Case Law Details
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.
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