AAR Gujarat: GST Levy on RCM Amount Over Stamp Tax Reimbursement

Name and address of the applicant	M/s. Enpay Transformer Components India Private Limited. Plot No. 112, Alindra , Manjusar GIDC, Savli, Vadodara-391775.
GSTIN of the applicant	24AACCE2260M1ZR
Date of application	06.07.2018
“Clause(s) of Section 97(2) of CGST / GGST Act, 2017, under which the question(s) raised”	“(b) applicability of a notification issued under the provisions of this Act. (e) determination of the liability to pay tax on any goods or services or both”
Date of Personal Hearing	23.12.2020(Through online hearing)
Present for the applicant	Shri Rachit Shah CA

The Gujarat Authority of Advance Ruling (AAR) has passed a ruling that GST shall be applicable and that too on a ‘reverse charge basis’ on the sum that is paid for reimbursing stamp tax (as a pure agent). Here, in this case, the applicant Messrs Enpay Transformers Components India Pvt. Ltd. has been involved in the business of manufacturing and supplying the transformer components.

The aforesaid applicant has further stated that the company imports goods from its holding company Messrs Enpay Endstriyel Pzarlama ve Yatirim A.S. (hereinafter referred to as Enpay, Turkey) that is located overseas in Turkey. It is mentioned in the terms of payment between the applicant and Enpay, Turkey that 120 days are allotted for payment of credit. And if the applicant/parent company(M/s. Enpay Transformers Components India Pvt. Ltd) does not pay the invoice sum within aforesaid 120 days from the date of invoice for import of goods, the applicant is liable/responsible to pay the interest on late payment.

It is worth mentioning here that the applicant has obtained a facility of bank credit from CITI Bank and the corporate guarantee has been given by Enpay, Turkey. It has also paid stamp tax in Turkey as per the prevailing land rules there and has also raised the reimbursement invoice of aforesaid payment to the applicant.

The applicant is importing goods on a CIF basis (cost including freight) and the invoice that has been raised clearly shows and proves that the amount of sea freight has been paid by Enpay, Turkey. It has also been noted that at the hour of Bill of Entry, the assessable value that has been calculated for paying of IGST includes the value of sea freight; So, IGST has already paid the value of sea freight at the hour of customs clearance.

Now the applicant has sought AAR Gujarat on the matter that whether the liability to pay GST on Reverse charge arises

• A. If the liability/responsibility of paying “GST on Reverse charge” arises if the amount is paid as interest on late payment of invoices of imported goods?
• B. And if yes, then at what rate?
• C. Another clarification that the applicant is seeking is whether Entry No.10 of Notification No.10/2017 issued under IGST is applicable?

The Coram of Mohit Aggarwal and Sanjay Saxena ruled that the applicant is liable/responsible to pay GST on a reverse charge basis and it is for the sum paid as interest on late payment of invoices of imported goods for the aforesaid reasons. However, Coram ruled that The rate of GST shall be the same as the rate of IGST that is imposable on the imported goods.

The AAR further ruled that the applicant is liable/responsible to pay GST and that too on a reverse charge basis on the sum paid for reimbursing Stamp tax that has been paid by the supplier Enpay, Turkey on behalf of the applicant. The reason being, the supplier of the applicant, does not satisfy all the conditions that are required to be categorized as ‘Pure agent’ as per provisions of Rule 33 of the CGST Rules, 2017.