Judgments by Maharashtra Authority for Advance Rulings (AAR) under GST

Source: GST Sutra

AAR: Rules in applicant’s favor, reimbursement of salary on behalf of a foreign entity, not liable to GST

• Maharashtra AAR held that the applicant engaged in recruitment of shipping personnel for Foreign Ship Owner (FSO) shall not be liable to pay GST on salary amount received and disbursed as such to the Crew.
• It further Referred to Rule 33 of CGST Rules and observed that Salary of Crew of FSO will be deposited in the account of the applicant in one go and same will be transferred from the applicant’s account to the bank account of Crews by the bank.
• Finding that the entire amount received by the applicant towards the salary of Crew is disbursed as such, the AAR concluded that the applicant is acting as a ‘pure agent’ of FSO.
• It noted that the applicant will be receiving compensation separately in the form of fixed fee to be charged as service charges while noting that no other amounts which are not authorized and due as salary can be handled through this account by the applicant: Maharashtra AAR

The order was passed by Shri B.V. Borhade (State Tax) and Shri. Pankaj Kumar (Central Tax)

Mr. Mukund Pol and Mr. R.S. Bajwa appeared on behalf of the applicant, while the Revenue was represented by Mr. Avinash Shinde

AAR: ‘Cost’ paid for contract manufacturing ‘beer’ not taxable, however, ‘fixed cost’ paid in lieu of job-work services taxable

• Maharashtra AAR rules on taxability of ‘cost’ and ‘fixed fee’ paid by an applicant under a Tie-up agreement with Privilege Industries Ltd. (PIL) under whereby PIL brew/manufacture, package and supply beer from its bottling unit.
• It observed that ‘costs’ are paid as a consideration for purchasing required materials, arranging labor and other facilities on behalf of the applicant whereas the applicant entered into an agreement for brewing/manufacturing, packaging and supplying beer only because PIL has surplus manufacturing and licensed capacity at its bottling unit.
• Accordingly, the AAR held that there is no requirement to pay GST on such costs paid by applicant to PIL absent element of supply of goods/services in form of sale, transfer, barter, exchange, etc., however, PIL is liable to pay GST on ‘fixed costs’ like it (i.e. PIL) is providing job work services to applicant, hence there is a supply of service in form of brewing/manufacturing, packaging and supplying beer.
• It rejected the applicant’s plea that the supply of products (i.e. alcoholic liquor for human consumption) is excluded from the purview of taxability and there is no constitutional authority to levy GST thereon in terms of Article 366 (12A) of Constitution of India.
• Furthermore, the AAR remarked, “if the applicant had brewed/manufactured, packaged and supplied beer on their own account then their activity would not have been liable to tax” as “supply of beer per is not taxable under GST”: Maharashtra AAR

The order was passed by Shri B.V. Borhade and Shri. Pankaj Kumar

Ms.Shanti Mathews, Mr. Vasu Nigam, Mr. Ashish Jain, and Mr. Sachin Agarwal appeared on behalf of the applicant while the Revenue was represented by Ms. Sheetal Gajane

AAR: Only Items essential for warship/ submarine’s existence, qualify as ‘parts’, subject to 5% GST

• Maharashtra AAR rules upon the classification of various inputs used in the construction of warships and submarines in case of an applicant, a leading defense public sector undertaking shipyard.
• It noted that parts of goods of heading 8906 viz. ‘other vessels including warships and lifeboats other than rowing boats’ are subject to GST rate of 5%, examines whether various items listed by Applicant would qualify as ‘parts’ of warship, submarines while holding that items like anchor, bow, bowsprit, keel, engine, propeller, etc. are very essential part of ship or vessel without which ship cannot be in existence.
• Furthermore, the AAR noted that additional equipment that is required to be made available on ship due to statutory requirements cannot be taken as ‘part’ of ship, but they are only equipment on ship, considers dictionary meaning of term ‘part’ viz. a separate piece of something or a piece that combines with other pieces to form the whole of something, also relies upon judicial precedents such as SC decision in Saraswati Sugar Mills & Kores India Ltd.;
• After it examined various lists of inputs provided by Applicant, the AAR held that only those equipment, inputs which are essential for ship’s existence can be considered as ‘parts’ eligible for concessional 5% rate;
• Further, regarding material list with items such as steel items which are consumed in the process of construction, it held that such metals cannot be removed for repair etc. and should not be considered as ‘parts”, but they are only consumables: Maharashtra AAR

The order was passed by Shri B .V. Borhade and Shri. Pankaj Kumar

Mr. Viren Thakkar, Mr. A.B. Shetty appeared on behalf of the applicant, the Revenue was represented by Mr. K W Thaware

AAR: Activity of Mechanical, Electrical & Plumbing works (MEP), constitutes a composite ‘Works contract’ service

• Maharashtra AAR held that activity of Mechanical, Electrical &Plumbing works (MEP) comprising of designing, engineering, work laying of RCC Hume pipe/GI pipe etc., for storm waterline and construction of chambers constitutes a composite supply of ‘works contract’ defined u/s 2 (119) of CGST Act, 2017;
• Referring to the draft agreement, it observed that plumbing system is either attached to earth or fastened to building attached to earth, hence contract is an indivisible ‘works contract’ pertaining to immovable property; Rejects Revenue’s plea that there are different supplies of goods and labor not naturally bundled or supplies in conjunction with each other;
• The AAR observed that the act of supply of goods and services are inseparable and cannot be divided into 2 parts while elucidating that, “all the activities to be undertaken by the applicant pursuant to the agreement are integral parts of the performance of the contractual obligation by the applicant”
• However, in the absence of submission of details/evidence such as agreements entered into with developer/builders, the AAR refused to delve into aspect whether the supplies are in relation to affordable housing project: Maharashtra AAR

The order was passed by Shri B .V. Borhade and Shri. Pankaj Kumar

Mr. Narendra Varma, Mr. Govind Soni appeared on behalf of the applicant, the Revenue was represented by Mr. Said Hakim

AAR: Marketing and distribution services to the overseas parent not ‘export’, liable to GST

• Maharashtra AAR held that marketing, promotion and distribution services provided by the Applicant to Overseas Client are liable to GST, rejects Applicant’s claim that such services would qualify as export of services u/s. 2(6) of IGST Act.
• After noting that the Applicant scouts for potential subscribers for CRS Software belonging to the foreign parent company, AAR held that the applicant qualifies as “Intermediary” and does not provide services on their own account, but for the overseas client;
• It observed that intermediary services cannot be treated as “Export of services” for non-satisfaction of crucial condition i.e. Place of supply (POS) being outside India; Elucidates that in case of ‘Intermediary services’, POS is the “location of the supplier” as per Sec 13(8)(b) of IGST Act which in Applicant’s case, is in taxable territory.
• Further, it held that since the intermediary services are provided to a recipient located outside India, IGST is payable on such transaction: Maharashtra AAR

The order was passed by Shri B .V. Borhade and Shri. Pankaj Kumar

Mr. S.Thirumalai, Mr. Irshad Ahmed, Mr. Rajeev Pallath appeared on behalf of the applicant while the Revenue was represented by Mr. Nijay lande

AAR: Consultancy services to Municipal Corporation w.r.t. an upcoming project of development/establishment of textile museum liable to GST

• Maharashtra AAR held that the applicant liable to GST on consultancy services rendered to Municipal Corporation of Greater Mumbai (MCGM) for consultancy services w.r.t. an upcoming project of establishment and development of the textile museum in Mumbai.
• It held that said activity is not exempt vide Sr. No. 3 of Notification No. 12/ 2017- Central Tax (Rate) being in relation to function entrusted to a Municipality under Article 243W of the Constitution.
• The AAR noted that Architecture Consultancy Cell of the applicant college has entered into an agreement to provide comprehensive architecture service and project management service including architecture service and MEP design, reviewing tender documents for inviting contracts, site supervision, certifying bills of contractors.
• Further, it noted that project involved heritage restoration and adoptive use of various structures such as the textile museum, library building, shopping areas to be leased out to various State Govt. authorities for showcase of textiles, auditorium, underground parking, landscape area, etc. whereas agreement has been registered after payment of stamp duty with Govt. of Maharashtra as ‘Works Contract Agreement’.
• Also, it noted that the establishment and development of the museum and the recreational ground is not a function listed in 12th Schedule to be read with Article 243 of the Constitution: Maharashtra AAR

The order was passed by Shri B.V. Borhade and Shri. Pankaj Kumar

Mr. Kushal Mehta and Mr. Sumesh Porwal appeared on behalf of the applicant, while Revenue was represented by Mr. Sneh Siyar