The members of Gujarat Authority for Advance Ruling, Goods and Services Tax ruled that services such as stevedoring, transportation, storage, bagging, stuffing and again transportation of the goods (which have been temporarily imported into India) rendered by the applicant shall be considered as ‘export of service’ and shall be eligible for ‘Zero Rated Supply‘ w.e.f. 01.02.2019.
The details of the Advance Ruling are as under:
Brief Facts
- The applicant, a service provider operating in a port, is engaged in handling bulk imported fertiliser on behalf of Indian fertiliser companies. They discharge bulk fertiliser from the vessels, pack it into bags and then make dispatches by Rail, Road and Water.
- They, as the service providers, did stevedoring, transportation, storage, bagging, stuffing and again transportation of the goods which were temporarily imported.
- A foreign supplier sent bulk fertiliser for job work in custom bonded godowns.
- The cargo directly went from vessel to custom bonded warehouses and these goods never crossed the customs barrier and mixed-up with the indigenous goods.
- These goods were temporarily imported to India for export purpose and stored in customs bonded warehouses and exported from there to outside India.
Questions seeking Advance Ruling
- Whether above described services (in brief facts) considered to be Export of Service or not?
- If Yes, then we are eligible for Zero Rated Supply under Section 16 of the IGST Act, 2017?
Discussions and Findings
- As per Section 2(14)(d) of the IGST Act, 2017, the location of the recipient of services in the case under discussion is the usual place of residence of the recipient i.e. outside India.
- Section 2(6) of the IGST Act, 2017 stipulates five conditions for services to be considered as ‘export of services’.
“2(6) “export of services” means the supply of any service when,–
(i) the supplier of service is located in India;
(ii) the recipient of service is located outside India;
(iii) the place of supply of service is outside India;
(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; and
(v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;”
- The conditions (i), (ii), (iv) and (v) were satisfied but condition (iv) required further discussion.
- Section 13(3) of the IGST Act, 2017 provides that the place of supply for services such as the services under discussion shall be the location where the services are performed. However, the second proviso to the mentioned section provides conditions for services to be excluded from Section 13(3).
- The second proviso, prior to 01 February 2019, excluded the services supplied in respect of goods which are temporarily imported into India for repairs and were exported after repairs without being put to any other use in India, than that which was required for such repairs.
- The services in discussion could not be considered as repairs and hence, could not be excluded from Section 13(3).
- However, Notification No.01/2019-Integrated Tax dated 29 January 2019 provided amendment in the second proviso to Section 13(3) to include ‘treatment‘ and ‘process‘ along with ‘repairs‘.
- The services provided by the applicant were in the nature of job-work and though, the services did not fall under the category of ‘treatment‘, it was considered as ‘process‘.
- Hence, w. e. f. 01 February 2019, the services in discussion were excluded from Section 13(3) and fell under the ambit of Section 13(2), which stated that the place of supply of such services shall be the location of the recipient of services i.e. outside India.
- Hence, the services shall be treated as ‘Export of Services‘ w. e. f. 01 February 2019.
- As per Section 16(1) of the IGST Act, 2017, export of goods or services or both is ‘Zero rated Supply‘.
- Hence, the services shall be treated as ‘Zero rated Supply‘ w. e. f. 01 February 2019.
Ruling
- Whether above described services (in brief facts) considered to be Export of Service or not?
The services such as stevedoring, transportation, storage, bagging, stuffing and again transportation of the goods (which have been temporarily imported into India) rendered by the applicant shall not be considered as ‘export of service’ up-to 31 January 2019, but shall be considered as ‘export of service’ w. e. f. 01 February 2019, for the reasons discussed herein-above. - If Yes, then we are eligible for Zero Rated Supply under Section 16 of the IGST Act, 2017?”
The applicant will not be eligible for ‘Zero rated supply’ under Section 16 of the IGST Act, 2017, up-to 31 January 2019 for the reasons discussed herein-above. However, they shall be eligible for ‘Zero rated supply’ as per the provisions of Section 16(1)(a) of the IGST Act, 2017 w.e.f. 01 February 2019, for the reasons discussed herein-above.
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Relevant Provisions / References:
Section 2(6) of the IGST Act, 2017
| “export of services” means the supply of any service when,— |
Section 2(14) of the IGST Act, 2017
| “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; |
Explanation 1 to Section 8 of the IGST Act, 2017
For the purposes of this Act, where a person has,—
| (i) | an establishment in India and any other establishment outside India; | |
| (ii) | an establishment in a State or Union territory and any other establishment outside that State or Union territory; or | |
| (iii) | an establishment in a State or Union territory and any other establishment registered within that State or Union territory, |
then such establishments shall be treated as establishments of distinct persons.
Section 13 of IGST Act, 2017
(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.
(2) The place of supply of services except the services specified 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.
(3) The place of supply of the following services shall be the location where the services are actually performed, namely:—
| (a) | services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services: | |
| Provided that when such services are provided from a remote location by way of electronic means, the place of supply shall be the location where goods are situated at the time of supply of services: | ||
| Provided further that nothing contained in this clause shall apply in the case of services supplied in respect of goods which are temporarily imported into India for repairs or for any other treatment or process and are exported after such repairs or treatment or process without being put to any use in India, other than that which is required for such repairs or treatment or process; | ||
| (b) | services supplied to an individual, represented either as the recipient of services or a person acting on behalf of the recipient, which require the physical presence of the recipient or the person acting on his behalf, with the supplier for the supply of services. |
(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 the place where the immovable property is located or intended to be located.
(5) The place of supply of services supplied by way of admission to, or organisation of a cultural, artistic, sporting, scientific, educational or entertainment event, or a celebration, conference, fair, exhibition or similar events, and of services ancillary to such admission or organisation, shall be the place where the event is actually held.
(6) Where any services referred to in sub-section (3) or sub-section (4) or sub-section (5) is supplied at more than one location, including a location in the taxable territory, its place of supply shall be the location in the taxable territory.
(7) Where the services referred to in sub-section (3) or sub-section (4) or sub-section (5) are supplied in more than one State or Union territory, the place of supply of such services shall be taken as being in each of the respective States or Union territories and the value of such supplies specific to each State or Union territory shall be in proportion to the value for services separately collected or determined in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed.
(8) The place of supply of the following services shall be the location of the supplier of services, namely:—
| (a) | services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders; | |
| (b) | intermediary services; | |
| (c) | services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month. |
Explanation.—For the purposes of this sub-section, the expression,—
| (a) | “account” means an account bearing interest to the depositor, and includes a non-resident external account and a non-resident ordinary account; | |
| (b) | “banking company” shall have the same meaning as assigned to it under clause (a) of section 45A of the Reserve Bank of India Act, 1934 (2 of 1934); | |
| (c) | “financial institution” shall have the same meaning as assigned to it in clause (c) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934); | |
| (d) | “non-banking financial company” means,— |
| (i) | a financial institution which is a company; | |
| (ii) | a non-banking institution which is a company and which has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner, or lending in any manner; or | |
| (iii) | such other non-banking institution or class of such institutions, as the Reserve Bank of India may, with the previous approval of the Central Government and by notification in the Official Gazette, specify. |
(9) The place of supply of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of such goods.
(10) The place of supply in respect of passenger transportation services shall be the place where the passenger embarks on the conveyance for a continuous journey.
(11) The place of supply of services provided on board a conveyance during the course of a passenger transport operation, including services intended to be wholly or substantially consumed while on board, shall be the first scheduled point of departure of that conveyance for the journey.
(12) The place of supply of online information and database access or retrieval services shall be the location of the recipient of services.
Explanation.—For the purposes of this sub-section, person receiving such services shall be deemed to be located in the taxable territory, if any two of the following non-contradictory conditions are satisfied, namely:—
| (a) | the location of address presented by the recipient of services through internet is in the taxable territory; | |
| (b) | the credit card or debit card or store value card or charge card or smart card or any other card by which the recipient of services settles payment has been issued in the taxable territory; | |
| (c) | the billing address of the recipient of services is in the taxable territory; | |
| (d) | the internet protocol address of the device used by the recipient of services is in the taxable territory; | |
| (e) | the bank of the recipient of services in which the account used for payment is maintained is in the taxable territory; | |
| (f) | the country code of the subscriber identity module card used by the recipient of services is of taxable territory; | |
| (g) | the location of the fixed land line through which the service is received by the recipient is in the taxable territory. |
(13) In order to prevent double taxation or non-taxation of the supply of a service, or for the uniform application of rules, the Government shall have the power to notify any description of services or circumstances in which the place of supply shall be the place of effective use and enjoyment of a service.
Section 2(68) of CGST Act, 2017
“job work” means any treatment or process undertaken by a person on goods belonging to another registered person and the expression “job worker” shall be construed accordingly;
Section 16 of IGST Act, 2017
(1) “Zero rated supply” means any of the following supplies of goods or services or both, namely:—
| (a) | export of goods or services or both; or | |
| (b) | supply of goods or services or both for authorised operations to a Special Economic Zone developer or a Special Economic Zone unit. |
(2) Subject to the provisions of sub-section (5) of section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply.
(3) A registered person making zero rated supply shall be eligible to claim refund of unutilised input tax credit on supply of goods or services or both, without payment of integrated tax, under bond or Letter of Undertaking, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder, subject to such conditions, safeguards and procedure as may be prescribed:
Provided that the registered person making zero rated supply of goods shall, in case of non-realisation of sale proceeds, be liable to deposit the refund so received under this sub-section along with the applicable interest under section 50 of the Central Goods and Services Tax Act within thirty days after the expiry of the time limit prescribed under the Foreign Exchange Management Act, 1999 (42 of 1999) for receipt of foreign exchange remittances, in such manner as may be prescribed.
(4) The Government may, on the recommendation of the Council, and subject to such conditions, safeguards and procedures, by notification, specify—
| (i) | a class of persons who may make zero rated supply on payment of integrated tax and claim refund of the tax so paid; | |
| (ii) | a class of goods or services which may be exported on payment of integrated tax and the supplier of such goods or services may claim the refund of tax so paid. |
Research Credit: Priya Bhaiya
