CA Manoj Nahata 
1. Whether “Clinical Research” services provided by a person to entities located outside India is liable to CGST and SGST or IGST?
Held: CGST and SGST will applicable.
In the case of Clinthia Research Limited- AAR Maharashtra,the applicant is a global clinical organization, providing comprehensive range of clinical research and support services by performing technical testing and analysis on the Drug/ Investigational product provided by sponsors located outside India and submits the final report to such foreign sponsors. The Applicant submitted that the clinical research services provided by them to the foreign sponsors would amount to export of service in terms of section-2(6) of the IGST Act, 2017. The GST provisions prescribed certain conditions to be fulfilled for export of services. The applicant satisfied all the conditions except one which is related to Place of Supply. As per section-13(3)(a) of the IGST Act, any services performed in respect of goods that are physically required to be made available by the recipient, the place of supply will be the location where the services are performed. The applicant contended that this provision will not be applicable to those cases where the service is provided using the goods provided by the recipient or in the cases where the goods sent by recipient are altered while providing the service. The applicant relied on the decision of Hon’ble Mumbai Tribunal in the case of Principal Commissioner of C. Ex. Pune-1 v Advinus Therapeutics Ltd. 2017 (51) S.T.R. 298. The applicant further submits that the service provided is not in respect of the goods given by the recipient. This is supported by the fact that the applicant is not required to return the goods back to those foreigners. The applicant concluded that as GST is a destination based tax, the services of the applicant should be treated as export of service as these are consumed by sponsors outside India.
The Authority found that the research is for conducting a study of the effect of such investigational product. The prime importance is their product itself. Without this product, the research cannot be completed. Therefore, it was concluded that the said supply of research services is in respect of goods supplied by the sponsors. The sponsors would like to know the efficiency of the product and for which such testing is conducted.
Hence the Authority ruled that the supply of clinical research services to the entities located outside India is not eligible to be treated as export of service in terms of section-2(6) of the IGST Act. The services are liable to CGST and SGST as the Supplier of service and the place of supply is in the same state in terms of section-13(3)(a) of the IGST Act.
2. Whether a supplier is liable to GST on supply of services by way of renting dwelling units even if the recipient Commercial entity is using the dwelling unit for residential purpose of its employee?
Held: No
In case of Borbheta Esatate Pvt. Ltd. –AAR West Bengal, the applicant is renting dwelling units. It has executed agreements for leasing/renting of four dwelling units it owns at different locations in Kolkata. According to the agreements, all of these units are to be used for residential purpose. Three flats have been rented to individuals and one flat to a public limited company, where the employees of the company will stay. The question of fact on which Advance Ruling is sought, is that whether the supply of services by way of renting of dwelling house to the employees of a commercial entity for residence is exempt or not?
The Applicant argued that he is not liable to pay tax on leasing or renting of these dwelling units, as they are all let out for residential purpose, and services by way of renting of dwelling units for residence is exempted under Sl. No. 12 of Notification No. 12/2017-CT (Rate) dated 28-6-2017 as amended from time to time. Whereas the concerned officer from the Revenue stated that provisions under Sl. No. 12 of the Exemption Notification apply to renting of dwelling units for residential purpose. It should not be available when the dwelling unit is rented to a commercial entity like the public limited company.
The Authority found that the Applicant’s service is classifiable as rental or leasing service involving own/leased residential property (SAC 997211). Applicability of Sl. No. 12 of the Exemption Notification depends upon whether the dwelling unit is used as residence. In the applicant’s case all the dwelling units are being used for residence, irrespective of the fact whether they are let out to individuals or a commercial entity. The Applicant’s service of renting/leasing out the dwelling units for residential purpose is, therefore, exempt under Sl. No. 12 of the Exemption Notification.
The Authority concluded that the supply of services by way of renting dwelling units is exempt from GST and accordingly, the applicant is not liable to GST.
3. Whether credit is admissible of the input tax paid on the purchase of motor vehicles for the supply of cabs on a renting basis to institutions?
Held: No
In case of Mohana Ghosh- West Bengal, the applicant supplies rent-a-cab service, as defined in the Finance Act, 1994. She referred to section 17(5)(a)(B) of the GST Act that allows credit of input tax paid on the purchase of motor vehicles when used for supplying passenger transportation service. The Applicant submitted that people take the car on rent for the transportation of passengers. Rent-a-Cab is, therefore, essentially associated with the transportation of passengers. GST paid on the purchase of motor vehicles for supplying rent-a-cab service should, therefore, be admissible in terms of section 17(5)(a)(B) of the GST Act.
The Authority stated that The GST Act has been amended with effect from 01/02/2019. Before amendment the provisions of section 17(5)(b)(iii) of the Act did not allow credit of GST paid on inputs for supply of rent-a-cab service, except under certain specific conditions that are not applicable in the applicant’s case. Amended provisions of section 17(5)(b)(iii) of the GST Act do not contain reference to the rent-a-cab service. However, post-amendment, input tax credit shall not be available in respect of supply of the service of renting or hiring of motor vehicles in terms of section 17(5)(b)(i) of the GST Act, unless the inward and the outward supplies are of the same category, standalone or as an element of a taxable composite or mixed supply. Further, the Authority stated that Renting of any motor vehicle, however, is classified under SAC 9966. It is taxable under Sl. No. 10(i) of the Rate Notification. The recipient of this service is not a passenger. He is enjoying the service of having provided a motor vehicle, with or without a driver, for use in whatever way he likes for the duration of the renting period. It may remain parked for the entire duration of renting without actual transportation of any person. Even when any person – the recipient of the service or someone of his choice – is being actually transported, the consideration is paid not for the distance travelled, but for renting the cab. In the applicant’s case the motor vehicles are given on rental basis to various institutions who clearly could not travel as a passenger. Furthermore, the applicant raises invoice on the duration of renting, which is a fixed number of hours in a calendar month. In passenger transportation service (SAC 9964) the recipient of the service is a passenger and he pays the consideration for the distance travelled, whatever be the degree of control he enjoys over the vehicle. In renting or hiring of a motor vehicle (SAC 9966) the recipient is provided the right to use the vehicle over a specified duration, whether he is a passenger or not. Distance travelled is taken into consideration to recover the cost of fuel. But travelling a certain distance is not the essence of the service.
The Authority concluded that GST paid on the purchase of motor vehicles for supplying rent-a-cab service is not admissible for credit in terms of section 17(5)(b)(i) of the GST Act.
4. Whether an importer was again required to pay IGST on the component of ocean freight under RCM mechanism on deemed amount which would amount to double taxation of IGST on the deemed component of ocean freight of the imported goods?
Held: Yes
In the case of M/s. E-DP MARKETING PRIVATE LIMITED-AAR Madhya Pradesh, the applicant intends to import crude soyabean oil on CIF basis (Cost + Insurance + Freight) which includes the component of ocean freight in the price of imported goods. Ocean Freight will not be paid by the applicant because, the seller is supposed collect the ocean freight while deciding the price of the goods payable by the applicant. The payment of ocean freight would be made by the seller located outside India. As per corrigendum issued on 30.06.2017 to the Notification No. 8/2017— Integrated Tax (Rate), dated 28th June, 2017, the importer of the goods is required to pay IGST on Reverse Charge Mechanism on the amount of deemed ocean freight equal to 10% of the value of goods imported. The issue raised by the applicant is on Applicability of Reverse Charge Mechanism on Ocean Freight when IGST is paid by the importer on Goods Imported on CIF Basis. It is submitted that at the time of import of said goods into India the applicant is required to pay aggregate customs duties on CNF/CIF value of the imported goods which is considered as an assessable value for the purpose of levying the import duties on such goods and which includes IGST component also. Since the CNF/CIF value of the imported goods includes the component of ocean freight therefore, the applicant is required to pay IGST on this ocean freight component also along with other duties of customs. This is a first incidence of payment of IGST on the component of ocean freight by the applicant. The Applicant stated that as per Notification No. 10/2017—Integrated Tax (Rate), dated 28th June, 2017, the applicant/importer is again required to pay IGST on the component of ocean freight incurred by them under RCM mechanism. If this is paid by the applicant/importer, it will amount to double taxation of IGST on the same component of ocean freight of the imported goods which apparently illegal and against the basic principles GST of law.
The Authority found no ambiguity, regarding payment of IGST on ocean freight. As per existing law, IGST on ocean freight has to be paid by the importer under reverse charge mechanism, irrespective of the fact that such freight charges are included in the intrinsic CIF value. The applicant pleaded that the authority to levy and collect IGST on import of goods from outside India vests under the Customs Act only hence the levy of RCM on deemed value of ocean freight is without jurisdiction. The Authority observed that any question relating to constitutional validity of the Notifications issued is not within the ambit of the jurisdiction of the Appellate Authority in terms of section-97(2) of the GST Act.
Thus, the Authority concluded that in terms of prevailing provisions of the IGST Act, 2017 and the Rules made there under, the applicant is liable to pay IGST on ocean freight under RCM as provided under Notification No.10/2017-IT(R) read with Notification No.8/2017-IT(R).
5. Whether services provided under vocational training courses recognized by National Council for Vocational Training (NCVT) or Jan Shikshan Sansthan (JSS) is exempt either under Entry No.64 of the exemption list of GST Act, 2017 or under “Educational Institution” defined under Notification No. 22 C.T(R)?
Held: Certain services exempt under Sr. No.66 of Notification No. 12/2017 C.T(R) dated 28.06.2017
In the case of The Leprosy Mission Trust of India-AAR Maharashtra, the applicant is an NGO registered under section-12A of the Income Tax Act, 1961 and have Leprosy Referral Hospitals, Vocational Training Institutes, Research Laboratories, Advocacy and Research. The activities of the applicant are charitable in nature and within the meaning of section-2(15) of the Income Tax Act, 1961. The applicant contends that it is an “educational institution” under clause-(iii) of the Notification No. 22 C.T (R) dated 28th June, 2017 and is exempt from GST. Again it refers to the Entry No. 64 of the Notification No.12/2017 C.T(R) under GST, 2017 where exemption from tax is granted for services provided by training providers by way of vocational training courses certified by National Council for Vocational Training. Accordingly, the applicant seeks a ruling on whether the services provided by way of vocational training courses are exempt either as Educational Institute or under Exemption list?
The Authority stated that the applicant is not a Central/State Govt., Union Territory or local Authority and therefore Entry no. 64 is not applicable to them. The Authority referred to Sr. No. 66 of the Notification No. 12/2017 C.T(R). Further reference was made to the definition of ‘approved vocational education course’ to determine whether the applicant qualifies as an Educational Institution or not. The applicant has been granted affiliation from National Council for Vocational Training in respect of vocational skills in respect of diesel mechanic, computer operator and programming assistance, welder and motor mechanic. The definition of ‘approved vocational education course’ defines it as a course run by an industrial training institute or an industrial training center affiliated to the NCVT or State Council for Vocational Training. Accordingly, the abovementioned services provided by the applicant attracts Nil rate of tax under Sr No. 66 of the Notification No. 12/2017 CT(R) dated 28th June,2019.
Hence, The Authority ruled that the services provided under vocational training courses recognized by National Council for Vocational Training (NCVT) or Jan Shikshan Sansthan (JSS) is exempt neither under Entry No.64 of the exemption list of GST Act, 2017 nor under “Educational Institution” defined under Notification No. 22 C.T(R). Vocational training courses pertaining to diesel mechanic, computer operator and programming assistance, welder and motor mechanic are only exempt under Sr No.66(a) of the Notification No.12/2017 C.T (R) dated 28.06.2017 as amended.
6. Whether the procedure to raise invoice from one state for imports received at another state, where the person does not have separate registration, and charging IGST is correct? Whether the person is allowed to do transactions from the place wherefrom invoices are issued and mention the GSTIN of the same state to dispatch goods from importing state?
Held: Yes
In the case of M/s Aarel Import Export Pvt. Ltd., AAR Maharashtra the applicant is an importer and exporter/trader of different products, having its head office at Mumbai. The applicant wishes to import Coke (processed product from Coking Coal) from Indonesia to Paradip Port in the state of Odisha. Goods would be stored at a rented Customs Warehouse (Ex-Bond) at Paradip Port. The applicant does not have a separate establishment or place of operation in Odisha. The applicant endeavors to clear the goods from that warehouse in the name of Mumbai office using Maharashtra GSTIN, where the importation will be completed on payment of custom duties, if any, and IGST in the name of Mumbai head office and wish to sell the goods directly from Paradip Port to customer in Odisha and accordingly charge IGST to the customers by raising bill from Mumbai office and not Odisha.
The Authority found that as per the provisions of section-7(2) of the IGST Act, 2017 supply of goods imported into India shall be treated as supply of goods in the course of inter-state trade or commerce and liable to IGST (under section-5 of IGST Act) at the point when custom duties are levied on the goods. Again in case of goods imported into India, the place of supply shall be the location of the importer. In the present case, the place of supply is the location of the importer who is situated in the Maharashtra and hence the applicant will be clearing the goods by paying IGST using GSTIN of Mumbai, Maharashtra. Since the applicant has no establishment or GSTIN of Odisha, the applicant can clear the goods on the basis of invoices issued by Mumbai head office and therefore need not to take registration in Odisha. Answering to the second question, the Authority stated that the applicant can raise invoice upon the customers of Odisha in the GSTIN of the Mumbai, Maharashtra. The GSTIN of Mumbai Head Office shall be used in E-Way bills.
Note: Similar ruling was also issued earlier by the AAR Maharashtra in case of M/S. Sonkamal Enterprises Pvt Ltd.
7. Whether services provided by way of conservancy/solid waste management service to Conservancy Department of Municipal Corporation is exempt under GST?
Held: Yes
In the case of Indrajit Singh-AAR West Bengal, the applicant is providing conservancy/solid waste management service to the Conservancy Department of the Howrah Municipal Corporation (hereinafter the HMC). The HMC, however, is deducting TDS while paying consideration for the above supply in terms of Notification No. 50/2018 – Central Tax dated 13-9-2018 and State Government Order No. 6284 – F(Y) dated 28-9-2018. The Applicant seeks a ruling on whether the above supply is exempted in terms of Sl. No. 3 or 3A of Notification No. 12/2017 – Central Tax (Rate) dated 28-6-2017, as amended from time to time and if so, whether the notifications regarding TDS are applicable in his case.
The applicant contends that Sl. No. 3 of the Exemption Notification exempts from payment of GST any “pure service” (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority or a Government Entity by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or in relation to any function entrusted to a Municipality under Article 243W of the Constitution. The applicant is providing services to a municipal corporation which is a local authority. So his supply of services should be exempt from GST.
The Authority stated that the Central Government, in its Circular No. 51/25/2018-GST dated 31/07/2018, clarifies that the service tax exemption at serial No. 25(a) of Notification No. 25/2012 dated 20/06/2012 has been substantially, although not in the same form, continued under GST vide Sl. Nos. 3 and 3A of the Exemption Notification. Sl. No. 25(a) of the ST notification under the service tax exempts “services provided to the Government, a local authority or a governmental authority by way of water supply, public health, sanitation, conservancy, solid waste management or slum improvement and upgradation.” The Applicant’s eligibility under Sl. No. 3 or 3A of the Exemption Notification should, therefore, be examined from three aspects: (1) whether the supply being made is pure service or a composite supply, where supply of goods does not exceed more than 25% of the value of the supply, (2) whether the recipient is government, local authority, governmental authority or a government entity, and (3) whether the supply is being made in relation to any function entrusted to a panchayat or a municipality under the Constitution. Regarding first aspect, the Authority stated that describes the nature of the work as lifting and removing of daily garbage etc. accumulated from the vats, dumping yards, containers and other places on the roads, lanes and bye-lanes of HMC area. There is, however, no reference to any supply of goods in the course of executing the work. The vehicles used and the fuel consumed and the machinery used do not result in any transfer of property in goods to HMC. Therefore, the applicant’s supply to HMC is a pure service. In respect of second aspect, it is clear that the recipient is a local authority as defined under section 2(69) of the GST Act. In respect of third aspect, it is found that Applicant’s supply to HMC is a function mentioned under Sl. No. 6 of the Twelfth Schedule of the Constitution of India.
These notifications of TDS are applicable only if TDS is deductible on the Applicant’s supply under section 51 of the GST Act. Section 51(1) of the Act provides that the Government may mandate, inter-alia, a local authority to deduct TDS while making payment to a supplier of taxable goods or services or both. As the Applicant is making an exempt supply to HMC the provisions of section 51 and, for that matter, the TDS Notifications do not apply to his supply.
The Authority ruled that the Applicant’s supply to the Howrah Municipal Corporation, as described in para 3.5, is exempt from the payment of GST under Sl. No. 3 of Notification No. 12/2017 – Central Tax (Rate) dated 28-6-2017. The provisions of section 51 and, for that matter, Notification No. 50/2018 – Central Tax dated 13-9-2018 and State Government Order No. 6284 – F(Y) dated 28-9-2018, to the extent they mandate and deal with the mechanism of TDS, do not apply to his supply.
8. Whether exemption under Sl. No. 3A of Notification No. 9/2017-Integrated Tax (Rate), dated 28-6-2017 as amended from time to time applies to the services provided to West Bengal Fisheries Corporation Ltd. for up-gradation of Jalda Kuti Landing Centre by protection to Mandarmani River and up-gradation of navigability by dredging of Mandarmani River?
Held: Yes
In the case of M/s.Dredging and Desiltation Company (P.) Ltd.-AAR West Bengal, the applicant has been awarded a contract from West Bengal Fisheries Corporation limited for up-gradation of Jalda Kuti Landing Centre by protection to Mandarmani River and upgradation of navigability by dredging of Mandarmani River in Purba Medinipur. The Applicant seeks a ruling on whether an exemption under Sl. No. 3A of Notification No. 9/2017-Integrated Tax (Rate) dated 28-6-2017 (hereinafter the Exemption Notification), as amended by Notification No. 2/2018 dated 25-1-2018 Integrated Tax (Rate) dated 25-1-2018, applies to the above supply.
The applicant stated that the recipient is a Government entity, as defined under clause 2 (zfa) of the Exemption Notification. Further, he stated that the work undertaken is in relation to a function entrusted to a Panchayat under Article 243G of the Constitution of India.
The Authority stated that The applicant’s eligibility under Sl. No. 3A of the Exemption Notification should, therefore, be examined from three aspects: (1) whether the supply being made is a composite supply, where supply of goods constitutes not more than 25% of the value of the composite supply, (2) whether the recipient is government, local authority, governmental authority or a government entity, and (3) whether the supply is in relation to any function entrusted to a Panchayat or a Municipality under the Constitution.
The Applicant’s supply involves the construction of spurs for providing protection against land erosion and improving navigability by dredging the channel. It is a works contract, intended to construct, improve/alter the immovable property, and involves the supply of goods such as granite stone, boulders, polypropylene gabions, nylon crates and filaments. It further involves supply of services like dredging, loading/unloading and transportation of the excavated material etc. It is, therefore, a composite supply of goods and services. It is also apparent from the documents that supply of goods constitutes about 11% of the value of the composite supply. The recipient is a Government entity as per Exemption Notification.The up-gradation of Jalda Kuti Landing Centre and the related work that has been awarded to the applicant has a direct nexus with fisheries development. It is, therefore, an activity in relation to the development of fisheries – a function listed under Sl. No. 4 of the Eleventh Schedule, and, therefore, entrusted to a Panchayat under article 243G of the Constitution of India.
The Authority ruled that Exemption under Sl.No. 3A of the Exemption Notification is, therefore, applicable to the applicant’s supply of services.
9. Whether sweeping service to the Housing Directorate of Government of West Bengal is exempt from payment of GST in terms of Notification No 12/2017-CT (Rate) dated 28.06.2017?
Held: Yes.
In the case of M/s. NIS Management Ltd.-AAR West Bengal, the applicant is a service provider to the West Bengal Housing Board. The Board awarded the applicant the contract for deployment of personnel for services of plumbing, sweeping etc. The Applicant was required to charge GST on the entire bill, including sweeping service. The Directorate, however, has since raised an objection on GST being charged on sweeping service, which, in their opinion, is part of sanitation service listed under the Eleventh Schedule of the Constitution and, therefore, eligible for exemption under Sl. No. 3 of the Exemption Notification.
The concerned officer from the revenue submits that the above exemption is applicable to the government or local authority. The Board is neither Government nor Local Authority, but a statutory body created by the West Bengal Housing Board Act, 1972. The above exemption is, therefore, not applicable for supplies to the Board.
The Authority stated that the Exemption Notification cover the supply of certain services to the government, local authority, governmental authority, or government entity. The service should be an activity in relation to any function entrusted to a Panchayat under Art 243G of the Constitution or to a Municipality under Art 243W of the Constitution. From the tender issued by the Board, it appeared that the Housing Directorate invited quotation for deployment of personnel for several services, including ‘Sweeping Service’. The job description of a sweeper mentioned therein includes sweeping of the compound and common staircase and corridors of all floors of the buildings in the Housing Estate, cutting of jungles and bushes, cleaning and disposal of garbage, cleaning of the roof, surface drain cleaning, pit cleaning of sewerage system etc. It is, therefore, a bundle of activities that are classifiable under SAC 99853 as ‘cleaning service’. It may be eligible for the above exemption if it also qualifies as a service for public health sanitation, being an activity under Sl No. 7 (public health sanitation, conservancy and solid waste management) of the Twelfth Schedule to the Constitution. ‘Sanitation and similar services’ are classified under SAC 99945. It includes sweeping and cleaning, but only with reference cleaning of a road or street. Sweeping of premises – public or residential – is not classified under ‘Sanitation or similar service’, Sweeping service that the Applicant supplies to the Housing Directorate cannot, therefore, be classified as an activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or in relation to any function entrusted to a Municipality under Article 243W of the Constitution.
The Authority ruled that Sweeping Service provided by the applicant to the Housing Directorate of the Government of West Bengal, cannot be classified as an activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or in relation to any function entrusted to a Municipality under Article 243W of the Constitution. The exemption under Sl No. 3 or 3A, as the case may be, of Notification No 12/2017-CT (Rate) dated 28.06.2017 and WB Govt Gazette Notification-1136-FT dated 28.06.2017 is not, therefore, applicable to such supplies.
10. Whether exemption from payment of GST is available to a society providing Security services and Scavenging services to various hospitals under the State Government as well as the Central Government in terms of Notification No 12/2017-CT(Rate) dated 28.06.2017 and West Bengal Government Gazette Notification-1136-FT dated 28.06.2017, as amended?
Held: No
In the case of Ex-Servicemen Resettlement Society-AAR West Bengal, the applicant is supplying Security Guards & Scavenging Services to the medical colleges and hospitals of West Bengal without and also to the Central Govt. Cancer Institute. The Applicant contends that the services provided by them are exempt by way of activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or in relation to any function entrusted to a Municipality under Article 243W of the Constitution. The applicant further stated that no materials/equipment is supplied by them.
The concerned officer from the revenue submits that the above exemption is extended to Panchayats and Municipalities. The Applicant, being a private party, is not eligible for this exemption.
The Authority found that in order to come within the ambit of Exemption Notice, the service should be an activity in relation to any function entrusted to a Panchayat under Art 243G of the Constitution or to a Municipality under Art 243W of the Constitution.The Applicant’s eligibility under Sl No. 3 or 3A of the Exemption Notification should, therefore, be examined from three aspects: (1) whether the service being supplied is pure service or composite supply, (2) whether the recipient is government, local authority, governmental authority or government entity, and (3) whether the services provided are classifiable as a function entrusted to a Panchayat or a Municipality under the Constitution.
Since no goods are supplied by the applicant while provisioning the services, the applicant’s services are classifiable as pure services. The supplies are made, according to the Application, to hospitals owned or managed by the government. It is, therefore, obvious that the recipient is government or governmental authority etc. A study of Article 243G and 243W of the Constitution of India makes it clear that “Security Services” provided to Government Hospitals and Medical Colleges, as institutions of Central/State/District/Local authorities, are clearly not covered under the either list. Also, the services which the Applicant bundled under the description ‘Scavenging Services’ do not come within the scope of Article 243G and 243W of the Constitution of India therefore, not exempt under Sl No. 3 of the Exemption Notification. The Authority ruled that the benefit of exemption from the payment of GST is not available to the applicant under Notification No 12/2017-CT(Rate) dated 28.06.2017 and WB Govt Gazette Notification-1136-FT dated 28.06.2017, as amended, for the supply of Security Services and the bundle of service that he describes as ‘Scavenging Services’.
