In re Auriga Research Private Limited (GST AAR Karnataka)
Section 95 (c) of the CGST Act 2017 defines ‘Applicant’ as any person registered or desirous of obtaining registration under the said Act.
It could be easily inferred from above that any person registered or desirous of obtaining registration under CGST Act 2017 can seek advance ruling only in relation to the supply of goods or services or both being undertaken or proposed to be undertaken.
In the instant case, we observe that Auriga Research Private Limited, who have filed the application, is not a supplier. Thus the instant application is not admissible and liable for rejection in terms of Section 98(2) of the CGST Act 2017.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, KARNATAKA
ORDER UNDER SECTION 98(4) OF THE CGST ACT, 2017 85 UNDER SECTION 98(4) OF THE KGST ACT, 2017
M/s. Auriga Research Private Limited, (hereinafter referred to as ‘The applicant’), No.136, 6th Cross, 2nd Stage, Yeshwanthpur, Bengaluru-560022, having GSTIN 29AABCH1202M1ZR have filed an application for Advance Ruling under Section 97 of CGST Act, 2017 read with Rule 104 of CGST Rules, 2017 and Section 97 of KGST Act, 2017 read .with Rule 104 of KGST Rules, 2017, in FORM GST ARA-01 discharging the fees of Rs. 5000/- each under the CGST Act and the KGST Act.
2. The Applicant is a Private Limited Company registered under the provisions of Central Goods and Services Tax Act, 2017 as well as Karnataka Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act and KGST/SGST Act respectively). The Applicant is providing Covid-19 Testing facility for all the passengers travelling by air, whether domestic or international.
3. The applicant has sought advance ruling in respect of the following question:
i. Whether Goods and Service Tax (“GST”) will be levied on Revenue Sharing invoices raised by one party on to another party wherein the outward supply of services is exempt in nature.
4. Admissibility of the application: The question is about the “determination of the liability to pay tax on any goods or services or both” and hence is admissible under Section 97(2) (e) of the CGST Act 2017.
5. BRIEF FACTS OF THE CASE: The applicant furnishes some facts relevant to the issue
5.1 The applicant has stated that it is a Company registered under Companies Act, 1956 (now Companies Act, 2013) and having its registered office at 4/9, Kirti Nagar, Industrial Area, New Delhi.
5.2 The applicant has stated that they are providing services for food testing, pharmaceuticals testing, herbal testing, Covid testing etc. for domestic as well as foreign clients. Being a service provider, they are also registered under the Goods and Services Tax Act, 2017 in various States in India.
5.3 The applicant has stated that due to sudden surge in Covid-19 cases all over the world, India being no exception, there was a need for establishing testing facilities / labs which are capable enough to test the existence of the virus in one’s body. Therefore, they decided for providing such facilities to the patients who believed that they were infected with corona virus.
5.4 The applicant has stated that for establishing a Covid Lab, they approached Bangalore International Airport Limited, (hereinafter referred to as “BIAL”) a company registered under Companies Act, 2013, wherein the applicant and BIAL entered into Leave and License Agreement dated 01.12.2020. Based upon which the BIAL rented out its space to the applicant for a sum of Rs.16,568/- per month for providing Covid testing facilities. The rent is paid by the applicant on monthly basis after deduction of Tax at Source (“TDS”) at the rates applicable under section 194-I of the Income Tax Act 1961. On the tax invoice generated by BIAL, it is specifically mentioned as License Fee. The applicant states that on 22nd September 2021 another space was taken on rent from BIAL at a monthly rent of Rs.15,776/- (increased to Rs.23,664/- per month). The applicant states that he has also entered into an Agreement dated 23rd September 2020 for Operating a Food Testing Lab (later on Covid Testing Lab) with BIAL for obtaining a space on rent for a sum of Rs.50,000/- per month (now 52,500/- per month). Later on it was agreed between the parties and the space allocated for Food Testing Lab was also converted into Covid Testing Lab at the same terms and conditions.
5.5 The applicant has stated that they have entered into an agreement with BIAL for operation of Covid Testing Facility on 2nd September 2021. As per this particular agreement the BIAL will get certain percentage of revenue based upon the turnover of the applicant. The slabs for calculating the revenue share amount were agreed upon and mentioned in the said agreement.
5.6 The applicant has stated that apart from the rent charged from them, BIAL has also made a Revenue Sharing arrangement wherein the applicant will pay BIAL a share on the gross revenue earned during the month.
5.7 The applicant has stated that the revenue earned by them every month is variable in nature. Therefore, the applicant and BIAL have mutually decided the slabs / slab rates on which the revenue will be shared between both the parties, to avoid any future confusion and litigation.
5.8 The applicant states that BIAL will raise tax invoices for both rent and revenue sharing separately on them, as per the payment terms mutually decided by the parties. As per the mutually agreed payment terms between BIAL and the applicant, it can be construed that both rent and revenue sharing clauses are separate in nature. Hence separate tax invoices are generated.
5.9 The applicant states that BIAL has raised the tax invoices as per mutually agreed payment terms between BIAL and applicant and charged GST @ 18% on the value of its revenue share. The tax invoices are being generated by BIAL bearing SAC 996761 i.e., Airport Operation Services.
6. Applicant’s Interpretation of Law:
6.1 The applicant is of the view that they are providing Covid Testing facilities at BIAL and such activities are exempt from levy of GST vide Notification No.12/2017-Central Tax (Rate), dated 28th June, 2017 as such activities are covered under Sl.No.74 Heading 9993 which specifically exempts services by way of healthcare services. Hence, these transactions are specifically exempted from such levy. The relevant portion of the notification is extracted hereunder for ease of reference:
