In re IVL India Environmental R&.D Private Limited (GST AAAR Maharashtra)
AAAR, uphold the MAAR Order No. GST-ARA-50/2020-21/B-108 dated 01.12.2022 vide which it has been held that the transfer of monetary proceeds by the Applicant to IVL Sweden, will be liable for payment of Integrated Goods and Service Tax under reverse charge mechanism under Entry No.1 of Notification 10/ 2017 IGST(Rate) dated June 28. 2017.
The case of IVL India Environmental R&D Pvt Ltd provides critical insights into the GST implications on transferring monetary proceeds to its parent company, IVL Sweden. The Appellant, IVL India, was incorporated under Indian laws by IVL Sweden to execute a project management consultancy (PMC) contract. The proceeds earned by IVL India were further transferred to IVL Sweden. A crucial point of contention arises regarding the GST implications on this transfer, given the reverse charge mechanism under Entry No.1 of Notification No. 10/2017-I.T. (Rate) dated 28.06.2017
Analysis: Under the PMC contract, IVL India was identified as the consultant, and IVL Sweden as the guarantor. However, despite the work being carried out by IVL India, the crucial support services rendered by IVL Sweden were a significant contributing factor. In essence, without IVL Sweden’s expertise and resources, IVL India would not have been able to secure the PMC contract with MCGM. Hence, it was concluded that IVL India availed support services from IVL Sweden. The place of supply of these services was deemed to be India, making it an import of services scenario.
Conclusion: As per Section 13(2) and Section 2(11) of the IGST Act, 2017, the transfer of monetary proceeds from IVL India to IVL Sweden for the support services falls under the ambit of import of services. Given the recipient of services (IVL India) is located in India and the supplier of services (IVL Sweden) is located outside India, the recipient is liable to pay IGST under the reverse charge mechanism in compliance with Notification No. 10/2017-I.T. (Rate) dated 28.06.2017. Therefore, GST is applicable on the transfer of monetary proceeds from IVL India to IVL Sweden.
FULL TEXT OF THE ORDER OF APPELLATE AUTHORITY FOR ADVANCE RULING, MAHARASHTRA
1. At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is made in respect of such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the MGST Act.
2. The present appeal has been filed under Section 100 of the Central GST Act,2017 (hereinafter referred to as the CGST Act’) read with Section 100 of the Maharashtra GST Act, 2017 (hereinafter referred to as the MGST Act’) by M/s. IVL India Environmental R&D Private Limited having Address at A808 and 809. Shelton Sapphire.
Sector 1 5 and CBD Belapur, Navi Mumbai, Maharashtra-400614 (hereinafter referred to as the Appellant’) against the advance Ruling No.GST-ARA-50 2020-21 B-108 dated 01.12.2022
BRIEF FACTS
3. IVL India Environmental R&D Private Limited (TVL India’ or ‘The Appellant’) is a company incorporated under the laws of India and is a whole owned subsidiary of IVL Swedish Environmental Research Institute Limited (TVL Sweden’) a foreign company incorporated under the laws of Sweden The Municipal Corporation of Greater Mumbai CMCGMT is the governing civic body of Mumbai under the Bombay Municipal Corporation Act, 1888.
4. IVL Sweden applied for the bid for all the projects invited by MCGM for the contract of ‘Project Management Consultancy Services” for four locations which are Versova and Malad Influent Pumping Station under MSDP Stage -II, Mithi River Rejuvenation Project (Package I, II, III & IV), Bandra WWTP under MSDP Stage – II, Worli WWTF under MSDP Stage – II on the basis of their credentials, work experience and various certifications received from different government organizations as required in the bidding eligibility criteria.
5. MCGM successfully awarded the tender for ‘Project Management Consultancy Services’, for the following projects to IVL Sweden with the respective contract amounts:
