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 applicant, an investment advisory firm, has proposed to set up a new investment vehicle, AIF Fund wherein funds from various domestic & overseas investors will be pooled in & invested in various portfolio companies in India as per AIF Regulations. The proposed AIF Fund is a contributory trust registered with the SEBI. The assessee submitted that before setting up the fund, the applicant undertakes fundraising activities. Later, the applicant is appointed as Investment Manager of the AIF Fund & provides several services. For providing such services, the applicant raised invoices at regular intervals.
Before the AAR, the assessee sought for clarification regarding its tax liability under the GST regime.
The AAR bench observed that the Advisory and Management Fees received by the applicant are for financial services rendered to the AIF. It was noted that as the location of both the applicant as well as the AIF is in India, the place of supply must be determined by applying provisions of Section 12 of the IGST Act. It was further noted that as both parties are within taxable territory & the services rendered by the applicant to AIF are taxable, hence GST is payable u/s 12(12) of the IGST Act: AAR
The AAR held that “the Advisory and Management Services are provided to the AIF, which is a separate legal entity which makes investment decisions on the advice of the applicant and therefore sub-section 12 of Section 12 of IGST Act, 2017 will apply in this case also as both supplier and the recipient of service are located in India. For the same reason, we do not agree with the applicant’s contention that the transaction with foreign investors should be determined in terms of Section 13 of the IGST Act, 2017 because the recipient of service i.e. AIF is not located outside India and the applicant are not providing any services to the Overseas Contributors, The transaction also do not qualify to be an export of service as the condition specified in sub-clause (ii) of Sub-section (6) of Section 2 of IGST Act,2017 that recipient of service should be outside India, is not satisfied, and therefore it is not a zero-rated supply. We also do not agree with the concerned officer’s submission that the applicant should be treated as a financial institution which distinctly falls under Sec. 13(8)(a) of the IGST Act, 2017.”
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 applicant, an investment advisory firm, has proposed to set up a new investment vehicle, AIF Fund wherein funds from various domestic & overseas investors will be pooled in & invested in various portfolio companies in India as per AIF Regulations. The proposed AIF Fund is a contributory trust registered with the SEBI. The assessee submitted that before setting up the fund, the applicant undertakes fundraising activities. Later, the applicant is appointed as Investment Manager of the AIF Fund & provides several services. For providing such services, the applicant raised invoices at regular intervals.
Before the AAR, the assessee sought for clarification regarding its tax liability under the GST regime.
The AAR bench observed that the Advisory and Management Fees received by the applicant are for financial services rendered to the AIF. It was noted that as the location of both the applicant as well as the AIF is in India, the place of supply must be determined by applying provisions of Section 12 of the IGST Act. It was further noted that as both parties are within taxable territory & the services rendered by the applicant to AIF are taxable, hence GST is payable u/s 12(12) of the IGST Act: AAR
The AAR held that “the Advisory and Management Services are provided to the AIF, which is a separate legal entity which makes investment decisions on the advice of the applicant and therefore sub-section 12 of Section 12 of IGST Act, 2017 will apply in this case also as both supplier and the recipient of service are located in India. For the same reason, we do not agree with the applicant’s contention that the transaction with foreign investors should be determined in terms of Section 13 of the IGST Act, 2017 because the recipient of service i.e. AIF is not located outside India and the applicant are not providing any services to the Overseas Contributors, The transaction also do not qualify to be an export of service as the condition specified in sub-clause (ii) of Sub-section (6) of Section 2 of IGST Act,2017 that recipient of service should be outside India, is not satisfied, and therefore it is not a zero-rated supply. We also do not agree with the concerned officer’s submission that the applicant should be treated as a financial institution which distinctly falls under Sec. 13(8)(a) of the IGST Act, 2017.”
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