In re Dharmshil Agencies (GST AAR Gujarat)
In this case, the moot point to be decided is as to whether the services provided by the applicant are liable to CGST and SGST or IGST? For this, we first need to know the nature of the transaction carried out by the applicant. As per the submission of the applicant, they have entered into an agreement with Tsudokoma Corporation, Japan to sell their machinery and against the said services, they are receiving commission income from Japan in foreign currency. Based on the submission of the applicant as well as the arguments and discussions made by the representative of the applicant during the course of personal hearing, it appears that the services provided by the applicant are in the nature of services of commission agents or commodity brokers who negotiate between buyers and sellers as a facilitator for the supply of goods for which they are paid a fee or commission. The said service can also be called as ‘intermediary services’. The term ‘intermediary’ has been defined at Section 2(13) of the IGST Act, 2017 and reads as under:
Sub-section(2) of Section 13 specifically provides that the place of supply of services except the services provided 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. In the instant case, the supplier of service is the applicant and the service recipient is M/s. Tsudokoma Corporation, Japan. We find that the services provided by the applicant i.e. ‘intermediary services’ appears at Sub-Section(8)(b) of Section 13. Also, sub-section (8) clearly mentions that the place of supply in respect of the services described under the said sub-section shall be the location of the supplier of services. Further, the supplier in the instant case is the applicant and the location of the said supplier is in Ahmedabad, Gujarat. Now, since the location of the applicant, who is supplier of services, is in Gujarat and both the supplier of service as well as the place of supply of service is in Gujarat, the supply of services would be considered akin to intra-state supply of services and would be liable to CGST and SGST (as per the provisions of Section 9(1) of the CGST Act, 2017). Therefore, the present procedure/course of GST payment followed by the applicant i.e. payment of CGST and SGST on the services provided by them, is correct. Further, the applicant would be liable to pay GST at the rate of 18% (9% CGST + 9% SGST) in terms of the provisions of Notification No:11/2017-Central Tax (Rate) dated 28.06.2017.
Looking to the nature of the transaction of services provided by the applicant M/s. Dharmshil Agencies, Ahmedabad, we rule that the applicant is liable to pay GST at the rate of 18% (9% CGST + 9% SGST).
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, (Gujarat)
The applicant M/s. Dharmshil Agencies has submitted that they have entered into an agreement with Tsudokoma Corporation, Japan to sell their machinery and against the said services, they are receiving commission income from Japan in foreign currency.
2. The applicant has submitted that earlier under Service Tax Regime, they were paying service tax of 18% under RCM for the above services categorised as ‘Business Auxilliary Services’; that after implementation of GST, they had started to pay IGST and in GSTR-1 they had shown the same under Export of services; that over and above they are also involved in export of goods and they had made export with payment of duties; that because of export of services, problems have arisen in ICEGATE site and they could not get their refunds due to mismatch in the amounts and that they had paid IGST upto 31.03.2018.
3. The applicant further stated that due to the above error, they inquired with the GST call services in the Department and came to know that they were liable to pay CGST and SGST and that the same was required to be shown in GSTR-1 under B2C transaction; that thereafter they starting paying CGST and SGST showing the same under B2C transaction in their GSTR-1 returns. They further stated that they had shifted their liability for GST from IGST to CGST and SGST relying on the definition of ‘intermediary services’ falling under Section 2(13) of the IGST Act, 2017 and accordingly place of provision will be as per Section 13(8)(b) of the IGST Act, 2017 i.e. the place of supply will be the location of supplier of services which in their case is Gujarat only. In view of the above, they started to charge CGST and SGST in place of IGST and are presently paying CGST and SGST based on the above definition. The applicant has put forward the following question on which advance ruling is required:
“We request to your good authority to kindly guide on the subject matter i.e. whether to charge CGST and SGST or IGST looking to our nature of transaction?”
DISCUSSION & FINDINGS:
4. We have considered the submissions made by the applicant in their application for advance ruling as well as the arguments/discussions made by their representative Shri Himanshu Kothari at the time of personal hearing. We have also considered the issues involved on which Advance Ruling is sought by the applicant.
5. At the outset, we would like to state that the provisions of both the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017 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 similar provisions of the GGST Act.
6. In this case, the moot point to be decided is as to whether the services provided by the applicant are liable to CGST and SGST or IGST? For this, we first need to know the nature of the transaction carried out by the applicant. As per the submission of the applicant, they have entered into an agreement with Tsudokoma Corporation, Japan to sell their machinery and against the said services, they are receiving commission income from Japan in foreign currency. Based on the submission of the applicant as well as the arguments and discussions made by the representative of the applicant during the course of personal hearing, it appears that the services provided by the applicant are in the nature of services of commission agents or commodity brokers who negotiate between buyers and sellers as a facilitator for the supply of goods for which they are paid a fee or commission. The said service can also be called as ‘intermediary services’. The term ‘intermediary’ has been defined at Section 2(13) of the IGST Act, 2017 and reads as under:
2(13) “intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account;
6.1 It appears from the above that the service provided by the applicant would be correctly classified under the Heading 9961 (specific sub-heading No.996111(Sr.No.67)) of the Annexure to the Notification No.11/2017-Central Tax (Rate) dated 28.06.2017 and under the Sub-heading 996111 (Sr.No.67 of Annexure),which reads as under:
