In re Enpay Transformer Components India Private Limited. (GST AAR Gujarat)
Question-1: Whether liability to pay GST on reverse charge arises if amount is paid as interest on late payment of invoices of imported goods? If yes, then at what rate?
Answer: The applicant M/s.Enpay Transformers Components India pvt.ltd. Plot No.112, Alindra, Manjusar GIDC, Savli, Vadodara is liable to pay GST on reverse charge basis for amount paid as interest on late payment of invoices of imported goods for the reasons discussed hereinabove. The rate of GST will be the same as the rate of IGST leviable on the imported goods for the reasons discussed hereinabove.
Question-2: Whether liability to pay GST on reverse charge arises if amount is paid for reimbursement of Stamp tax paid as a pure agent by M/s. Enpay, Turkey on our behalf?
Answer: The applicant is liable to pay GST on reverse charge basis on amount paid for reimbursement of Stamp tax paid by the supplier M/s. Enpay Turkey on behalf of the applicant, since the supplier of the applicant does not fulfil/satisfy all the conditions required for being a ‘Pure agent’ in terms of the provisions of Rule 33 of the CGST Rules, 2017 for the reasons discussed hereinabove.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, GUJARAT
BRIEF FACTS
The applicant M/s.Enpay Transformers Components India pvt.ltd. Plot No. 112, Alindra, Manjusar GIDC, Savli, Vadodara (hereinafter referred to as Enpay, India) is engaged in the business of manufacturing and supplying Transformer components. The applicant has stated that the company is importing goods from the Holding company located at Turkey namely M/s. Enpay Endstriyel Pzarlama ve Yatirim A.S. (hereinafter referred to as Enpay, Turkey) for which the payment terms is 120 days from the date of invoice for import of goods and if the company M/s.Enpay Transformer located at India does not pay to Holding company located at Turkey(outside India) on due date, the holding company is charging interest on late payment; that the company has obtained bank credit facility from CITI Bank based on the Corporate Guarantee issued by holding company Enpay Endustriyel Pazarlama ve Yatirim A.S. and they have paid Stamp tax in Turkey as per their land rules and they have raised reimbursement invoice of said payment to ENPAY India; that as mentioned above, the company is importing goods on CIF basis(cost including freight) and the invoice that is raised by the seller is clearly showing the amount of Sea freight and it is also noted that at the time of Bill of Entry, the assessable value calculated for payment of IGST includes the value of Sea Freight, hence, IGST is already paid on the value of sea freight at the time of customs clearance.
2. The applicant has asked the following questions seeking Advance Ruling on the same:-
(i) Whether liability to pay GST on Reverse charge arises if amount is paid as interest on late payment of invoices of imported goods? If yes, then at what rate?
(ii) Whether liability to pay GST on Reverse charge arises if amount is paid for reimbursement of Stamp tax paid as a pure agent by M/s. Enpay, Turkey on our behalf?
(iii) Whether Entry No.10 of Notification No. 10/2017 issued under IGST is applicable, if import of goods is made on CIF(Cost including Freight basis) where the supplier is charging sea/ocean freight in his invoice itself and IGST is already paid at the time of Bill of Entry by including the same value of ocean freight in the assessable value?
3. The applicant has submitted his view of interpretation of law on the above issues stating that the stamp tax is paid by Enpay, Turkey on behalf of Enpay, India for proceedings of Corporate Guarantee/Bank Guarantee and Enpay, Turkey has also raised an invoice for the reimbursement of the same. The applicant has stated that the Explanation to Rule 33 of the GST Valuation Rules, 2017 gives following meaning of ‘Pure Agent’:-
A. “Pure Agent” means a person who-
(a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both;
(b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply;
(c) does not use for his own interest such goods or services so procured; and
(d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account.
3.1 The applicant has submitted that in this case, the Stamp duty paid by Enpay, Turkey is neither intending to hold any title for it and not for the use of his own interest; that also Enpay, Turkey has received only actual amount of stamp tax paid and considering the above facts, the value paid as a reimbursement to Enpay, Turkey should not be considered as import of services considering it as a payment made to pure agent and hence no IGST on RCM should be liable to pay. As regards the import of goods, the applicant has stated that the import of goods is made on CIF (Cost including Freight basis) where the supplier is charging sea/ocean freight in his invoice itself and IGST is already paid at the time of Bill of Entry by including the same value of ocean freight in the assessable value; that Enpay, India is not directly paying amount of sea/ocean freight to the Service provider and considering the above facts and considering that IGST is already paid on imports made on CIF basis, the entry No.10 of Notification No. 10/2017 issued under IGST Act should not be made applicable and hence no IGST again should be paid on it under Reverse charge.
4. The applicant has given additional submission vide letter dated 09.01.2021(received vide email on 11.01.2021) wherein they have stated that during hearing they were asked to furnish details of Stamp tax paid and clarification regarding whether any markup/profit had been charged by Enpay Endustriyel Pazarlama ve Yatirum A.S.(Enpay, Turkey) from Enpay Transformer Components India pvt.ltd. while making payment of stamp tax on their behalf at the time of documentation of Corporate Guarantee Agreement executed on 13.04.2018; that accordingly they have obtained clarification in writing from Enpay Endustriyel Pazarlama ve Yatirum A.S. stating that no mark up (profit) was charged for the reimbursement of stamp tax paid against corporate guarantee issued to CITI bank as security/collateral for funded/non-funded facility used by Enpay Transformer Components India Private Limited and have attached a copy of the same. They have submitted the table for Stamp Tax Collection as under:
