MARCH 04, 2020

By Vijay Kumar

SEC.97 of the CGST Act, 2017 reads as:

Sec.97: Application for advance ruling.-

(1) An applicant desirous of obtaining an advance ruling under this Chapter may make an application in such form and manner and accompanied by such fee as may be prescribed, stating the question on which the advance ruling is sought.

(2) The question on which the advance ruling is sought under this Act, shall be in respect of,-

(a) classification of any goods or services or both;

(b) applicability of a notification issued under the provisions of this Act;

(c) determination of time and value of supply of goods or services or both;

(d) admissibility of input tax credit of tax paid or deemed to have been paid;

(e) determination of the liability to pay tax on any goods or services or both;

(f) whether applicant is required to be registered;

(g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.

Is the 'place of supply' an issue which can be agitated before the Authority for Advance Ruling?

In Utility Powertech Ltd, the GST AAR Chhattisgarh - 2018-TIOL-124-AAR-GST held,

Determination of place of supply has been kept out of the purview of Authority for Advance Ruling (AAR) stipulated under the provisions of section 97(2) of the CGGST Act, 2017.

In Fichtner Consulting Engineers (I) Pvt Ltd, the GST AAR Tamilnadu - 2018-TIOL-129-AAR-GST held,

No other issue can be decided by the Advance Ruling Authority and therefore the Acts limit the Advance Ruling Authority to decide the issues earmarked for it under Section 97(2). The Application is therefore rejected without going into the merits of the case, on the issue of lack of jurisdiction.

In Kandla Port Trust - AAR, Gujarat - 2018-TIOL-194-AAR-GST held,

As the 'place of supply' is not covered by Section 97(2) of the Acts, this authority is helpless to answer the question raised in the application, as it is lacking jurisdiction to decide the issues. The jurisdiction of this authority does not extend to the questions on determination of 'place of supply'.

In Tech Mech Global Interface Pvt. Ltd. GST AAR Andhra Pradesh - 2019-TIOL-486-AAR-GST, held

The applicant, sought Advance Ruling in “Place of Supply“ issue, which is outside the purview of the Advance Ruling Authority as per Section 97(2) of CGST Act, 2017. Hence the application is not admitted under Sec 98 (2) of CGST Act, 2017 and APGST Act, 2017.

In Dagger Die Cutting India Pvt Ltd - Tamil Nadu AAR - 2019-TIOL-149-AAR-GST held,

The Act limits the Advance Ruling Authority to decide the issues earmarked for it under Section 97(2) and no other issue can be decided by the Advance Ruling Authority. The issue for which Advance Ruling is sought depends on the 'Place of Supply' of the goods, which is not in the ambit of this authority. The Application is therefore rejected without going into the merits of the case, on the issue of lack of jurisdiction.

The Advance Ruling Authority consists of two Joint Commissioners. There is an appellate Authority consisting of two Chief Commissioners. The Appellate Authorities had also decided on this mega issue.

In Toshniwal Brothers, the Karnataka Appellate Authority For Advance Ruling - 2019-TIOL-01-AAAR-GST, held

Determination of place of supply is not question on which an Advance Ruling can be sought. The AAR is a creature of the statute and has to function within the legal boundary mandated by the Act. As the 'place of supply' is not covered by section 97(2) of the Acts, the AAR was right in refraining from answering this question on the grounds of lack of jurisdiction. We uphold the ruling on this issue.

In NES Global Specialist Engineering Services Pvt Ltd, the Maharashtra Appellate Authority For Advance Ruling - 2019-TIOL-73-AAAR-GST, held

Therefore, we do not have jurisdiction to pass any ruling on such questions which involve the determination of the place of supply of the goods or services or both.

In view of the above rationale, the Advance Ruling Authority should have refrained from passing any ruling on the above mentioned two questions asked by the Respondent vide the Advance Ruling application filed before the Advance Ruling Authority. However, the Advance Ruling Authority have passed the ruling in the instant case by exceeding its jurisdiction, we hereby set aside the impugned ruling passed by the Advance Ruling Authority.

In Multiples Alternate Asset Management Pvt Ltd, the Maharashtra Appellate Authority For Advance Ruling, Goods And Services Tax - 2019-TIOL-71-AAAR-GST, held

Now, to decide the taxability of the above said Investment Advisory and Management Fees, it is imperative to determine the place of supply in respect of the impugned overseas transactions. Further, on perusal of the provisions under Section 97(2), it is adequately clear that question on determination of the 'place of supply' has been excluded from the above mentioned specific and exhaustive set of questions, in respect of which advance ruling can be sought under the CGST Act. This clearly indicates that we cannot pass any ruling in respect of the question which involves the determination of the place of supply of the goods or services or both.

In view of the above rationale, it can decisively be concluded that the question posed by the Appellant i.e. whether the GST is applicable on the Investment Advisory and Management Fees collected from the overseas Investors, is beyond the jurisdiction of the Advance Ruling, and hence cannot be decided by the Advance Ruling Authority. Accordingly, the Advance Ruling Authority should have refrained from passing any ruling over the above said questions raised by the Appellant. Since, the Advance Ruling Authority have passed the ruling in the instant case by transcending its jurisdiction, we set aside the impugned ruling passed by the Advance Ruling Authority.

In Five Star Shipping, before the Maharashtra Appellate Authority For Advance Ruling - 2018-TIOL-21-AAAR-GST, the appellant withdrew his appeal and the Authority held,

There being no specific question in respect of place of supply covered under Section 97 of the GST Act, the applicant conceded that his queries with respect to place of supply may not be considered for decision by the Advance Ruling Authority.

In Sutherland Mortgage Services Inc, the Kerala Authority For Advance Ruling - 2019-TIOL-172-AAR-GST, held

This authority is a creature of statute and has to function within the legal boundary mandated by the Act. As the 'place of supply' is not covered by Section 97(2) of the Acts, this authority is helpless to answer the question raised in the application, as it is lacking jurisdiction to decide the issues. The jurisdiction of this authority does not extend to the questions on determination of 'place of supply'.

Against this order, the taxpayer did not go in appeal to the Appellate Authority for Advance Ruling, but went straight to the High Court with a writ petition and the High Court, just a couple of days ago ruled - 2020-TIOL-486-HC-KERALA-GST,

A reading of clauses (a) to (g) of sub section (2) of Sec. 97 of the CGST Act would make it clear that 7 items are enumerated as per clauses (a) to (g) of sub section (2) of Sec. 97 and all those clauses other than clause (e) thereof, are in specific terms. Whereas clause (e) of sub section (2) of Sec. 97 of the CGST Act clearly mandates that the larger issue of "determination of liability to pay tax on any goods or services or both" would also come within the ambit of the questions to be raised and decided by the Advance Ruling Authority on which advance ruling could be sought and rendered under the said provisions. Whereas Clauses (a), (b), (c), (d), (f) & (g), ie. the clauses other than clause (e), are in specific "pigeon holes" and the provision as per clause (e) of sub section (2) of Sec. 97 is in wide terms and the Parliament has clearly mandated that the latter issue of determination of liability to pay tax on any goods or services or both, should also be matters on which the applicant concerned could seek advance ruling from the Advance Ruling Authority on which the said authority is obliged to render answers thereto. The Parliament has made the said provision envisaging that in transactions in nature, where India is now a growing economy and has to make its substantial performance in economic growth and development not only domestic investments, but even foreign investments would also be heavily required and that host of tax laws has been subsumed into the overarching umbrella of the goods and sales tax regime introduced by the Parliament and the Parliament would have certainly taken cognizance of the fact and has intended that very often applicants would require clarity and precision about various aspects of taxation in the transactions and that there should be certainty and precision in those matters, so that the applicant concerned is given the right to seek advance ruling even in such a larger issue as the one as per clause (e) of Sec. 97(2) of the CGST Act, which deals with issue of determination of liability to pay tax on any goods or services or both.

In the instant case, it is true that the issue relating to determination of place supply as aforestated is not expressly enumerated in any of the clauses as per clauses (a) to (g) of Sec. 97(2) of the CGST Act, but there cannot be any two arguments that the said issue relating to determination of place of supply, which is one of the crucial issues to be determined as to whether or not it fulfills the definition of place of service, would also come within the ambit of the larger of issue of "determination of liability to pay tax on any goods or services or both" as envisaged in clause (e) of Sec. 97(2) of the CGST Act. The Advance Ruling Authority has proceeded on a tangent and has missed the said crucial aspect of the matter and has taken a very hyper technical view that it does not have jurisdiction for the simple reason that the said issue is not expressly enumerated in Sec. 97(2) of the Act. This Court has no hesitation to hold that the said view taken by the Advance Ruling Authority is legally wrong and faulty and therefore the matter requires interdiction in judicial review in the instant writ proceedings. In that view of the matter, it is ordered that the abovesaid view taken by the Advance Ruling Authority is legally wrong and faulty and is liable to be quashed and accordingly declared and ordered. Consequently, it is ordered that the said rejection order as per Ext.P-2 will stand quashed and Ext.P-1 application will stand remitted to the Advance Ruling Authority concerned for fresh consideration and decision in accordance with law.

Now, what will happen to all the rejected applications?

Will the Authorities in States other than Kerala follow the Kerala High Court judgement?

The High Court also had some sagely words before parting with the above case. It observed,

Before parting with this case, it has to be borne in mind that India is at the cusp of great global changes and there cannot be any two opinions for anyone, who cherishes the best interests for this country, that with extreme hard work and industry, we have to progress economically, socially and in all spheres of our life. It has been in the consistent policies of the various Governments, both at the Union level and at the levels of the States concerned, that foreign investments, apart from domestic investments, are also highly needed for our economy, subject to the regulatory framework projected by laws. In cases like this, a foreign entity like the principal company in this case, would like to have precision and certainty about tax liability so that they can accordingly modulate their future outlook and it goes without saying that the executive authorities concerned including the taxation authorities will have to take the correct perspective and in accordance with the legislative policy framed as per the wisdom of the Parliament and the State Legislatures to ensure that there is certainty and precision in taxation liability, etc. so that the domestic investors as well as foreign investors, will get more incentive to continue and increase their level of activities, for the overall better development and growth of our economy.

Do we need so much litigation? The High Courts are already overburdened. Do we need to flood them with GST cases? Should the officers be so hyper-active in denying small mercies to the taxpayers?

In any case, why should anyone apply to the Advance Ruling Authority, knowing what it is?

We are scared of the Coronavirus disease, but recently an advocate submitted before a High Court that GST virus is more dangerous than corona virus.

Until next week