Complete Case Digest of Maharashtra AAR (Part 3)

The Maharashtra GST AAR refers to the Advance Ruling Authority (AAR) for the state of Maharashtra under India's Goods and Services Tax (GST) regime. The AAR is a quasi-judicial organisation that assists taxpayers seeking clarification on various areas of GST. The State GST Commissioner and the State GST Additional Commissioner comprise the Maharashtra GST AAR. They hear applications from taxpayers seeking clarity on GST provisions and deliver judgements on a variety of GST-related matters. Amount Pooled by Clubs to Meet Expenses other than Administrative Expenses liable to GST In re: M/s Rotary Club of Mumbai Elite The Maharashtra Bench of the Authority of Advance Ruling ( AAR ) in an application filed by Rotary Club of Mumbai Western Elite held that only membership fees received from members of the club shall be exempt making other collections (except for meeting administrative expenses) liable to GST. The Bench consists of Shri B. Timothhy and Shri A.A. Chahure held that the amount collected by Rotary Club to its members constitutes supply under GST. The said amount is paid towards the convenience of members and pooled together for paying meeting expenses, communication expenses, RI per capital dues, subscription fees to the Rotarian or Rotary regional magazine, district per capita assessment and the same is deposited in a single bank account. Prize Money from Horse Race attracts 18% GST In re: Vijay Baburao Shirke The Maharashtra Authority of Advance Ruling (AAR) has ruled that receipt of prize money from horse race conducting entities, in the event horse owned by the applicant wins the race, would amount to ‘supply under section 7 of the Central Goods and Service Tax Act, 2017. The bench observed that the applicant’s activity and services rendered are not specifically described in the said notification 11/2017 and hence, it is covered by the entry at Sr. no. 35 i.e. “Other services and other miscellaneous services including services nowhere else classified” and are held taxable services @ 18 % (9% each of CGST and SGST). According to us, as discussed above, an applicant's transaction is a supply of services, under entry at Sr. no. 35 of notification no. 11/2017 i.e. “taxable services” and liable to tax @ 18% under GST Act”. Construction of Tunnel is Composite Supply and not Earthwork In re: M/s Soma Mothit Joint Venture The Maharashtra Authority of Advance Ruling in an application filed by Soma-Mohite Joint Venture held that construction of the tunnel under joint venture shall be the composite supply of works contract and not earthwork. The supply is hence not leviable to a concessional rate under the below-stated notification. The bench consists of B. Timothy and B.V. Borhade held the concessional rate of tax as per this entry is available to those composite supply of works contract where the earthwork constitute more than 75% of the value of the works contract. Shyam Samruddhi is an Organic Fertilizer liable to 5% GST M/s Alligo Agrivet Private Limited The Maharashtra Authority of Advance Ruling in an application filed by Alligo Agrovet Pvt Ltd held that Shyam Samruddhi derived from an organic source is an Organic Fertilizer classifiable under HSN 3105 liable to 5% GST. The Bench consists of Hon’ble members B. Timothy and B.V. Borhade held that the above products are classifiable under HSN Code – 3808 under the head ‘Plant Growth Regulators’ and are liable to the rate of 18% under Notification Number 1 of 2017 – Central Tax (Rate) dated 28.06.2017 each respectively. Further, the good Shyam Samruddhi is an organic fertilizer classifiable under HSN – 3105 and is liable to a rate of 5% as per Sl. Number 182D of Schedule I of Notification Number 1 of 2017 Central Tax (Rate) dated 28.06.2017. No GST for Supply of Maritime Products from Bonded Warehouses to Vessels In re M/s Wilhelsmen Maritime Services Private Limited The Maharashtra Authority of Advance Ruling has held that, Supply of Maritime Products from Bonded Warehouses to Vessels not liable to Goods and Services Tax (GST). The Authority has observed that, WMSPL has w.e.f 1.7.2017 levied and paid GST on all its “Maritime Products” supplies. However, in WMSPL view the said supply should be considered an “Export of goods” as defined under Section of the IGST, 2017 and thus be considered as a zero-rated supply as per Section 16 of IGST Act, 2017. GST leviable on Advisory & Management Fees received in Indian Rupee for Services Provided to AIF Fund In re: M/s Multiples Alternate Asset Management Private Limited The Maharashtra State Authority for Advance Ruling (AAR) has held that the GST is payable on the advisory and management fee received by the assessee in Indian currency from the domestic contributors for financial services provided to AIF Fund. The Maharashtra State Authority for Advance Ruling (AAR) has held that the GST is payable on the advisory and management fee received by the assessee in Indian currency from the domestic contributors for financial services provided to AIF Fund. Supply of Ice-Cream Scoop would attract 18% GST In re: M/s Arihant Enterprises The Authority for Advance Rulings (AAR), Maharashtra has held that the supply of an ice-cream Scoop would attract 18 per cent Goods and Services Tax (GST). The AAR observed that “the ice creams are sold in the same form as received by them and at agreed rates not exceeding the MRP and in most of the cases, the said ice creams appear to be consumed outside the premises of the applicant. Even if we consider the said transaction as a composite supply as per Section 2(30) of the CGST Act we find that the principal supply in the subject case is a sale of goods i.e. ice creams, being the predominant element of the transaction.” No GST on Interest-Free Security Deposit for Lease In re: M/s E Square Leisure Pvt Ltd The Authority for Advance Rulings ( AAR ), Maharashtra has held that the Goods and Services Tax ( GST ) cannot be levied on the interest-free security deposit, given for leasing a commercial property. Granting relief to the applicant, the authority observed that the definition of supply requires presence of consideration as an element for any of the defined transactions to be eligible for tax. Further, the definition of consideration given under the CGST Act, 2017 requires a direct link between the payment and supply. Deposits will only classify as consideration where the supplier appropriates such deposit as consideration for the said supply. Gold Schemes Offered to Customers not eligible for GST Input Tax Credit In re: Biostadt India Limited The Maharashtra Advance Ruling Authority (AAR) has ruled that the companies cannot avail input tax credit under the GST regime in respect of Gold Schemes offered to the customers to promote business. The authority held that since the scheme amounts to gifts, the company cannot claim input tax credit on the procurement of gold coins, which are to be distributed to customers. AAR relied on the Section 17(5)(h) of the Central GST Act, which says, “…input credit shall not be available in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.” Maintenance Contracts are Services In re: M/s Cummins India Limited In a significant ruling, the Authority for Advance Ruling (AAR), Maharashtra has held that the supply under annual maintenance contracts (AMCs) are a “composite supply” and classified them as service. The authority found that the principal supply in the transaction before us is supply of service, then the place of supply is required to be determined. The place of supply would be determined in terms of the default Section 12(2) of the IGST Act which states that the location of the recipient would be the place of supply. ITC not available for GST paid for Hotel Stay on Rent-free Accommodation provided to Company Director and Manager In re: M/s POSCO India Pune Processing Center Private Limited The Authority for Advance Ruling ( AAR ), Maharashtra has held that the input tax credit not available for GST paid for the hotel stay in case of rent-free hotel accommodation provided to the General Manager and Managing Director of the company. It was observed that the MD/GM could have been provided with any other residential accommodation and still would have performed their duties for the applicant. In the case of residential accommodation, as per the provision of the GST laws, GST is not liable to be paid on the rent received. AAR clarifies Taxability of Unleavened and Leavened Flatbread, Corn Chips, Pancake and Pizza Bread In re: M/s Signature International Foods India Private Limited The Maharashtra Authority of Advance Ruling (AAR) has clarified the Taxability of Unleavened and Leavened Flatbread, Corn Chips, Pancake and Pizza Bread. After going through the ingredients and manufacturing process of the product a differentiation between ‘bread, chapatti or roti’ and ‘pizza bread’, it was ruled that the schedule entry for pizza bread is wide enough to cover pizza base within its ambit and hence is liable to tax at 18%. No GST applicable on Reimbursement of Salary on behalf of Foreign Entity In re: M/s DRS Marine Services Private Limited The Maharashtra Authority of Advance Ruling has ruled that, Goods and Services Tax (GST) is not applicable on Reimbursement of Salary on behalf of Foreign Entity. While ruling in favour of applicant, the AAR observed that, “the applicant will be acting as a pure agent of RMS in as much as the entire amount received by them as Crews’ Salary will be disbursed to the Crew and no amounts from the said receipt will be used by the applicant for his own interest. In fact, for performing as a pure agent they will also be receiving compensation separately in the form of fixed fees to be charged as service charges. In view of the above we are of the opinion that the applicant will not be liable to pay GST on Salary amount received from RMS and disbursed to the Crew”. GST payable by E-Commerce Operator for Commission Received from Website Users In re: Sadashiv Anjalee Shete The Maharashtra Authority of Advance Ruling ( AAR ) has ruled that, GST is payable by E-Commerce Operator for commission received from website users / pundits , not for the total amount received. While ruling against the application the AAR said that, “In the present case we find that applicant and recipient are not related persons and price received is sole consideration. We further see that these services are given by the applicant in his business models to choose the type of model. In all the three business models we find that consideration is first received by him on online as a whole and thereafter major part of it, is given to Pundits who are having an agreement with the applicant to provide their services as and when it is requisitioned but they are not the applicant’s employees but are providing their services independently. The actual basic services like puja and abhishek etc are performed by the pundits or Brahmins which are exempted by nature of notification issued under GST Act. No GST on Membership Fee for Convenience of Lions Club Members, says It is not for Furtherance of Business In re: Lions Club Poona Kothrud The Maharashtra Authority of Advance Ruling has held that there is no GST liability for the amount collected by individual Lions club and Lions District is for the convenience of Lion members and pooled together only for paying Meeting expenses & communication expenses and the same is deposited in a single bank account. While deciding the issue against the department, the AAR observed that, “As can be seen, the club is not formed to provide any supply of goods or services to its members qua the fees received from them. There being no supply qua the fees received, there arises no occasion for us to visit the definition of ‘Supply’ under the GST Act. The applicant club as per the facts put up before us does not render any ‘Supply’ for the purposes of the GST Act”. GST payable on Penal Interest for Delayed Loan EMI In re: M/s Bajaj Finance Limited The Advance Ruling Authority (AAR), Maharashtra has held that the penal interest collected by the Bajaj Finance Limited, an Indian financial services company, from its customers for delayed payment of EMI is subject to GST.The authority pointed out that there is a clear understanding or agreement between the parties to foresee and tolerate an act or a situation of default on the part of loanees for a monetary consideration which is actually a consideration received by the applicant, though in the agreement they may be giving this consideration, other names such as ‘penal interest’, penal charges, penalty, etc. as thought proper by them, but these different nomenclatures in their Agreement. Back Offices liable to IGST and Supporting Services to Overseas Entities not ‘Zero-Rated Supply’ In re: Behr - Hella Thermocontrol India Private Limited The Maharashtra Authority for Advance Ruling (AAR) in an application filed by Behr-Hella Thermocontrol India Pvt. Ltd. ruled that testing services of providing Functional Tests, Electrical Tests, Mechanical Tests, Life-Cycle Tests, etc. to overseas entities are liable to tax under Integrated Goods and Services Tax Act (IGST Act) and are not ‘Zero-rated supply’ under the same. The Bench constituting B.V. Borhade and Pankaj Kumar while examining the provisions of Section 16 concerning ‘zero rated supply’ which makes a reference to definition of ‘export of services’ under Section 2(6)(iii) which consequently refers to Section 13 to determine place of supply where location of supplier is outside India. It held that the present situation clearly fits within the provisions of Section 13(3)(a) i.e. the services are physically made available by the service receiver to the service provider and therefore liable to tax. GST payable on Educational Courses Offered by Entities approved by NSDC In re: IMS Proschool Private Limited The Authority for Advance Ruling (AAR), Maharashtra has held that there is no tax exemption to the educational courses offered by the entities approved by the National Skill Development Corporation ( NSDC ) under the Goods and Services Tax (GST) regime. The authority noted that the functions of National Skill Development Corporation (NSDC) are in the nature of encouraging and supporting the private sector in skill development which is also one of its mandates and functions. Apart from this it is also implementing agencies for various schemes such as Pradhan Mantri Kaushal Vikas Yojana , Sankalp, Udaan, etc. 18% GST on Liquidated Damages: Appellate Authority upholds AAR Order M/s Bharat Heavy Electricals Limited The Appellate Authority for Advance Ruling (AAAR), Maharashtra has upheld the order of AAR wherein it was held that the liquidated damages are classifiable as ‘other services’ and is taxable at the rate of 18% GST. The members observed that the levy of the liquidated damages was specifically identified as an independent levy under the contract. “In terms of the aforesaid agreement, GST would be applicable on the Liquidated Damages…we have observed that the impugned levy of liquidated damages would be recovered by clause (e) of para 5 of Schedule II appended to the GST Act…in terms of the aforesaid agreement, schedule entry no.35 of the Notification no.11/2017-Central/State Tax (Rate) for taxable services would cover the impugned levy of liquidated damages”, read the order. Concessional GST Rate available to all Affordable Housing Projects, Registration under PMAY not required In re: M/s The Ideal Construction The Authority for Advance Rulings (AAR), Maharashtra has ruled that 12% GST (8% GST after deducting the value of land) would be levied in case of Affordable Housing Project. The authority clarified that if the project qualifies as an Affordable Housing Project, then registration under Pradhan Mantri Awas Yojana is not required to avail this benefit. The authority noted that the GST Council in its 25th meeting extended the concessional rate of 12% (8% GST after deducting value of land) to services by way of construction of low cost houses up to a carpet area of 60 sqm in a housing project which has been given infrastructure status under notification No. 13/06/2009 dated 30th March, 2009. Services provided by Charitable Trusts not exempted under GST, Tax payable on Sale of Spiritual Products In re: M/s Shrimad Rajchandra Adyatmik Sastang Sadhana Kendra The Authority for Advance Ruling (AAR), Maharashtra has clarified that the activity of imparting yoga is not exempted under the Goods and Services Tax (GST) regime as the same constitutes “business”. The Authority also clarified that GST is payable on the supply of spiritual products by the Trust as the services provided by the Charitable and religious trusts are not specifically exempted under the new tax regime. The authority held that the activities carried on by the applicant is in the nature of business as defined under section 2(17) of the GST Act and further considering the GST Regulations that all services provided by the religious trusts and charitable institutions are not exempt from tax. Post- Sale Discounts cannot be Deducted from Transaction Value under GST In re: M/s Ultratech Cement Limited In a major setback to the traders, the Authority for Advance Rulings (AAR) of Maharashtra has ruled that the post- sale discounts offered by manufacturers to dealers cannot be deducted from the transaction value under the Goods and Services Tax (GST) regime. The authority found that there is no basis or criteria or parameter (which may even be of personal relations nature between the parties to the agreement) mentioned in the agreement on the basis of which the quantum of discount to be given on the goods which have already been supplied is mentioned. Compensation for Alternative Accommodation / Delayed Handover of Possession to Tenant subject to GST In re: Zaver Shankarlal Bhanushali In a major setback for the real estate sector, the Advance Ruling Authority (AAR) of the Maharashtra State held that compensation received by a tenant, covered by a redevelopment plan, for alternative accommodation during construction and any additional compensation for delayed possession of new premises will be subject to Goods and Services Tax (GST). The AAR observed that the act of vacating premises for facilitating the developer would constitute ‘supply’ for the purpose of attracting tax liability under the GST regime. 18% GST Applicable to Liquidated Damages In re: M/s Maharashtra State Power Generation Private Limited The Maharashtra Authority for Advance Ruling (AAR) held that liquidated damages are classifiable as ‘other services’ and are taxable at the rate of 18% GST. The Authority comprising Members B.V. Borhade & Pankaj Kumar after perusing the contract and related documents found that the contract price and the liquidated damages are two different aspects. They noted that deduction of one from the other was a mere facilitation towards the settlement of the accounts. The members observed that the levy of the liquidated damages was specifically identified as an independent levy under the contract. E-Rickshaw Tyres is liable to GST at the rate of 28% In re: CEAT Limited The Authority for Advance Ruling (AAR) Mumbai held that ‘ E-Rickshaw tyres ’ is classified under Tariff Heading 4011 and the rate of tax shall be at the rate of 14 % under Maharashtra Goods and Service Tax, Act 2017 and 14% under the Central Goods and Services Act, 2017. The Authority composed of Members B.V. Borhade & Pankaj Kumar distinguished between powered cycle rickshaw and E rickshaw. E rickshaw is not a powered cycle rickshaw because it doesn’t have a pedal which is a prerequisite for Powered Cycle Rickshaw and it cannot be peddled. It is a motor vehicle under the Motor Vehicle Act. The Authority noted that the product of the appellant is with electric batteries and wholly different from powered cycle rickshaws. 12% GST applicable to Natural Ester Dielectric Fluid In re: M/s Cargill India Private Limited The Authority for Advance Rulings (AAR), Mumbai held that Natural Ester Dielectric Fluid (Envirotemp FR3) falls under the description of ‘inedible preparation of vegetable oils’ and is taxable at 12% Goods and Services Tax. The Authority composed of Members B.V. Borhade & Pankaj Kumar observed that the product of the applicant is a preparation from vegetable oil and is derived from soybean Oil. The product being inedible, the authority further observed that it could be covered by the description “inedible preparation of vegetable oils”. Consequently, it held that the product Envirotemp FR3 falls under Serial No 27 of Schedule II of Notification under MGST, Act 2017 and is taxable at the rate of 12%. Caesarstone classifiable as “Other than Natural Sands”, 18% GST applicable In re: M/s Hafele India Private Limited The Authority for Advance Ruling (AAR), Maharashtra recently held that Caesarstone Quartz Surface is classifiable under HSN Code 6810 and is liable to tax at the rate of 18%. However, the Authority composed of members B.V. Borhade & Pankaj Kumar observed that Caesarstone is in the nature of an Engineered Stone that falls under the HSN Code 6810 and is taxable at 18%. Services Provided by Entrance Coaching Centers liable to GST at 18% In re: Simple Rajendra Shukla The Authority for Advance Ruling (AAR), Maharashtra held that services related to providing the coaching for entrance examination is taxable under GST at the rate of 18%. he Authority comprising Members B.V. Borhade & Pankaj Kumar found that the private institute doesn’t have any specific curriculum and does not conduct any examination or award any qualification recognized by any law which would be covered in the above notification. “The activity of the appellant is not covered under the specific definition provided for interpretation of exemption notification. We find that the education service provided in the case is taxable at the rate of 9% under CGST Act and 9% under SGST Act.” the members observed. Setting Up & Operation of Solar Power Plant is in nature of ‘Works contract’, 18% GST applicable In re: M/s Fermi Solar Farms Private Limited The Authority for Advance Ruling (AAR) Maharashtra ruled that in the case of separate contracts for supply of goods and services for solar power plant, there would be a cumulative consideration as ‘works contract’ and hence the rate of tax would be 18% under IGST and an aggregate of 18% of CGST and SGST. Though the authority couldn’t provide clarity to the other two questions owing to absence of any documents, the first question was clarified in the aforementioned manner. The authority further stressed that depending upon the nature of supply, intra-state or inter-state, the rate of tax would be governed by the entry under Integrated Goods and Service Act, 2017. GST leviable on Contribution made by RBI and Public Sector Banks to NIBM In re: M/s National Institute of Bank Management The Authority for Advance Ruling (AAR), Maharashtra has held that GST can be levied on the contribution to the National Institute of Bank Management ( NIBM ) by the member banks like the Reserve Bank of India and the Public Sector Banks. “Any contributions collected/received by the applicant will definitely be understood as ‘consideration as the same has been paid for supply of services. The applicant has fulfilled both the conditions prescribed by Section 7 of the GST Act; firstly that such supply is made by them in lieu of consideration i.e contribution and secondly, such supply has been made in the course or furtherance of business since the term business includes provision by club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members,” it said. GST applicable on Construction of Flats to be given on Lease In re: M/s Nagpur Integrated Township Private Limited The State Appellate Authority of Advance Ruling (AAAR), Maharashtra has recently held that GST was rightly levied on real estate developers engaged in the development of land and construction of flats to be given on lease. The AAAR has observed that normally the flats given on lease are completed flats with occupancy certificates, and the general lease rent in the Mumbai market amounts to 2 percent to 3 percent of the property value per month. It, however, found that the amount paid as the lease consideration without having possession of the land was around 50 percent to 60 percent of the price of ready-to-move flats. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

Complete Case Digest of Maharashtra AAR (Part 3)

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Complete Case Digest of Maharashtra AAR (Part 3)

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