GST Advance Rullings – July 2022

Ruling: Sale of Internet advertising space except on commission is exigible to 18% GST.

The Karnataka Advance Ruling Authority in the case of an applicant who owns an e-commerce platform and provides space to the advertisers for advertisement gave the following ruling for determining the taxability of the above- mentioned transaction.

“The services provided by the applicant are those of rendering “Sale of internet advertising space (except on commission)” and is charging a fixed rate and not a commission for providing such space. Hence the same is classified under SAC 998365 under the heading 9983 which reads “Other professional, technical and business services” exigible to 18 % GST.”

Ruling: GST on reimbursements received by NEEM facilitator from Industry partners – AAR ruling upheld.

The objective of the “National Employability Enhancement Mission (NEEM) is to offer job practical training to youths to enhance their employability.

The applicant being a NEEM facilitator partners with companies/ industry for imparting training to NEEM trainees. For this, the appellant charges the industry partner an “administrative fee” and reimbursement of the monthly stipend and cost of medical/accident insurance.

Aggrieved by the ruling of the AAR vide its order KAR ADRG No. 07/2022 dated 08.03.2022 which held that the applicant does not qualify to be a pure agent of the Industry partner for the reimbursement received towards stipend and medical/accident insurance and therefore making them taxable under GST, the applicant preferred an appeal.

The appellant submitted that with respect to the reimbursements of stipend received from industry partners, they are acting as pure agents on their behalf and hence the said reimbursement in not chargeable to GST.

The Hon’ble AAAR held that as per the NEEM regulations, the appellant is obligated to pay stipend to the trainees and merely because the company reimburses the stipend, it will not make the appellant a “Pure Agent “of the company. Thus 1^st condition of Rule 33 which states that the company is under obligation to pay the stipend and it has authorised the appellant to make payment on its behalf is not satisfied.

Further, 3^rd condition of Rule 33 which states that in addition to the services of pure agent, other services should also be supplied by the appellant on his own account is also not satisfied since no other service is supplied by the appellant.

Thus, it is concluded that the appellant does not fulfil the conditions required to act as a “Pure Agent”.

The AAAR dismissed the appeal filed by the appellant and upheld the ruling of AAR vide its order KAR ADRG No. 07/2022 dated 08.03.2022.

Ruling: Supply of Telecommunication services to local authority is a taxable service.

In the given case, the applicant was engaged in providing telecommunication services to Greater Hyderabad Municipal Corporation (GHMC) to be used by employees for general office and administrative purposes and not related to any specific project or specific scheme of Government.

The Hon’ble AAR held that there is no direct relation between the services provided by the applicant and the functions discharged by the GHMC under Article 243W read with Schedule 12 of the Constitution of India.

Hence supply of telecommunication services to local authority is a taxable service being ineligible for exemption under Notification No. 12/2017.

Ruling: In Joint Development Agreement GST to be paid by the developer at the time of transfer of possession/right in the constructed property.

The Hon’ble AAR held that in case of Joint Development Agreement (JDA), transfer of development rights by the landowner to the developer is consideration received by such developer for supply of construction service.

“Thus, GST on transfer of Development rights is payable by the developer at the time of transfer of possession or right in the constructed complex/constructed flats and not at the time of receipt of development rights.”

Ruling: GST @ 12% on printing of leaflets and packing materials when client supplies the physical inputs.

The Hon’ble AAR in response to the query raised by the applicant engaged in printing leaflets containing literature related to medicine and packing materials of clients in pharmaceutical sector, regarding the rate of tax including HSN code for printing of leaflets gave the following ruling: –

• Where physical inputs are used by the applicant, the activity falls under S.No.27(ii) of the Notification No. 11/2017 taxable @18%.
• Where physical inputs are supplied by the recipient of services, the activity falls under S.No.26(iia) of Notification No.11/2017 as amended on 13.10.2017 taxable @12%.

Thus, when the applicant uses the physical input i.e. the paper supplied by the client for printing leaflets, GST @12% is chargeable on such printing activity.

Ruling: Supply of Ayurvedic products under AYUSH Department Licences attracts 12% GST.

The given application was for seeking advance ruling on whether the products manufactured by the applicant under the licences issued by the AYUSH department of the Government of Telangana and sold as Ayurvedic products fall under HSN No. 30.04 or under HSN 3304 of the GST Tariff.

The Hon’ble AAR noted that the products referred to by the applicant are classified as medicaments or cosmetics based on these parameters namely –

• Whether the product has a drug license
• Whether the product’s composition has medical ingredients and
• The function or purpose indicated in the label and literature of the product.

Thus, the products which are used for care are treated as “Cosmetics” taxable @ 18% and the products which are used for cure are treated as “Medicaments” falling under Serial No. 63 of Schedule II taxable @ 12%.

Hence the AAR concluded that the supply of ayurvedic products under Ayush department licences attracts 12% GST.

Ruling: Supply of Ayurvedic products under AYUSH Department Licences attracts 12% GST.

The given application was for seeking advance ruling on whether the products manufactured by the applicant under the licences issued by the AYUSH department of the Government of Telangana and sold as Ayurvedic products fall under HSN No. 30.04 or under HSN 3304 of the GST Tariff.

The Hon’ble AAR noted that the products referred to by the applicant are classified as medicaments or cosmetics based on these parameters namely –

• Whether the product has a drug license
• Whether the product’s composition has medical ingredients and
• The function or purpose indicated in the label and literature of the product.

Thus, the products which are used for care are treated as “Cosmetics” taxable @ 18% and the products which are used for cure are treated as “Medicaments” falling under Serial No. 63 of Schedule II taxable @ 12%.

Hence the AAR concluded that the supply of ayurvedic products under Ayush department licences attracts 12% GST.

Ruling: No ruling on eligibility of ITC on inputs received for development of infrastructure as the matter is sub-judice.

In the given case the applicant intends to establish a warehouse with the sole objective of leasing the same against rentals for which it has constructed the foundation by procuring inputs/manpower and further construction of the structure has been outsourced to a contractor.

The applicant is seeking an advance ruling on the issue as to “whether the Input Tax Credit on inputs/inputs services received for development of the said infrastructure is admissible or not?

The applicant contended that relying on the judgement of the Hon’ble High Court of Orissa in case of Safari Retreats Pvt. Ltd. Vs. Chief Commissioner of CGST, Bhubaneshwar in WP(C) No. 20463 of 2018, it is concluded that ITC stands admissible in respect of the above-mentioned activity. It also admitted that an appeal has been filed against the said judgement in the Supreme Court but since no stay has been granted by the Apex Court, the judgement being precedent as on date is binding.

The Hon’ble AAR held that in view of the first proviso to Sec 98(2) of the CGST Act, 2017, the application shall not be admitted where the question raised is already pending in any proceedings in the case of an applicant.

Also, since appeal against the decision of Safari Retreat has been admitted by the Apex Court, the issue has become disputed and hence cannot be termed as judicial precedent.

Thus, the AAR refrained from answering the question raised by the applicant holding the matter as sub-judice.

Ruling: Maintaining the micro-compost centres and processing the wet waste provided by the Greater Chennai Corporation is exempt from GST.

In the given case, the applicant has entered into an agreement with Greater Chennai Corporation (GCC) for maintaining the micro-compost centres and processing the wet waste at designated locations.

The Hon’ble AAR in response to the application filed regarding the classification of such services and its taxability under GST gave the following ruling:

• Activity of maintaining micro-compost centres and processing the wet waste provided by GCC is classifiable under SAC 99943 – “Waste Treatment and Disposal services” as per the Annexure to Notification No.11/2017-C.T.(Rate) dated 28.06.2017.
• The work order received from GCC for maintenance of the micro-compost centres is “Pure services” rendered to a local authority and the said services are activities entrusted to a municipality under article 243W of the Constitution. Hence, the applicant is eligible for exemption from GST vide Sl. No. 3 of Notification 12/2017-CT(Rate) dated 28.06.2017(as amended).

Thus, the AAR held that maintaining micro-compost centres and processing the wet waste provided by a local authority is exempt from tax.