The West Bengal Appellate Authority of Advance Ruling (AAAR) ruled that the supply of service to Bharat coking coal Ltd. (BCCL) in terms of a Maintenance and Repair Contract (MARC) is import of service and GST applicable on the reverse charge basis.
The appellant, P.G. Korobkov Ltd., Russian Federation entered into a Maintenance and Repair contract with Bharat coking coal Ltd. Dhanbad (BCCL) for maintenance of Electric Rope Shovel, supplied by the appellant.
As per the agreement, a foreign MARC-holder shall be entirely responsible for all the tax, duties, license fees, and such other levies imposed outside BCCL’s country. The foreign supplier shall also be responsible for all taxes and duties in BCCL’s country legally applicable during the execution of the contract.
The appellant company sought an advance ruling to specify the person who is liable to pay tax in the aforesaid circumstances and whether it is legally justified by BCCL to deduct GST from payments made to the foreign company.
The AAR ruled that supply of service to BCCL in terms of MARC is not an import of service. The recipient is not, therefore, liable to pay GST on a reverse charge basis in terms of Notification dated June 28, 2017. The applicant, being the domestic MARC holder is liable to pay tax as applicable in terms of the MARC.
The Appellant has filed the Appeal against the Advance Ruling with the prayer to set aside the impugned Advance Ruling passed by the WBAAR or pass any such further order as may be deemed fit and proper in facts and circumstances of the case.
The appellant has claimed that their activity is an import of service and the tax is payable by BCCL. The WBAAR has not made any observation on this aspect while holding that the appellant’s domestic entity (domestic MARC holder) is the supplier of the service. Import of service, as defined under Section 2(11) of the IGST Act, 2017, contains a supply of service containing the three elements namely the supplier of service should be located outside India, the recipient of service should be located in India and the service should be provided in India.
The two-member bench of Devi Prasad Karanam and A.P.S Suri, while modifying the AAR’s ruling held that the supply of service by the appellant to BCCL qualifies as import of service as defined under Section 2(l 1) of the IGST Act, 2017 and GST is payable on such import of service by BCCL under reverse charge mechanism in terms of Notification dated June 28, 2017.
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