The Maharashtra Authority for Advance Ruling (AAR) has held that the Integrated Goods and Service Tax (IGST) would be applied to transfer of monetary proceeds by IVL India under the reverse charge mechanism.
IVL Sweden was a foreign company incorporated under the laws of Sweden and the applicant- IVL India, Environmental R&D private ltd was a company incorporated under the Indian laws. IVL Sweden had incorporated IVL India in order to fulfil the tender condition on the ‘project management consultancy service’ by the municipal corporation of greater Mumbai (MCGM). The applicant had sought advance ruling to determine whether mere transfer of monetary proceeds by IVL India Environmental R&D PVT Ltd to IVL Swedish Environmental Research Institute Limited without underlying import of service would be liable for IGST or not.
Badrinath who appeared for the applicant submitted that the IVL India had been incorporated for the sake of satisfying conditions of (MCGM) only and IVL India had not received any service from the IVL Sweden. He also contended that the Integrated Goods and Service Tax (IGST) would not be applied on reverse charge mechanisms.
The two-member bench of M. Rammohan Rao (additional commissioner of income tax – member)and T.R. Ramanan i(joint commissioner of state tax-member) observed that as the applicant had received support services from IVL Sweden, which was located in a non-taxable territory, the entire integrated tax leviable under Section 5 of the Integrated Goods and Services Tax Act should be paid on the reverse charge basis by the applicant for such services. The bench further ruled that the applicant would be liable to GST on the money proceeds which had been transferred to IVL Sweden because the ultimate responsibility for the performance of the contract would remain with IVL Sweden.
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