which are received for the purpose other than commerce, industry or any other business or profession. In other words, if the Government receives such services for the purpose of business or commerce, then tax would apply on the same.
Read Also AAAR: No GST on Service by service provider located in a non-taxable territory for Skill Development project of Govt
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, MADHYA PRADESH
PROCEEDINGS
(Under sub-section (4) of Section 98 of Central Goods and Service Tax Act, 2017 and the Madhya Pradesh Goods & Service Tax Act, 2017)
1. The present application has been filed u/s 91 of the Central Goods & Services Tax Act, 2017 and MP Goods & Services Tax Act, 2017 (hereinafter also referred to CGST Act and MPSGT Act respectively) by M/s. Directorate of Skill Development (hereinafter referred to as the Applicant), registered under the Goods & Services Tax.
2. The provisions of the CGST Act and MPGST Act are identical, except for certain provisions. Therefore, unless a specific mention of the dissimilar provision is made, a reference to the CGST Act would also mean a reference to the same provision under the MPGST Act. Further, henceforth, for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST or MP GST Act would be mentioned as being under the GST Act.
3. BRIEF FACTS OF THE CASE:
1. M/s. Director of Skills Development Department of Technical Education Skill Development and Employment Govt of Madhya Pradesh (hereinafter referred to as ‘the Applicant’), having their registered office at Global Skill Park ITI Building Raisen Road Govindpura Bhopal Madhya Pradesh is unregistered in GST.
2. The project for the Establishment of Centre for Occupational Skills Acquisition within the Global Skills Park (herein after referred as GSP) in Bhopal, Madhya Pradesh was awarded to Directorate of Skill Development, Department of Technical Education, Skill Development & Employment, Government of Madhya Pradesh.
3. The said Project will assist the Government of Madhya Pradesh (GOMP) in transforming its technical and vocational education and training (TVET) system to create a skilled workforce that meets the evolving development needs of the state.
4. The project will establish a new advanced TVET Institute of international standards to introduce high quality, technology oriented skills training for the state’s priority sectors.
5. ITE Education Services Pte. Ltd, a Singapore based Consultancy Company having its registered office at ITE Headquarters, Blk A, A2-01, 2 Ang Mo Kio Drive, Singapore 567720 is to provide certain Consulting Services to the Directorate of Skill Development for the said Project.
6. An agreement was executed on 28.09.2018 between Directorate of Skill Development, Department of Technical Education, Skill Development & Employment, Government of Madhya Pradesh (“Client “) and ITE Education Services Pte. Ltd, a Singapore based Consultancy Company.
7. The Project is to be executed by the ITE Education Services Pte. Ltd, Singapore between Nov 2018 to May 2023 the total consideration has been decided to be USD $ 38,12,740/- .Which is to be paid in 11 installments.
8. In this regard applicant reproduce the Clause 38.1 of the Agreement describing the consideration agreed between the parties: –
9. The Contract price is US $ 3,812,740 (inclusive of Consultant country taxes). The lump sum amount is exclusive of provisional sums and contingency, which will be covered separately under the project, if required.
10. The lump sum amount is exclusive of all Indian taxes, levies and duties imposed by the Applicable Law. If the Applicable Law requires any Indian taxes, levies or duties to be paid, the Consultant shall be entitled to invoice the Client for a higher amount such that, after the payment/witholding of the relevant Indian taxes, levies or duties, the Consultant shall receive the original amounts state in Appendix C.
11. The GSP would benchmark quality skills training institutions in order to arrive at desired competency standards with an appropriate assessment mechanism and offer market responsive employability skills training across various learner segments leading to –
a. Wage Employment – Regional, National & International
b. Self-Employment
c. Group Entrepreneurship
d. Incubation of ancillary start-ups
12. The Global skill park will impart Training to 10,000 students every year by trainers of international standard. The park will function on the spirit of ‘With Industry-For Industry’ and the Trained students will be given placement in India and outside India at international level.
13. Some Key features of GSP: –
a. International Training Method with On-Job trainings.
b. World Class Industrial Machinery, Tools & Equipment’s.
c. State of art classrooms, workshops and other facilities for students.
d. Partnership with Institute of Technical Education Singapore for course curriculum and teacher training.
14. Global Skills Park (GSP), is a new-age world class technical training institution for providing career cluster curriculum skilling courses and opportunities of overseas employment, is getting established in Bhopal, Madhya Pradesh, India.
15. GSP will provide world-class technical training in precision engineering sector with six career oriented trades namely Conventional Lathe, Conventional Milling, CNC Milling, CNC Turning, Surface Grinding and Machining and Metrology with soft skills add on courses like IT Skills and Communication Skills.
16. As the state of Madhya Pradesh is developing state of India and mainly dependent of agricultural activities hence government wants to stimulate the industrial growth in the state of MP.
To promote this objective skilled manpower is the need of the hour keeping this objective in mind the Global skill Park is being established. There is no commercial or business motive behind establishment of this GSP hence the activity being performed by the Directorate of Skill development is the execution of functions entrusted to the government hence it cannot be considered as Business Activity.
4. QUESTIONS RAISED BEFORE THE AUTHORITHY:-
The applicant desired to know, whether the services received by it from a provider of service located in a non taxable territory would attract the provision of sec 5(3) read along with Notification No 10/2017 IT(R). In other words, whether applicant is liable to pay tax under reverse charge mechanism on the transaction mentioned above?
5. CONCERNED OFFICER’S VIEW POINT:
The Concerned Officer Submitted that Applicant shall be liable to pay IGST on import of services under Reverse Charge Mechanism in terms of Notification No. 10/2017 dated 28th June 2019- IT (Rate) and Notification No.8/2017 dated 28th June 2019 – lT(Rate).
6. RECORD OF PERSONAL HEARING:
Shree Navneet Garg , CA of the applicant for personal hearing .He reiterated submissions already made in the application. The argument in brief are as follows-
6.1 Directorate of Skill Development (herein after referred as Applicant) is part of Department of Technical Education, Skill Development & Employment, Government of Madhya Pradesh hence the applicant is a government department.
6.2 The project for the Establishment of Centre for Occupational Skills Acquisition within the Global Skills Park in Bhopal, Madhya Pradesh was awarded to Directorate of Skill Development, Department of Technical Education, Skill Development & Employment, Government of Madhya Pradesh.
6.3 The said Project will assist the Government of Madhya Pradesh (GOMP) in transforming its technical and vocational education and training (TVET) system to create a skilled workforce that meets the evolving development needs of the state.
6.4 The project will establish a new advanced TVET Institute of international standards to introduce high quality, technology oriented skills training for the state’s priority sectors.
6.5 ITE Education Services Pte. Ltd, a Singapore based Consultancy Company having its registered office at ITE Headquarters, Blk A, A2-01, 2 Ang Mo Kio Drive, Singapore 567720 is to provide certain Consulting Services to the Directorate of Skill Development for the said Project.
6.6 An agreement was executed on 28.09.2018 between Directorate of Skill Development, Department of Technical Education, Skill Development & Employment, Government of Madhya Pradesh (“Client “) and ITE Education Services Pte. Ltd, a Singapore based Consultancy Company.
6.7 The Project is to be executed by the ITE Education Services Pte. Ltd, Singapore between Nov 2018 to May 2023 the total consideration has been decided to be USD $ 38,12,740/- .Which is to be paid in 11 instalments.
6.8 In this regard we would like to reproduce here the Clause 38.1 of the Agreement describing the consideration agreed between the parties: –
The Contract price is US $ 3,812,740 (inclusive of Consultant country taxes). The lump sum amount is exclusive of provisional sums and contingency, which will be covered separately under the project, if required.
The lump sum amount is exclusive of all Indian taxes, levies and duties imposed by the Applicable Law. If the Applicable Law requires any Indian taxes, levies or duties to be paid, the Consultant shall be entitled to invoice the Client for a higher amount such that, after the payment/withholding of the relevant Indian taxes, levies or duties, the Consultant shall receive the original amounts state in Appendix C.
6.9 The ITE Education Services Pte. Ltd, Singapore shall raise invoices as per the applicable taxation laws of the Singapore against the services provided to the Department of Skill Development in respect of the said Project in India.
1. The consideration is to be paid in foreign Currency (i.e. US Doller).
2. The Department of Skill Development is recipient of services and ITE Education Services Pte. Ltd. Singapore is supplier of services.
3. Section 2(11) of The IGST Act 2017, define the word Import of Services as follows
import of services” means the supply of any service, where-
(i) the supplier of service is located outside India;
(ii) the recipient of service is located in India; and
(iii) the place of supply of service is in India.
6.10 Place of supply of services where location of supplier or location of recipient is outside India is defined in Sec 13 of IGST Act, 2017:
(1) The provisions of this section shall apply to determine the place of supply of services where the location of the supplier of services or the location of the recipient of services is outside India.
(2) The place of supply of services except the services specified in sub-sections (3) to (13) shall be the location of the recipient of services:
Provided that where the location of the recipient of services is not available in the ordinary course of business, the place of supply shall be the location of the supplier of services.
6.11 As the case do not fall under any of sub sections (3) to (13) of section 13 of IGST Act, 2017 the Place of supply shall be the state of Madhya Pradesh, (i.e. Place of recipient).
6.12. Hence considering the above mentioned points services being availed by the Department of Skill Development from ITE Education Services Pte. Ltd, Singapore can be said to Import of services within the meaning of 2(11) of IGST Act 2017.
6.13 Sec 5(3) of IGST Act, 2017 read along with Notification No. 10/2017 Integrated Tax (Rate) dated 28th June 2017 provide for the tax to be paid on Reverse Charge Basis in case of Import of service by any person located in the taxable territory other than non-taxable online recipient
Sec 5(3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.
Extract from Notification No. 10/2017 Integrated Tax (Rate) dated 28th June 2017
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