AAR has jurisdiction to determine Place of Supply
- Mar 19, 2020 | Viren Shah
As per Section 97(2) of the CGST Act, an advance ruling can be sought in respect of:
a. Classification of any goods or services or both;
b. Applicability of a notification issued under provisions of the GST Act(s);
c. Determination of time and value of supply of goods or services or both;
d. Admissibility of input tax credit of tax paid or deemed to have been paid;
e. Determination of the liability to pay tax on any goods or services under the Act;
f. Whether the applicant is required to be registered under the Act;
g. Whether any particular thing done by the applicant with respect to any goods or services amounts to or results in a supply of goods or services, within the meaning of that term.
In the past, in many taxpayer cases , the AAR has rejected the applications for Advance Ruling in case of export of services on the ground that the Authority does not have jurisdiction to decide the ‘place of supply of service’.
Recently, the Kerala High Court in the case of Sutherland Mortgage Services Inc., USA - India Branch Office has observed that the issue relating to the determination of place of supply is not enumerated, however, the same will get covered within the ambit of more significant problem pertaining to the determination of the liability to pay tax on any goods or services or both as envisaged under Section 97(2)(e) of the CGST Act.
In this case, the taxpayer is a branch office engaged in the business of providing ITeS services such as mortgage orientation, primary servicing, special servicing, cash management and analytics, and reporting to its US Head Office (‘HO’). The branch entered into an agreement with the HO for providing services to customers outside India. The HO reimburses the branch for costs incurred for performing the services and invoices are issued by the branch to the HO.
The branch office filed an application for AAR and contended that the services were provided directly to customers located outside India and not to the HO. Therefore, the services shall qualify as export of services under Section 16 of the IGST Act.
However, the AAR rejected the application citing the lack of jurisdiction to entertain the application. The AAR refused to provide its ruling by holding that the issue of determination of place of supply does not come within the permissible issues (i.e., Section 97(2) of the CGST Act) that can be determined by an AAR.
The branch office, being aggrieved by the AAR order, filed a writ petition before the Kerala High Court. After considering the various provisions/rule of GST law, the High Court observed as under:
- While the issue relating to the determination of place of supply is not enumerated, the same will get covered within the ambit of a more significant matter related to ‘determination of the liability to pay tax on any goods or services or both’ [i.e., Section 97(2)(e)].
- The AAR has jurisdiction to determine the place of supply while clarifying that the same will be covered within larger entry pertaining to the determination of the liability to pay tax.
- The view taken by the AAR is legally wrong, and thus the matter required judicial review in the instate case.
Thus, the High Court remitted the matter to AAR for fresh consideration.
This is a welcome decision since it provides much-needed clarity to the Authority for considering the matter involving ‘place of supply’. It will also give relief to various taxpayers since many cases have been rejected by the AAR on the ground of determination of place of supply.
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i Sabre Travel Network India Pvt. Ltd. [2019 (7) TMI 1475] - Appellate AAR (Maharashtra)
Asiatic Clinical Research Pvt. Ltd. [2020 (1) TMI 571] - AAR (Karnataka)
ii WP(C) No. 32634 of 2019