A. The Hon'ble Authority of Advance Ruling (the AAR) decided on the question regarding restriction of ITC on (i) medicines supplied to patients admitted in hospitals (ii) medicines supplied to patients treated as outpatients (iii) medicines supplied to other than inpatients and outpatients (iv) supply of food and beverages to patients admitted in hospital?

The Hon'ble AAR held that healthcare services supplied by hospital is exempted supply under GST and therefore, ITC is restricted on medicines used in supply of healthcare services provided to inpatients/outpatients. Further, cases where medicines are supplied independent of health care services to outpatients/customers and GST is discharged on such supply, the Applicant is eligible to claim ITC on said medicines.

It has been further held that ITC is restricted on supply of food and beverages by hospitals to inpatients as same is part of health care services.

Takeaway: ITC is not available when outward supplies is 'health care services'.

[M/s Ambara KAR ADRG 51/2020 dated October 8, 2020]

B. The AAR decided on the question whether services provided by the Applicant to Bihar School Educational Board (BSEB) by way of conducting of examination and post examination process such as scanning of OMR Flying slip, OMR Marks Foil, OMR attendance sheet, OMR absentee sheet along with data extraction and finalisation of data (the Services) is exempted from GST in terms of Serial No. 66 of Notification No. 12/2017-CT(R) dated June 28, 2017 [Notification 12/2017]?

The Hon'ble AAR observed that the process of conducting examination is not limited to a test center but will also include scanning of answer sheets and quantifying marks which is also an essential part of the examination process. In view of the above it has been held that work awarded by BSEB to the Applicant qualifies as conduct of examination, therefore, the Services provided by the Applicant is covered under "other educational support services" falling under heading 999299 of the scheme of classification of services and exempted from payment of GST in terms of Serial No. 66 of Notification 12/2017.

Takeaway: Services provided by way of scanning of answer sheets and quantifying the marks qualify as conducting examination and thus, exempted under GST.

[M/s Datacon Technologies KAR ADRG 47/2020 dated September 11, 2020]

C. The Applicant's Head Office (HO) is incorporated in Germany and engaged in the business of promoting applied research. HO has established its Liaison Office (LO) in India which is acting as an extended arm to carry out activities permitted by the Reserve Bank of India. The Hon'ble AAR decided on questions whether (i) activities of LO amount to supply of services (ii) the Applicant is required to be registered under GST as it accounts for no income (iii) In case answer to (i) is yes, then whether LO is liable to pay GST?

The Hon'ble AAR held that the activities performed by LO in India are covered under definition of 'business' under Section 2(17) of the CGST Act, thus, services provided by LO qualifies as supply of services. The Hon'ble AAR further held that HO and LO are related parties and distinct persons as the Applicant has an establishment in India (LO) and outside India (HO), thus, services performed by LO cannot be said to be export of services.

The Hon'ble AAR further observed that LO has facilitated supply of services between HO and its Indian customers and does not make any supply of services on its own. Hence, activities carried out by the Applicant would qualify as 'intermediary services' in terms of Section 2(13) of the IGST Act and place of supply shall be in India. Accordingly, the exemption under Entry 10 of Notification 9/2017 - Integrated Tax (R) dated June 28, 2017 is not available to LO. The Hon'ble AAR also held that LO has provided inter-state supply of services to HO, therefore, required to take compulsory registration in terms of Section 24 of the IGST Act and pay applicable GST.

Takeaway: HO and LO is treated as establishments of distinct persons.

[M/s Fraunhofer-Gessellschaft Zur Forderung der angewwandten Forschung KAR ADRG 50/2020 dated October 8, 2020]

D. The Division bench of the Hon'ble High Court of Madras held that Cenvat credit or ITC under GST regime is in nature of 'concessions' and 'facility' and not a 'vested right'. Further, the Hon'ble High Court held that transition of unutilized ITC is allowed only in respect of taxes and duties which were subsumed in new GST laws. Since the Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess (the Cesses) have not been subsumed under new GST laws either by the parliament or by the States, question of transitioning into GST regime and giving ITC against output tax liability does not arise. Further it has been held that the object of GST law would be defeated by allowing ITC on Cesses. Hence, taxpayer is not entitled to carry forward and set off the unutilized Cesses against output tax liability in terms of Section 140 of the CGST Act.

The Hon'ble bench has reversed the Single Member judgment which has earlier allowed carry forward of unutilized Cenvat credit into GST regime.

Takeaway: Taxpayer not eligible to carry forward unutilized Cenvat credit of the Cesses from previous regime into GST.

[UOI vs Sutherland Global Services Private Limited Writ Appeal No. 53 of 2020 dated October 16, 2020]


E. The Appellant received services for collating and uploading details/information of employees in database and call detailed processing service of employees (Administrative Services) from service providers. Further, the Appellant used global telecommunication channel setup by its overseas group entities for making calls, mails, messaging, internet etc. (Networking Services). Also, the Appellant has entered into employment contract with employees (the Employees) of overseas entities in terms of which the Employees would be on payroll of the Appellant and required to work under control/supervision of the Appellant on secondment.

The Hon'ble Customs Excise Service Tax Appellate Tribunal (the CESTAT) decided on issues whether (i) Administrative Services received by the Appellant is classified under 'Business Support Services' (ii) Networking Services received by the Appellant is classifiable under 'Online Information Database Access and Retrieval Services' (OIDAR) (iii) the Appellant has received manpower recruitment and supply agency service for hiring employees of overseas group entities on secondment?

The Hon'ble CESTAT held that Administrative Services received by the Appellant was included in taxable category of 'business support services' w.e.f. May 1, 2011 and therefore, not classifiable under 'business support services' prior to May 1, 2011. Further, the Hon'ble CESTAT held that overseas group entities has created a network of computers and provided connectivity between different group entities so that information and data can be exchanged. The information flows both ways from the Appellant to other global entities and vice versa and thus, the Appellant becomes both service provider and service receiver at times. Further, the amount paid by the Appellant against information received from the overseas group entities is also not substantiating the fact that it would fall under taxable category of 'OIDAR'. Thus, Networking Services received by the Appellant is not classifiable under taxable category of 'OIDAR'.

The Hon'ble CESTAT further held that activity of hiring employees of overseas group entities on secondment would not be classifiable under taxable category of 'manpower recruitment or supply agency's services' as there exists an employer-employee relationship between the Appellant and the seconded employees.

Takeaway: Information and data exchanged between different group entities not classifiable under OIDAR and activity of hiring employees of overseas group entities on secondment would not be classifiable under taxable category of 'manpower recruitment or supply agency's services'.

[M/s. Goldman Sachs Services vs. CCT Final Order No. 20734-20735/2020 dated October 1, 2020]


F. The Appellant was engaged in the manufacture of Zinc / Lead / Bulk Concentrate Sulphuric Acid, Zinc Cathode (the Goods) and availed various services such as Cost & Freight (C&F), Testing, Sampling, etc. (the Services) at port as the Services were necessary for export of goods. Accordingly, the Appellant availed Cenvat credit of Services used for exporting the Goods. The department disallowed Cenvat Credit on same and contended that the Services were availed beyond place of removal, therefore, would not qualify as input services in terms of Rule 2(l) of the Cenvat Credit Rules, 2004 (the Cenvat Credit Rules).

The Hon'ble CESTAT held that the place of removal is the place where sale takes place i.e. place where property in goods passes from seller to the buyer and in the instant case the property in the Goods is passed to buyer only at the port when shipping bill is filed and LeT export order is obtained. Therefore, the Services were used by the Appellant prior to obtaining LeT export order and hence, qualify as 'input services' in terms of Rule 2(l) of the Cenvat Credit Rules. Thus, the Appellant is entitled to avail the Cenvat credit on Tax paid on Services used for exports of the Goods.

Takeaway: Place of removal in case of export of goods would be the place where shipping bill is filed and LeT export order is obtained. [M/s Hindustan Zinc Ltd v. CCE Final Order No. 50852/2020 dated October 8, 2020]


G. The Hon'ble High Court decided the issue in relation to release of onions for export where shipping bill was generated before issuance of Notification No. 31/2015-2020 dated September 14, 2020 (Notification 31/2015-2020) issued by DGFT prohibiting export of all varieties of onions.

The Hon'ble High Court held that shipping bill was generated before Notification 31/2015- 2020 was uploaded in e-gazette. Therefore, export of onions to be allowed in respect of shipping bill generated prior to issuance of Notification 31/2015-2020 in e-gazette.

Takeaway: Applicability of notification would come in effect from time it is published in e-gazette.

[Horticulture Produce Exporters Association Vs UOI Writ Petition (ST) No. 93074 of 2020 dated October 20, 2020]

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