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Is IGST paid under RCM eligible to ITC?
Applicant: Fom Aluminium Machines Pvt. Ltd. (GST AAR Karnataka)
Ruling has obtained on following points:
1) Is Our Export of Services attract IGST under RCM
2) Is our Services considered as Intermediary Services
3) Is IGST paid under RCM eligible to ITC
4) Provision in GST Returns to show the transactions
5) We are not collecting IGST from our Customer and is absorbed as Cost-impact on the transaction value?
Facts of the case:
- The applicant company is a subsidiary of M/s Fom Industrie s.r.l, Italy, a Manufacturer of Aluminum working Machinery.
- The applicant is engaged in the business of Importing, Trading & Serving of Aluminium & UPVC Working Machinery. These machines are used for manufacturing Aluminium Doors, Windows &
- The applicant company identifies the customers in India, by using their sales representative / Personnel and refers the said customers to the parent company in Italy.
- The applicant stocks 86 sells the small and medium category of machines, that have been imported, to Indian customers.
- The applicant also books the orders for bigger machines which are advanced Automated CNC Machines, which are directly supplied/shipped to the identified Indian customers by the parent company in Italy. The applicant is not involved in import of the said machines.
- The applicant gets sales commission /marketing fee as per clause envisaged in the agreement by the parental company for booking of the direct supply orders.
Findings and Conclusion:
On the basis of submission & on perusal of the information furnished by the applicant, that they are involved in three business activities i.e.
(i) they import the machines in their own name, stocks the same and sells the machines,
(ii) they book the orders for the parent company M/s Fom Industrie s.r.l., Italy for sale of machines 86 earns sales commission and
(iii) identifies the probable customers for M/s Universal Pack s.r.l., Italy by marketing their products and earns monthly 4000 euros irrespective of the result of the said marketing.
- “is our export of services attracts IGST under RCM?’.
In the instant case the applicant is, undoubtedly, a supplier and hence the question of levy of IGST on export of services, under RCM, does not arise.
- The second question reads as “Is our services considered as Intermediary Services ?”.
The instant question is in relation to the second and third type of business activities. We proceed to examine these business activities.
- The applicant, as an agent of their parent company orders from the Indian Customers for Advanced Automated CNC Machines, which are supplied directly to the Indian Customers by their parent company in Italy. Also company gets sales commissiomn for this.Therefore the applicant is undoubtedly is an agent of the parent company under this type of transactions.
- As per Section 13 (8) (b) of the IGST Act 2017, the place of supply of “intermediary services” shall be the location of the supplier of services.
In the instant case the applicant acts as an agent, in terms of the aforesaid agreements, to the parent company Fom Industrie s.r.1, Italy as well as M/s Universal Pack s.r.1, Italy beyond doubt. Therefore the supply of services of the applicant under these transactions squarely falls under the Intermediary services and thereby the supply is in the taxable territory and thus the said supply is taxable, under forward charge mechanism.
- “Is IGST paid under RCM eligible for ITC?”
The levy of IGST is only on the inter-state supplies and importation of goods/services is treated as inter-state The IGST paid on clearance of imported goods by the applicant is available for ITC to the applicant. Further import of services attract IGST and the concerned importer has to discharge the said levy under RCM, which is also available for ITC to the importer of services. In the instant case the applicant is not importing any services and hence payment of IGST under RCM does not arise.
- The fourth & last question is not even a question but a piece of information Both these questions are not covered under the issues prescribed under Section 97(2) of the CGST Act 2017, on which the questions can be raised to seek advance ruling. Therefore no ruling is required to be given on these questions.
- Export of services by the applicant, if any, do not attract IGST under RCM, as the applicant becomes supplier for the said services.
- The services being provided by the applicant are squarely covered under the Intermediary Services and accordingly are taxable under forward charge mechanism, in the hands of the applicant.
- The payment of IGST under RCM does not arise as the applicant is a supplier but not the recipient of import of services.
- No. rulings are given in respect of fourth and fifth questions, as they do get covered under Section 97(2)of the CGST Act 2017 and hence out of the jurisdiction of this authority.