Telangana HC Allows GST Exemption for Construction Services in Maldives

GST is not liable to get paid on consideration received towards ‘works contract service of construction’ executed in the Maldives, the Telangana High Court ruled.

The bench of Justice Sujoy Paul and Justice Namavarapu Rajeshwar Rao has marked that the location of immovable property is located in the Maldives or outside India. Therefore, the place of supply shall specify the ‘location of the recipient’. The place of supply of services is Addu, Maldives.

The ‘location of recipient’ is already interpreted by holding that, under Section 2(14)(b), it will be the ‘fixed establishment’ of National Buildings Construction Corporation Ltd. (NBCCL), which will be the location of the recipient.

The Government of India (GoI) entered into a Memorandum of Understanding (MoU) with the Government of the Maldives to make a police academy funded by the GoI. In turn, the GoI appointed National Buildings Construction Corporation Ltd. (NBCCL) to perform the construction of the Police Academy by itself or through a contractor. NBCCL has allocated the contract to the petitioner.

NBCCL set up an office to finish the work in the Republic of the Maldives (Maldives), and in turn, the applicant has indeed set up their office in Addu City, Maldives. The Authorised Dealer Bank, which is performing on behalf of the Reserve Bank of India, approved the establishment of a branch office for applicants in the Maldives.

It was argued by the applicant that it has exported distinct goods to its Maldives office. The goods turnover was declared under the GST as zero-rated supplies. The applicant deemed the consideration obtained for the works contract service of construction which was executed in the territory of the Maldives through their Maldives establishment as outside the scope of the GST laws of India. On the construction to the applicant, the NBCC does not pay the GST and indeed stated that supplies generated outside India are outside the ambit of GST.

The petitioner submitted the application for an advance ruling due to the involvement of a substantial sum of Rs. 29.85 crores concerning GST. The advance ruling provided by the AAAR was unfavourable to the petitioner.

It was argued by the applicant that even assuming that the applicant is counted under the GST law of India and he is needed to pay the tax based on it, as per the contracts on March 11, 2015, and another filed with the response, Govt of India is obligated to reimburse the tax amount to NBCCL before the applicant.

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Therefore it is an arrangement in which the money would proceed from one pocket to another pocket of the government. For the activity performed in Maldives, the applicant could not be incurred to face issues and pay the tax under the GST law of India.

It was contended that as per section 2(105) of the CGST act, the applicant is a supplier. Likewise, section 2(93) of the CGST act which states the receiver, makes it clear where a consideration would be needed to get paid for the supply of goods or services or both, the individual would be obligated to file that consideration is the receiver.

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It is established that the performed work by the applicant in the Maldives is on the grounds of the work contract as per section 2(119) of the CGST Act and is pertinent to the contract of services, yet a works contract is practically a contract. The contract was between the applicant and NBCCL. The contract was entered into between two parties located in India, which directed that the location of the supplier and receiver both in India.

It was ruled by the court that as the supply of service and location of the receiver and supplier is outside India, there is no question to impose and collect the tax as per Section 9 of the CGST Act or Section 5 of the IGST Act.

While permitting the petition and quashing the advance ruling the court asked the department to reimburse the amount of GST, interest, and penalty deposited via the applicant to him concerning the construction services furnished in the Maldives under the contract within 90 days.

Case Title	Sri Avantika Contractors (I) Limited V/S GST AAR and Others
Citation	Writ Petition No.8405 Of 2023
Date	06.08.2024
Counsel For Appellant	C. V. Narasimham
Counsel For Respondent	Sri. Dominic Fernandes, Ms Shireen Sethna Baria
Telangana High Court	Read Order