Case Law Details
In re Fraunhofer-Gessellschaft Zur Forderung Der Angewwandten Forschung (GST AAR Karnataka)
Q. Whether the Activities of a liaison office amount to supply of services, Whether a liaison office is required to be registered under CGST Act, 2017 and Whether liaison office is liable to pay GST?
The applicant, incorporated in Germany, undertakes the business of promoting applied research and hence established their liaison office in Bangalore, India, (herein after referred to as “Applicant” or “Liaison office / LO “), under the permission of RBI vide FE.CO.FID/27803/10.97.856/2013-14 dated 11.06.2014, to act as an extended arm of the head office and to carry out the activities that are permitted by Reserve Bank of India.
In the instant case the applicant has representational office i.e. LO in Bangalore, India and hence the applicant has an establishment in India. Further the applicant’s head office is outside India and hence the applicant’s head office has an establishment outside India. Thus the applicant (LO) and their head office (HO) shall be treated as establishments of distinct persons, in terms of Section 8 supra. Therefore the applicant (LO) and their head office (HO) are distinct persons and the activities performed by them can’t be called export of services.
The applicant has claimed exemption by virtue of SI. No. 10F of notification No. 09/2017-Integrated Tax(Rate) dated 28.06.2017 as amended by Notification No. 15/2018-IT (R) dated 26.07.2018. The condition mentioned in the Notification for claiming exemption is that the place of supply of service is outside India in accordance with Section 13 of IGST Act, 2017.. Since this Authority is not eligible to decide the matter of place of supply as per Section 97 (2) of CGST Act 2017.we will not be able to comment on the claim of exemption, claimed by the applicant. However, we proceed to comment on the submission made by the applicant that they are not an intermediary as per Section 2 (13) of IGST Act, 2017. There is no doubt that the applicant is facilitating supply between the HO and Indian customers. They have a mandate from RBI for this purpose. Further, they are not making any supply on their own, which anyway is a restriction placed upon them by RBI. Their contention that they are not “person” has already been dealt in the above para. We find that they are a distinct legal entity and are aptly covered under the definition of intermediary as per Section 2 (13) ofIGST Act, 2017.. Lastly, in regard to the submissions made by the applicant in respect of valuation, we observe that Rule 28 to Rule 31 of the CGST Rules, 2017 have to be resorted for the purpose of determining tax liability.
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