Case Law Details
In re Avantika Contracts (I) Limited (GST AAAR Telangana)
Q1. Whether the construction of Institute of Security and Law Enforcement studies at Addu City in Maldives, constructed for Government of Maldives under an Memorandum of Understanding between India and Maldives falls within the GST net?
A1. Yes, the supply is within the ambit of GST.
Q2. Who is the recipient of service in the instant case?
A2. National Buildings Construction Corporation Limited, Delhi is recipient of service from the applicant
Q3. What is the place of supply in respect of the works contract for setting up of the Institute of Security and Law Enforcement Studies at ADDU City in Maldives?
A3. The applicant who is the supplier of service & NBCCL who is recipient of service are located in India and therefore the place of supply is to be determined under Section 12 of the IGST Act. The proviso to Sub-Section (3) of Section 12 of IGST Act clearly mention that if the location of immovable property is intended to be located outside India, the place of supply shall be the location of the recipient i.e., NBCCL.
Read AAR Order: Place of supply is Location of recipient in case of Construction of Immovable property Outside India
FULL TEXT OF THE ORDER OF APPELLATE AUTHORITY FOR ADVANCE RULING,TELANGANA
preamble
1. In terms of Section 102 of the Telangana Goods and Services Tax Act, 2017 (TGST Act, 2017 or the Act), this Order may be amended by the Appellate authority so as to rectify any error apparent on the face of the record, if such error is noticed by the Appellate authority on its own accord, or is brought to its notice by the concerned officer, the jurisdictional officer or the applicant within a period of six months from the date of the order. Provided that no rectification which has the effect of enhancing the tax liability or reducing the amount of admissible input tax credit shall be made, unless the applicant or the appellant has been given an opportunity of being heard.
2. Under Section 103 (1) of the Act, this Advance Ruling pronounced by the Appellate Authority under Chapter XVII of the Act shall be binding only,-
(a) On the applicant who had sought it in respect of any matter referred to in sub-Section (2) of Section 97 for Advance Ruling;
(b) On the concerned officer or the jurisdictional officer in respect of the applicant.
3. Under Section 103 (2) of the Act, this Advance Ruling shall be binding unless the law, facts or circumstances supporting the original Advance Ruling have changed.
4. Under Section 104 (1) of the Act, where the Appellate Authority finds that Advance Ruling pronounced by it under sub-Section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such Advance Ruling has never been made.
Subject: GST – Appeal filed by M/s. Sri Avantika Contracts (I) Limited, 610-B, Nilgiri Blocks, Aditya Enclav, Ameerpet, Hyderabad- 500 016 under Section 100 (1) of TGST Act, 2017 Against Advance Ruling TSAAR Order No. 05/2021, dated 05.08.2021 passed by the Telangana State Authority for Advance Ruling – Order-in- Appeal passed – Regarding.
1. The subject appeal has been filed under Section 100 (1) of the Telangana Goods and Services Tax Act, 2017 (hereinafter referred to as “TGST Act, 2017” or “the Act”, in short) by M/s. Sri Avantika Contracts (I) Limited, 610-B, Nilgiri Blocks, Aditya Enclav, Ameerpet, Hyderabad- 500 016 The appellant is registered under GST having GSTIN number 36AAJCS5046C1ZG, The appellant is a works contractor and engaged in the business of civil engineering and construction works. The appeal is filed against the Order No. 05/2021, dated 05.08.2021(“impugned order”) passed by the Telangana State Authority for Advance Ruling (Goods and Services Tax) (“Advance Ruling Authority” / “AAR” / “lower Authority”).
2. Brief Facts:
1. M/s Sri Avantika Contractors (I) Limited are engaged in construction services providing works contract services. They have secured contract from National Buildings Construction Corporation Limited (NBCCL) Delhi for constructing a building at Addu City, Maldives.
2. It is the understanding of the applicant that recipient of construction service is the Government of Maldives as the institute is being constructed as part of assistance from Government of India to Government of Maldives. Further as per the GST Act, 2017, the supply of services are taxable only within the territory of India. And therefore the supply of this service outside India does not constitute taxable supply.
3. They further contend in the application that the recipient of the service is Government of Maldives as they would be ultimate owners of the constructed building and hence the place of supply would be Maldives in terms of Section 13(4) of IGST Act, 2017.
4. We have considered the submissions made by the applicant in their application for advance ruling as well as the additional submissions made by R. Narasimha Murthy, Tax Consultant. During the personal hearing, we also considered the issues involved on which advance ruling is sought by the applicant and relevant facts. At the outset, we would like to state that the provisions of both the CGST Act and the TGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the TGST Act.
5. The Government of Republic of India & Government of Maldives entered into a memorandum of understanding for construction of a Police Academy. As per this MOU the Government of India has awarded the work relating to planning, designing and execution of the project to National Buildings Construction Corporation Ltd., New Delhi. Sri Avantika Contractors Ltd., are in turn awarded the sub-contract to construct the said building by National Buildings Construction Corporation Ltd., New Delhi.
6. Evidently Sri Avantika Contractor Ltd., have not entered into any contract with Government of Maldives for carrying out the said construction. Further they do not have any privity with respect to the MOU between the Government of Republic of India & Government of Maldives. Therefore the applicant does not have any mutual or successive relationship with the Government of Maldives. Hence Government of Maldives is not the recipient of any service from the applicant.
7. Further an agreement is reached by National Buildings Construction Corporation Ltd., (NBCCL) New Delhi & Sri Avantika Contractor Ltd to construct the building at Addu City in Maldives. Hence Sri Avantika Contractor Ltd., is supplier of the service of the works contract and National Buildings Construction Corporation Ltd., New Delhi is the recipient of the Service.
8. Both the applicant who is the supplier of service & NBCCL who is recipient of service are located in India and therefore the place of supply is to be determined under Section 12 of the IGST Act. The proviso to Sub-Section (3) of Section 12 of IGST Act clearly mention that if the location of immovable property is intended to be located outside India, the place of supply shall be the location of the recipient
Lower authority, examined the submissions made by the Appellant and vide the impugned order, the Advance Ruling Authority had given the following Advance Rulings:
In view of the observations stated above, the following rulings are issued with regard to the applicability of Not. No. 11/2017-CT(R), dated 28.06.2017 (as amended) to the below mentioned activities:
|
Question Raised |
Ruling |
| 1. Whether the construction of Institute of Security and Law Enforcement studies at Addu City in Maldives, constructed for Government of Maldives under an Memorandum of Understanding between India and Maldives falls within the GST net? | The applicant who is the supplier of service & NBCCL who is recipient of service are located in India and therefore the place of supply is to be determined under Section 12 of the IGST Act. The proviso to Sub-Section (3) of Section 12 of IGST Act clearly mention that if the location of immovable property is intended to be located outside India, the place of supply shall be the location of the recipient. Therefore the supply by the applicant to the NBCCL is within the ambit of GST |
| 2. Who is the recipient of service in the instant case? | National Buildings Construction Corporation Limited is recipient of service from the applicant |
| 3. What is the place of supply in respect of the works contract for setting up of the Institute of Security and Law Enforcement Studies at ADDU City in Maldives? | The applicant who is the supplier of service & NBCCL who is recipient of service are located in India and therefore the place of supply is to be determined under Section 12 of the IGST Act. The proviso to Sub-Section (3) of Section 12 of IGST Act clearly mention that if the location of immovable property is intended to be located outside India, the place of supply shall be the location of the recipient i.e., NBCCL |
4. The present appeal challenges the ruling and is contested on the following grounds:-
1. The impugned order is passed without proper appreciation of the GST law holding that the supply made by the appellant is within the ambit of GST. The 1st respondent erred in giving a finding that place of supply is in India and hence the appellant is liable to GST without properly appreciating the facts and correct legal position that if the supply is neither intra state nor inter-state, no GST can be levied on the same.
2. Levy of GST depends on the place i.e., situs of tax event. In a consumption-based tax like GST, the tax goes to a place where the goods or services are consumed. CGST, SGST and IGST are accordingly levied basing on the place of supply, location of recipient of the supply and the location of the supplier. Hence, to substantiate the contention that supply of service by the appellant is neither inter-state nor intra-state and hence not taxable and is outside the purview of GST and laws of India, it is to be proved that:-
(a) The location of the supplier or the location of the recipient are outside India.
(b) The supply of service is in relation to immovable property.
(c) The place of supply is outside India.
3. In the appellant’s case, the supply of works contract service of construction of immovable property in Maldives by the appellant through its establishment located in Maldives does not attract GST and is outside the purview of Indian laws as explained below:
4. The location of supplier is outside India:
1. The determination of location of supplier and location of recipient are essential to determine the place of supply under the provisions of IGST Act, 2017. The term ‘supplier’ is defined under Section 2(105) of CGST Act, 2017 as “supplier in relation to goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied.”
2. The location of supplier is not necessarily the registered place of business but is a place from where the supply is made such as the fixed establishment or branch office etc., The location of supplier is defined under Section 2(71) of CGST Act, 2017 which is parimateria to Section 2(15) of IGST Act, 2017, as below:
“Location of Supplier of services” means,-
(a) where a supply is made from a place of business for which the registration has been obtained, the location of such place of business;
(b) where a supply is made from a place other than the place of business for which registration has been obtained (a fixed established elsewhere), the location of such fixed establishment;
(c) where a supply is made from more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the provisions of the supply; and
(d) in absence of such places, the location of the usual place of residence of the supplier.
3. The term ‘fixed establishment’ is defined under Section 2(50) of CGST Act, 2017 which is parimateria to Section 2(7) of IGST Act, 2017 as “a place (other than the registered place of business) which is characterized by a sufficient degree of permanence and suitable structure in terms of human and technical resources to supply services, or to receive and use services for its own needs.”
4. In view of the above definition of the term ‘fixed establishment’, a place would be treated as a fixed Establishment when there is (i) sufficient degree of permanence, (ii) suitable structure in terms of human and technical resources. In terms of sub-section 15 (b) of Section 2 of IGST Act, 2017, when a supply is made from a place other than registered place of business, then location is that of the fixed establishment from where the supply is made and in terms of (c) of Section 2 of IGST Act, ibid, when a supply is made from more than one establishment, whether the place of business or fixed establishment, the location of establishment most directly concerned with the provision of the supply is to be treated as location of supplier.
5. The appellant has an established office in Maldives which is re-registered under the laws of Maldives and is considered a branch or project office of the appellant. There is no dispute that the supply made by the appellant is a construction service which requires manpower and supply and execution of goods in the premises where immovable property is located and such supply cannot be undertaken from a distance from the head office of the appellant and can be executed and supervised only from the project office or branch office located at the place of construction. Hence, the office (fixed establishment) of the appellant registered in Maldives is directly concerned with the provision of the works contract service to the Government of Maldives. In the vase of Re: Jaimin Engineering Pvt. Ltd 2018 (17) G.S.T.L. 33 (A.A.R. -GST), the Advance Ruling Authority held as follows:
“6. While supplying services if the supplier of services (i.e., applicant who in the given case is a works contractor and is registered in State of Gujarat) has any place of business/office in the State of Rajasthan i.e., has a fixed establishment for operation in the State of Rajasthan (place where the services are to be provided) then he is required to get himself registered in the State of Rajasthan.”
6. The Maldives establishment of the appellant bears all the characteristics of a fixed establishment in as much as:-
(a) The appellant is re-registered in Maldives with the Registrar of Companies of Maldives not as a separate company but under the same name of the appellant i.e., Sri Avantika Contractors (I) Limited as a project office (Annexure-8).
(b) The Maldivian office of the appellant has its registered office with all the manpower who execute the subject project in Maldives (Annexure-9). It has taken work permits for its staff of about 250 to work in Republic of Maldives. Copies of few work permits are filed as Annexure-17.
(c) The Maldivian office of the appellant had entered into agreement with the Maldivian government as a foreign investor treating the project being executed as a foreign investment (Annexure-10).
(d) The Maldivian office that is executing the project is registered under GST as per the Maldivian Laws and is paying GST as applicable and filing GST returns also with the Maldivian government (Annexure-13).
(e) The Maldivian office is receiving goods and services in its name from the local suppliers and also by way of imports and is even availing Input Tax Credit for the purpose of payment of GST in Maldives (Annexure-13).
7. In view of the above, since the supply is not made through the head office of the appellant located in India and is made through its fixed establishment located in Maldives, the location of the supplier is Maldives i.e., outside India.
5. The location of the recipient is outside India:
1. The term ‘recipient’ is defined under Section2(93) of the CGST Act, 2017 as below:
“recipient” of supply of goods or services or both, means-
(a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration;
(b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available, and
(c) where no consideration is payable for the supply of service, the person to whom the service is rendered, and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied.
2. NBCCL is the executive agent of the Government of Indiaand is liable to pay the consideration to the appellant on behalf of the Government of India. The location of NBCCL should be considered as the location of the recipient since the services are received by the Government of India through NBCCL and the term ‘recipient’ includes its agent as per the above definition. The location of the recipient is defined under Section 2(70) of CGST Act, 2017 and 2(14) of IGST Act, 2017 which are parimateria to each other and as extracted below: ‘location of the recipient of services’ means –
(a) where a supply is received at a place of business for which the registration has been obtained, the location of such place of business;
(b) where a supply is received at a place other than the place of business for which the registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment.
(c) where a supply is received at more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and
(d) in absence of such places, the location of the usual place of residence of the recipient.
3. The lower authority erred in holding that the location of the recipient is in India for the mere reason that NBCCL is located in India without examining the concept of ‘location’ in terms of above definition and without considering the essential factor of place of receipt of the supply. Hence, location of NBCCL is terms of the above definition is examined as below:-
(a) The registered place of business of NBCCL is in India but the construction services are not received in India and hence the location is not the place of business and mere location of registered office of NBCCL in India does not make the location of NBCCL under the provisions of GST Act, 2017 as India.
(b) NBCCL has a fixed establishment in Maldives in compliance of the agreement between NBCCL and
Government of India. They have an office in Maldives with sufficient employees to supervise the project works, ensure quality control, for co-ordination with officials of Government of Maldives etc., Therefore, Maldives is the location of the recipient.
(c) Clause (c) of Section 2(14) is not applicable since the construction activity is undertaken only in Maldives and the co-ordination and supervising of the works by the recipients is also done from its fixed establishment located at Maldives.
4. Merely because the consideration is paid in Indian currency by the recipient from its registered place of business in India to the supplier at its registered place of business in India, the location of either of the parties cannot be said to be constituted in India and the place where service is received is the only determining factor for determining the location under GST Act, 2017 and not where the consideration is paid from. Hence, the location of the recipient is also outside India.
6. Supply is in relation to immovable property:
1. There is no dispute with regards to the fact that the appellant is executing a works contract of construction of a building for government of Maldives on behalf of Ministry of External Affairs, Government of India. The building being an immovable property, all services in relation to such construction are treated as relating to immovable property.
7. The place of supply is outside India in terms of Section 13 of IGST Act, 2017:
1. The next important factor for determining whether the supply made by appellant is taxable under the purview of GST Act, 2017 is, the ‘place of supply’ which is defined under Section 2(86) of CGST Act, 2017 as “the place of supply as referred to in Chapter V of the Integrated Goods and services Tax Act”.
2. The 1st Respondent erred in holding that the ‘place of supply’ is India in terms of Section 12(3) of IGST Act, 2017 as such finding is incorrect since the subject supply of construction by the appellant is covered under Section 13 of the IGST Act, 2017 as detailed below:
3. Section 12 is not applicable to the present case of supply of service, since ‘the location of supplier’ and ‘location of recipient’ are outside India. When either location of supplier ‘or’ location of recipient are outside India, Section 13 of IGST Act, 2017 is applicable. As elaborately discussed above, both supplier and recipient have fixed establishments in Maldives and the supply is being provided from the fixed establishment located in Maldives and the supply is being received by the fixed establishment of recipient in Maldives. Relevant portion of Section 12 and Section 13 of IGST Act 2017 are extracted below for ready reference:-
“12. Place of supply of services where location of supplier and recipient is in India.
(1) The provisions of this Section shall apply to determine the place of supply of services where the location of supplier of services and the location of the recipient of services is in India.
……………………….
(3) The place of supply of services-
(a) Directly in relation to an immovable property including services provided by architects, interior decorators, surveyors, engineers and other related experts or estate agents, any service provided by way of grant of rights to use immovable property or for carrying out or co-ordination of construction work; or
Shall be the location at which the immovable property or boat or vessel, as the case may be, is located or intended to be located: PROVIDED that if the location of the immovable property or boat or vessel is located or intended to be located outside India, the place of supply shall be the location of the recipient.
13. Place of supply if services where location of supplier or location of recipient is outside India.
(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.
………………………..”
(4) The place of supply of services supplied directly in relation to an immovable property, including services supplied in this regard by experts and estate agents, supply of accommodation by a hotel, inn, guest house, club or campsite, by whatever name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including that of architects or interior decorators, shall be place where the immovable property is located or intended to be located.
…………………..”
4. The above provisions very clearly stipulate that when location of either supplier or the recipient is outside India and not necessarily both, Section 12 is not applicable and Section 13 is applicable and in terms of Section 13(4), the immovable property is intended to be located in Maldives and all services in relation to construction of immovable property are supplied outside India.
5. In view of the above legal position, the place of supply of service provided by the fixed establishment of the appellant is Maldives i.e., outside India.
8. The learned lower authority erred in not appreciating the facts and legal position that the supply provided by the appellant in the non-taxable territory of Maldives is outside the ambit of GST for the above reasons. The provisions of CGST Act and IGST Act, shall extent to the whole of India but not to non-taxable territory and when the entire supply and receipt of service is made outside India and when the supplier is also located outside India in the case of immovable property, GST laws of India cannot be applied.
9. 1. In order to levy GST, the supply shall be classified as inter-state or intra state as defined under Section 7 of IGST Act, 2017 and Section 8 of IGST Act, 2017, respectively. The supply is intra state only when the place of supply of services and location of supplier are in the same State or Union territory. The same is not applicable to the supply in question for the reasons detailed above. In order to be classified as inter-state supply even when supply or location is outside India, the supply shall fall under clause (4) or (5) of Section 7 of IGST Act, 2017 which is extracted as below:-
7. Inter-State Supply
(1) ……
(4) Supply of services imported into the territory of India shall be treated to be supply of services in the course of inter-state trade or commerce.
(5) Supply of goods or services or both,-
(a) when the supplier is located in India and the place of supply is outside India;
(b) to or by a Special Economic Zone developer or a Special Economic Zone unit;
(c) in the taxable territory, not being an intra-state supply and not covered elsewhere in this Section,
Shall be treated to be a supply of goods or services or both in the course of inter-state trade or commerce.
2. The supply does not classify under inter-state supply in terms of above Section for the following reasons:-
(a) There is no supply in the taxable territory i.e., within whole of India,
(b) supplier is not located in India,
(c) supply is neither made by or to SEZ.
3. The provisions of GST Act, 2017 are applicable only within India. Any attempt to levy tax on the construction of immovable property in a non-taxable territory by a supplier from its fixed establishment in the non-taxable territory to a recipient, whether having fixed establishment in the non-taxable territory or not, and the service being received outside the taxable territory is without jurisdiction.
Whether the appeal is filed in time:
5. In terms of Section 100 (2) of the Act, an appeal against Advance Ruling passed by the Advance Ruling Authority, has to be filed within thirty (30) days from the date of communication thereof to the applicant. The impugned Order dated 05.08.2021 was received by the appellant on 19.08.2021 as mentioned in their Appeal Form GST ARA-02. They filed the appeal on 13.09.2022, which is within the prescribed time-limit.
Personal Hearing:
6. In terms of Section 101(1) of the Act, the appellant was given personal hearing, on 29.04.2022. Shri M/s.YSR & Associates, Advocates and Tax consultants (C. Srinivas Tax Consultant and Y. Siri Reddy Advocate) and Authorised Representative appeared for the Appellants. The appellants reiterated their written submissions made along with the application and no additional submissions were made at the time of personal hearing. They requested to set aside the advance ruling in respect of said issue that are being contested and consider their appeal favourably.
Discussions and Findings :
7. The objections raised by the applicant are examined with the following observations:-
1. The applicant mainly contends that the location of the applicant and location of the recipient is outside India, hence the place of supply should be determined as per the provisions of section 13(4) of the IGST Act, 2017.
2. On verification of the contract documents it is noticed that National Building Construction Corporation Ltd, Delhi entered into contract with M/s Avantika Contractors (I) Limited, Hyderabad, Telangana for the Construction of institute for security and law enforcement studies at Addu, Republic of Maldives .
3. As per the agreement, the applicant will receive consideration for implementing the project from NBCC(India ) Ltd in “Indian Rupees” (As per clause 3.6 of Agreement for setting up of the Institute for security and law enforcement studies (ISLES) at ADDU city in Maldives dated 8-7-2016) and the laws applicable to the contract is the laws in force in India. (As per clause 5.1 of Agreement for setting up of the Institute for security and law enforcement studies (ISLES) at ADDU city in Maldives dated 8-7-2016).
4. The applicant also submitted copies of e-invoices for document numbers : ISLES/21-22/01 dated 30-04-2021 , ISLES/21-22/02 dated 31-05-2021, ISLES/21-22/03 dated 30-06-2021 , ISLES/21-22/04 dated 31-07-2021 issued by M/s Sri Avantika Contractors (I) Limited to NBCC (India) Ltd. In these invoices the supplier details are mentioned as ‘Sri Avantika Contractors(I) Limited, 610B, Neelgiri Blocks, Adhitya Enclave, Ameerpet, Hyderabad , 500016 Telangana and GSTIN:36AAJCS55046C1ZG’.
5. Some of the important terms of the contract extracted from Director (DPA) Letter No L/i/231/2010 dated 14-07-2016:-
– National buildings construction corporation limited (NBCC) (A Government of India enterprise) under the Aegis of Ministry of Urban development has been appointed by the ministry of external affairs, government of India as an executive agency f, Republic of Maldives’, as a Government or ‘Construction of Institute for Security and Law enforcement Studies (ISLES) at ADDU, Republic of Maldives’, as a Government of India Development cooperation in Maldives.
– This is to confirm and certify that M/s Avantika Contractor (I) Limited 401/A wing D.No:6-3-352/2&3, Astral height complex, Road No 1, Banjara hills, Hyderabad 500034 has been duly awarded the contract by the National buildings construction corporation limited on behalf of the Ministry of external affairs, Govt of India, New Delhi for implementation of the said project.
– The said project has been planned envisaging that most of the construction material & labour (Skilled, Semi Skilled & un skilled) for the project as would be required, shall be exported from India to Male , Republic of Maldives.
6. Further, it was stated that, Sri Avantika Contractors (I) Limited is registered under the laws and regulations of Republic of Maldives with registered office at F.Reef View,Hirudhu Maa Magu, S.Hithadhoo, Republic of Maldives.
7. The applicant contends that the registered office at Maldives is the fixed establishment for Sri Avantika Contractors (I) Limited, Hyderabad , hence the location of the supplier is in Maldives as per section 2(15) of the IGST Act, hence place of supply is to be considered as per section 13(4) of the IGST Act, 2017.
8. Before examining the Place of Supply or taxability of the transactions, it is necessary to examine the nature of transaction between the applicant and M/s NBCC (India) Ltd. The applicant all along contends that the transaction is that of Works Contract service. In this context, the definition of Works Contract as per Sub-section 119 of Section 2 of CGST Act, 2017 is reproduced as under :-
(119) “works contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract;
9. Therefore, the essential element of a works contract is that it is a contract between the supplier and recipient. Contract is defined under Sub-section (h) of Section(2) of The Indian Contract Act, 1872 as :
“An agreement enforceable by law is a contract;”
10. In order to determine, the Place of Supply, it is necessary to determine the supplier and recipient of the supply and the location of the supplier and recipient. In this context, it is necessary to examine the definitions of Supplier and Recipient as per the Provisions of the CGST Act, 2017
Section (2), Sub-section (105) of the Act defines supplier as Supplier in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied;
11. Here, the supply of service (works contract service), the agreement which enforceable by law is entered into between M/s Sri Avantika Contractors (I) Limited and M/s NBCC Limited, New Delhi. Hence, the appellant M/s Sri Avantika Contractors (I) Limited, will be the supplier of Works contract service.
12. The discussion from where the “individual” goods and services involved in the Works contract are supplied from, is immaterial in determining the Supplier or the Location of the Supplier. The service (works contract service) has to be looked in a holistic manner and the promise to deliver has been made by M/s Avantika Contractors (I) Limited, who will be held responsible in the event of any non-performance of the agreement.
13. Further, the location of supplier is defined in the provisions of CGST Act, 2017 (Sub-section 71 of Section 2) as under :-
(a) where a supply is made from a place of business for which the registration has been obtained, the location of such place of business;
(b) where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment;
(c) where a supply is made from more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the provisions of the supply; and
(d) in absence of such places, the location of the usual place of residence of the supplier;
14. In this case, the supply, the agreement to perform is being made from the Place of business for which registration has been obtained (i.e. M/s Avantika Contractor (I) Limited, 401/A wing D.No:6-3-352/2&3, Astral height complex, Road No 1, Banjara hills, Hyderabad 500034). Hence, this location, i.e., M/s Avantika Contract (I) Limited with GSTIN: 36AAJCS55046C1ZG at
Hyderabad will be the location of the Supplier of services.
15. Also, on careful perusal of the definition of “person” under subsection (84) of section 2 of the CGST Act, 2017 and the definitions of “company” and “foreign company” under Section 2 of the Companies Act, 2013, it is observed that a company incorporated in India and a foreign company incorporated outside India, are separate “person” under the provisions of CGST Act and accordingly, are separate legal entities. Thus, a company incorporated in India and a body corporate incorporated by or under the laws of a country outside India (which is also referred to as a foreign company under the Companies Act) are separate persons under CGST Act, and thus are separate legal entities.
16. Hence, the registered place of business of M/s Avantika Contractors (I) Limited, Maldives cannot be considered as fixed establishment of M/s Avantika Contractors (I) Limited, India.
17. In view of the above, the applicants contention that the location of supplier of services in Maldives is not correct. As per Section 2(15) of IGST Act,2017 Location of Supplier of Services is registered Place of business of the applicant i.e Hyderabad.
18. Further, Section(2), Sub-section (93) of the Act defines Recipient as (93) “recipient of supply of goods or services or both, means”-
(a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration;
(b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and
(c) where no consideration is payable for the supply of a service, the person to whom the service is rendered,
and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied;
19. Here, there is a consideration which is payable for supply services (Works Contract service) which is agreed to be paid by M/s NBCC Limited, New Delhi. Hence, M/s NBCC (India) Limited, New Delhi will be the recipient of services.
20. Further, the location of recipient of services is defined in the provisions of CGST Act, 2017 (Sub-section 70 of Section 2) as under :
“location of the recipient of services” means,-
(a) where a supply is received at a place of business for which the registration has been obtained, the location of such place of business;
(b) where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment;
(c) where a supply is received at more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and
(d) in absence of such places, the location of the usual place of residence of the recipient;
21. The discussion from where the “individual” goods and services involved in the Works contract are received, is immaterial in determining the Location of the Recipient. Instead, the place where the total service (works contract service), of agreeing to perform has been received will be the location of recipient of service.
22. In this case, the supply, the agreement to perform is received at the Place of business for which registration has been obtained (i.e. NBCC (India) Limited, Lodhi Road, New Delhi). Hence, this location, i.e., NBCC (India) Limited (with GSTIN: 07AAACN3053B1Z2) at New Delhi will be the location of the recipient of services.
23. Now, since the Location of the supplier and the location of the recipient are determined, we may proceed to examine the provisions relating to Place of Supply.
24. Here, in this case as both the location of the recipient of services and location of supplier of services are located in India and also since service is “directly in relation to” construction of an immovable property, the provisions of section 12(3)(a) of the IGST Act,2017 would apply . The contents of which are reproduced as under :-
(3) The place of supply of services,-
(a) directly in relation to an immovable property, including services provided by architects, interior decorators, surveyors, engineers and other related experts or estate agents, any service provided by way of grant of rights to use immovable property or for carrying out or coordination of construction work; or
(b) by way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by whatever name called, and including a house boat or any other vessel; or
(c) by way of accommodation in any immovable property for organising any marriage or reception or matters related thereto, official, social, cultural, religious or business function including services provided in relation to such function at such property;or
(d) any services ancillary to the services referred to in clauses (a), (b) and (c), shall be the location at which the immovable property or boat or vessel, as the case may be, is located or intended to be located: Provided that if the location of the immovable property or boat or vessel is located or intended to be located outside India, the place of supply shall be the location of the recipient.
25. Here, the location of immovable property is outside India, therefore the Place of supply of services is location of the recipient i.e., Delhi as per the provisions of Section 12(3) of the IGST Act, 2017.
26. Hence, the transaction becomes an inter-state supply and is taxable under the provisions of Sec 7, sub-section (1) of the IGST Act, 2017.
27. Thereby, we uphold the order of the Advance Ruling Authority accordingly.
8. In the light of the foregoing facts, we pass the following Orders .
ORDER
9. The ruling of the lower authority is modified to the extent of above order and the subject appeal is disposed accordingly.
|
Question Raised |
Ruling |
| 1. Whether the construction of Institute of Security and Law Enforcement studies at Addu City in Maldives, constructed for Government of Maldives under an Memorandum of Understanding between India and Maldives falls within the GST net? | Yes, the supply is within the ambit of GST |
| 2. Who is the recipient of service in the instant case? | National Buildings Construction Corporation Limited, Delhi is recipient of service from the applicant |
| 3. What is the place of supply in respect of the works contract for setting up of the Institute of Security and Law Enforcement Studies at ADDU City in Maldives? | The applicant who is the supplier of service & NBCCL who is recipient of service are located in India and therefore the place of supply is to be determined under Section 12 of the IGST Act. The proviso to Sub-Section (3) of Section 12 of IGST Act clearly mention that if the location of immovable property is intended to be located outside India, the place of supply shall be the location of the recipient i.e., NBCCL |
