ORDER

1. At the outset we would like to make it clear that the provisions of CGST, Act 2017 and SGST, Act 2017 are in pari materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the KGST Act.

2. The present appeal has been filed under section 100 of the Central Goods and Service Tax Act 2017 and Karnataka Goods and Service Tax Act 2017 (herein after referred to as CGST Act, 2017 and SGST Act, 2017) by M/s Workplace Options India Pvt Ltd, C2-601, 6lh Floor, No. 1 and 2, Tower C, The Millenia, Murphy Road, Ulsoor, Bangalore, 560008 (herein after referred to as Appellant) against the Advance Ruling order No. KAR ADRG 52/2021 dated 29lh October 2021.

Brief Facts of the case:

3. The Appellant is engaged in providing human resource consulting services, employee assistance services to its corporate customers across India or outside India. The Appellant is a part of a multi-national group and is a subsidiary of Workplace Options LLC. Workplace Options LLC entered into a global arrangement with Beacon Health Options Inc.-US (previously known as Value Options Inc. – US), which is a company established in USA and does not have any office or fixed establishment in India, in November 2009 for the purpose of mutual referral of clients and work agreements to Workplace Option group companies across the globe. Beacon US, as part of the global arrangement, has entered into arrangement, for the Indian market involving Workplace Option India Pvt. Ltd. (the Appellant) and referred a customer M/s FIS Global Solutions India Pvt. Ltd., (‘FIS India’) to the Appellant for performing employee assistant services. For referring clients to the Appellant, Beacon US charges referral fee to the Appellant, by raising an invoice directly to the Appellant, equal to certain percentage of the price charged by the Appellant to FIS India, as agreed by both the Appellant and Beacon US.

4. The Appellant approached the Authority for Advance Ruling (AAR) seeking a ruling on the following questions:-

a. “Whether the services procured by the applicant from Beacon US in respect of the referral of the FIS client is liable to tax under the IGST Act, 2017 and consequently whether the said service qualifies as an import of service under Section 2(11) of the said enactment?

b. If the answer to the above is yes, who is the person liable to tax in respect of the said services rendered by Beacon US to applicant?”

5. The AAR vide its order KAR ADRG No 52/2021 dated 29th October 2021 held as under:-

“The application is disposed off without any ruling as the determination of place of supply is beyond the jurisdiction of this authority.”

6. Aggrieved by the ruling given by the AAR, the Appellant has filed this appeal on the following grounds.

6.1. The Appellant submitted that the lower Authority erred in law and in facts, in their judgment that the application for advance ruling under Section 97 of the CGST/KGST Act is not maintainable as the issue is in relation to the “Place of Supply” on which the said Authority does not have any jurisdiction to pass an order. They submitted that Section 97(2) does not bar raising questions on place of supply and it is encompassed within clause 97(2)(e) – Determination of tax liability of goods or services; that Section 97(2) clearly provides for determination of tax liability as one of the questions on which advance ruling can be sought for; that under the GST law, tax can only be determined based on the chargeability of tax under IGST/CGST/SGST Act which in turn is dependent on place of supply; that under the GST scheme, it is impossible to ascertain a scenario where tax liability is determined without examining the place of supply; that a narrow interpretation as adopted by the AAR would make the very provision redundant which is clearly impermissible.

6.2. They submitted that the very issue was examined by the Kerala High Court in Sutherland Mortgage Services Inc vs Pr Commissioner of GST in 2020 (3) TMI 186 where the court came down heavily on taking a hyper technical interpretation of Section 97(2) and dismissing applications on the ground that the same involves ‘place of supply’ which is not maintainable before the AAR. The relevant extract of the decision is extracted below:-

23. In the instant case, it is true that the issue relating to determination of place of supply as aforestated is not expressly enumerated in any of the clauses as per clauses (a) to (g) of Section 97(2) of the CGST Act, but there cannot be any two arguments that the said issue relating to determination of place of supply, which is one of the crucial issues to be determined as to whether or not it fulfils the definition of place of service, would also come within the ambit of the larger of issue of “determination of liability to pay tax on any goods or services or both” as envisaged in clause (e) of Section 97(2) of the CGST Act. The Advance Ruling Authority has proceeded on a tangent and has missed the said crucial aspect of the matter and has taken a very hyper technical view that it does not have jurisdiction for the simple reason that the said issue is not expressly enumerated in Section 97(2) of the Act. This Court has no hesitation to hold that the said view taken by the Advance Ruling Authority is legally wrong and faulty and therefore the matter requires interdiction in judicial review in the instant writ proceedings.”

6.3. The Appellant submitted that GST being a central legislation applicable to the entire country, the decision of the Kerala High Court would be binding on all subordinate authorities across the nation, especially in the absence of any contrary decision. They placed reliance on the following decisions for the proposition that even non-jurisdictional High Court decisions would have authoritative binding force on the subordinates across the country in the absence of any contrary decision of their respective jurisdictional High Court:-

a) East India Commercial Co Ltd vs Collector of Customs AIR 1962 SC 1893

b) Commissioner of Income-Tax vs Smt Godavaridevi Saraf [1978] 113 ITR 589 (BOM).

6.4. The Appellant submitted that the action of the AAR is discriminative for the simple reason that multiple orders involving place of supply have been passed by the very same AAR; that this is violative of Article 14 of constitutional scheme and clearly depicts a prejudiced mind. They enlisted the following decisions passed by the Karnataka Advance Ruling Authority wherein place of supply was determined:-

a) GEW (India) Pvt Ltd – KAR ADRG 63/2021

b) Airbus Group India Pvt Ltd – KAR ADRG 31/2021

c) Guitar Head Publishing LLP – KAR ADRG 23/2021

d) Vevaan Ventures – KAR ADRG 05/2021

e) Dolphine Die Cast (P) Ltd – KAR ADRG 31/2019

f) Gogte Infrastructure Development Corporation Ltd – KAR ADRG 2/2018

g) Spx Flow Technology India Pvt Ltd – GUJ/GAAAR/Appeal/2021/34

h) Rajendra Santhosh – KAR/AAAR-14-G/2019-20

6.5. They also relied on the following decisions of the AAR/AAAR in the country which gave a decision on place of supply by relying on the decision of the Kerala High Court in Sutherland Mortgage Inc case:-

a) M/s Prettl Automotive India Pvt Ltd – GST-ARA-20/2019-20/B-59

b) Hilti Manufacturing India Pvt Ltd – GUJ/GAAR/R/26/2021

c) Amogh Ramesh Bhatawadekar – 2020 (12) TMI 786-AAR Maharashtra

d) M/s Stovec Industries Ltd – GUJ/GAAR/R/70/2020

In view of the above, they submitted that there should not be any doubt left on the scope / interpretation of Section 97(2) in light of the decision of Kerala High Court and AARs across the nation accepting the same and passing advance rulings on the subject of place of supply. Therefore, they prayed that the impugned order of the lower Authority be set aside as being contrary to law and binding judicial precedents and pass necessary /consequential directions as deemed fit in the interest of equity and justice.

PERSONAL HEARING

7. The appellant was granted a virtual hearing on 27th January 2022. The hearing was conducted on the Webex platform following the guidelines issued by the CBIC vide Instruction F.No 390/Misc/3/2019-JC dated 21st August 2020. The Appellant was represented by Shri. Harish Bindhumadhavan and Shri. Rishabh Singhvi, Advocates and authorised representatives.

7.1. The Advocate Shri. Harish Bindhumadhavan explained the facts of the case and the circumstances leading to the present appeal. He submitted that the Appellant is an entity which is a subsidiary of an overseas Company – Workplace Options LLC. The latter has entered into an agreement with M/s Beacon Health Options Inc – US for the purpose of referring clients to Workplace Options companies worldwide, which includes the Appellant. As part of the agreement, M/s Beacon Health Options US has referred clients to the Appellant. The Appellant renders service to the referred clients and they pay GST on the services so supplied. The Appellant also pays a commission/fee to M/s Beacon Health Options Inc-US for referring clients to them. It is this referral fee paid by the Appellant to Beacon US which is the subject matter of their application for advance ruling. The Appellant sought for a ruling whether the referral fee paid to M/s Beacon US is subject to levy of GST. If so, whether the same is an import of service and liable to tax under RCM at the hands of the Appellant.

7.2. The Advocate submitted that during the course of hearing before the lower Authority the matter was discussed entirely on merits as to whether the service received by the Appellant from M/s Beacon US is an import of service; that the Appellant was shocked to receive an order from the lower Authority stating that the application was not maintainable since examination of import of service requires determination of place of supply which is beyond the jurisdiction of the Authority in terms of Section 97(2) of the CGST/KGST Acts. He submitted that the same Authority had in other cases (a list of which was given in their compilation submitted today), clearly discussed the issue of ‘place of supply’ and hence holding that their application is not maintainable on this ground is clearly discriminatory.

7.3. He submitted that it is only against this aspect of maintainability that the Appellant is in appeal today. In this regard, he submitted that Section 97(2) does not bar raising questions on place of supply and it is encompassed within clause 97(2)(e) i.e determination of tax liability of goods or services; that this view was put forth by the Kerala High Court in the case of Sutherland Mortgage Services Inc. v. Pr CIT in 2020 (3) TMI 186 wherein the court came down heavily on Advance Ruling Authorities taking a hyper technical interpretation of section 97(2) and dismissing applications on the ground that the same involves ‘place of supply’ which is not maintainable before the AAR; that the High Court has held that the issue relating to determination of place of supply, which is one of the crucial issues to be determined as to whether or not it fulfills the definition of place of service, would also come within the ambit of the larger issue of “determination of liability to pay tax on any goods or services or both” as envisaged in clause (e) of Sec. 97(2) of the CGST Act.

7.4. On a specific query from the Member whether the above decision of the Kerala High Court has been accepted by the Department, Shri. Rishabh Singhvi, Advocate replied that it is not known whether the Department has accepted the said order. However, the said decision of the Kerala High Court has since been taken cognizance of by other Advance Ruling authorities and Appellate Authority for Advance Ruling in other parts of the country and they have proceeded to examine issues relating to place of supply. He submitted a list of such rulings in the compilation, where the authorities have determined place of supply, based on the decision of the Kerala High Court.

7.5. In view of the above, the Advocates submitted that the ruling of non-maintainability given by the lower Authority is incorrect and deserves to be set aside. They submitted that they will not be arguing on merits since the lower authority has not examined and passed a ruling on merits of the case; that their only plea is that the application for advance ruling is maintainable and the question on which the ruling has been sought is well within the purview of Section 97(2) of the Act.

7.6. They agreed to submit a written summary of the submissions made today. They also stated that if the Appellate authority desires to hear the case on merits, they may be given another opportunity for another personal hearing to submit their case on merits.

DISCUSSIONS AND FINDINGS

8. We have gone through the entire case records and considered the submissions made by the Appellant in their grounds of appeal, as well as the submissions made at the time of personal hearing. We have also gone through the impugned order passed by the lower Authority wherein it was held that no ruling can be given on the questions raised by the applicant as it involves determination of place of supply which is beyond the jurisdiction of the Advance Ruling Authority. The Appellant is before us in appeal on the limited aspect that the dismissal of their application by the lower Authority on the grounds of jurisdiction is incorrect and bad in law.

9. The short point for determination by us is whether the lower Authority was correct in not giving a ruling on the grounds that determination of place of supply is beyond the jurisdiction of the Authority. For this let us look into the provisions of law relating to the questions on which an advance ruling can be sought. Section 97(2) of the CGST Act states that the question on which the advance ruling is sought under the Act, shall be in respect of:-

(a) Classification of any goods or services or both;

(b) Applicability of a notification issued under the provisions of this Act;

(c) Determination of time and value of supply of goods or services or both;

(d) Admissibility of input tax credit of tax paid or deemed to have been paid;

(e) Determination of the liability to pay tax on any goods or services or both;

(f) Whether applicant is required to be registered;

(g) Whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.”

We agree that determination of place of supply per se is conspicuously absent in the list of issues enumerated under Section 97(2). However, in certain situations, the liability to pay tax or otherwise is dependent on the place of supply and in such cases, the determination of tax liability inevitably involves a determination of place of supply. Therefore, we are of the opinion that clause (e) of Section 97(2) covers within its scope the determination of place of supply if such determination is linked with the liability to pay tax and in such cases the Authority has the jurisdiction to pass a ruling on the issue of place of supply.

10. Having thus said, we now examine whether the in the instant case the Authority was correct in not determining the place of supply. As already stated, in the instant case, the issue is whether the services procured by the applicant from Beacon, US qualifies to be an import of service. Import of service has been defined in Section 2 (11) of the IGST Act as a supply of service where:-

– The supplier of service is located outside India

– The recipient of service is located in India; and The place of supply of service is in India

Thus, one of the important requirements for supply of any service to be treated as an import of service, is that the place of supply must be in India. The liability to pay tax in the case of an import of service is dependent on the place of supply. If the place of supply is outside India, then the supply of service will not be treated an import and the applicant who is the importer of the service will not be liable to pay tax on such import. Determining the place of supply of services in respect of a transaction where the location of supplier or location of recipient is outside India is to be done in terms of Section 13 of the IGST Act. As per Section 13(2) of the IGST Act, the place of supply of services, except the services specified in subsections (3) to (13), shall be the location of the recipient of services. However, in respect of services specified in sub-sections (3) to (13) of Section 13, the place of supply varies depending on the nature of service. Therefore, in the case of import of service, one has to determine the place of supply of service depending on the nature of the service supplied. In other words, one has to be certain of the classification of the service supplied. Depending on the classification of the service supplied, the place of supply will be determined as to whether it is under Section 13(2) (location of the recipient) or under any of the sub-sections (3) to (13) of Section 13.

11. In this case we find that the Appellant has also sought for a ruling on the nature of the service supplied by Beacon, US to them. The order of the lower Authority is however silent on this aspect and the impugned order does not make any mention of the nature of services supplied by Beacon, US to the Appellant. No ruling has been given on the question whether the services procured by the Appellant from Beacon, US is liable to tax under IGST Act. We find that the lower Authority has rightly refrained from examining this aspect since examining the classification of the service procured by the Appellant as a recipient of service is beyond the scope of the advance ruling mechanism. Section 95(a) of CGST Act defines ‘advance ruling’ as follows:-

“advance ruling” means a decision provided by the Authority or the Appellate Authority to an applicant on matters or on questions specified in sub-section (2) of Section 97 or Sub-section (1) of Section 100, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant;

Section 95(c) of the CGST Act defines “applicant” as follows:-

“applicant ” means any person registered or desirous of obtaining registration under this Act;

12. A reading of the above provisions of law gives the clear understanding that any person who is registered under GST or desirous of obtaining a registration under GST may apply for an advance ruling and that the question on which an advance ruling is sought for may be with respect to any of the issues referred to in Section 97(2) which are in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. In other words, it is a supplier of goods or services or both who can seek an advance ruling on any of the issues specified in clauses (a) to (g) of Section 97(2) above. In the case before us, we find that the Appellant who is the applicant of the advance ruling, although registered under GST, is not the supplier of the transaction in question but is the recipient of the supply of service. The Appellant has sought for a ruling as a recipient of service. The advance ruling mechanism under GST does not envisage giving a ruling to a recipient of supply of goods or services or both for the simple reason that any ruling passed by the Authority is applicable only to the supplier of the transaction and to the jurisdictional officer. In terms of Section 103 of the CGST Act, the advance ruling pronounced by the Authority is binding only on the applicant who has sought for the ruling on any matter referred to in Section 97(2) as well as on the concerned officer or jurisdictional officer of the applicant. The Appellant in the capacity of recipient of service is not eligible under law to seek a ruling on the taxability of a transaction which is received by him. The lower Authority does not have the authority to determine the classification or nature of service supplied by Beacon, US based on an application made by the recipient of service.

13. If the classification or nature of the service supplied by Beacon, US cannot be determined for lack of jurisdiction, it automatically flows that determination of place of supply also cannot be determined. We are therefore in agreement with the ruling passed by the lower Authority although for a different reason. The Appellant has argued before us that determination of liability to pay tax on any goods or services is a matter which is well within the ambit of an advance ruling and if the said determination involves examining the place of supply, then the same also falls within the scope of clause (e) of Section 97(2) of the CGST Act. They have strongly relied on the Kerala High Court decision in this regard as well as a number of advance rulings passed by the lower Authority and by Advance Ruling Authorities in other parts of the country to substantiate their claim that examining the place of supply provisions is not outside the ambit of an advance ruling. We have gone through all the relied upon decisions and we find that in all decisions relied upon (including the case of Sutherland Mortgage Services Inc), the determination of place of supply was either with respect to export of goods or services made by the applicants therein or with respect to supplies made by the applicants therein. In other words, in all the cases relied upon by the Appellant, the applicants for advance ruling were suppliers of the goods or services and the place of supply with respect to the supply made by the applicants therein was being determined. Even in the case before the Kerala High Court, the petitioner was an exporter of service and had sought for an advance ruling on the following aspects :-

“Whether supply of services by India Branch of Sutherland Mortgage Services Inc. USA to the customers located outside India shall be liable to GST in the light of the intra-company agreement entered into by the said branch with the principal company incorporated in USA ? “

It is in this background that the Hon’ble High Court has observed as follows:-

A reading of clauses (a) to (g) of sub-section (2) of Section 97 of the CGST Act would make it clear that 7 items are enumerated as per clauses (a) to (g) of sub-section (2) of Section 97 and all those clauses other than clause (e) thereof are in specific terms. Whereas clause (e) of sub-section (2) of Section 97 of the CGST Act clearly mandates that the larger issue of “determination of liability to pay tax on any goods or services or both” would also come within the ambit of the questions to be raised and decided by the Advance Ruling Authority on which advance ruling could be sought and rendered under the said provisions. Whereas Clauses (a), (b), (c), (d), (f) & (g), i.e. the clauses other than clause (e), are in specific “pigeon holes ” and the provision as per clause (e) of sub-section (2) of Section 97 is in wide terms and the Parliament has clearly mandated that the latter issue of determination of liability to pay tax on any goods or services or both, should also be matters on which the applicant concerned could seek advance ruling from the Advance Ruling Authority on which the said authority is obliged to render answers thereto. The Parliament has made the said provision envisaging that in transactions in nature, where India is now a growing economy and has to make its substantial performance in economic growth and development not only domestic investments, but even foreign investments would also be heavily required and that host of tax laws has been subsumed into the overarching umbrella of the goods and sales tax regime introduced by the Parliament and the Parliament would have certainly taken cognizance of the fact and has intended that very often applicants would require clarity and precision about various aspects of taxation in the transactions and that there should be certainty and precision in those matters, so that the applicant concerned is given the right to seek advance ruling even in such a larger issue as the one as per clause (e) of Section 97(2) of the CGST Act, which deals with issue of determination of liability to pay tax on any goods or services or both.”

14. The case before us is not on the same footing. Here the Appellant is the recipient of service and is seeking a ruling on the tax liability of a transaction made by the supplier of service. We have already made it clear that the Authority is not competent to determine the classification of a service supplied by the third party who is not the applicant seeking the ruling. Therefore, the place of supply of the transaction undertaken by Beacon US to the Appellant also cannot be determined by the Authority. We find that the decision of the Kerala High Court in the case of Sutherland Mortgage Services Inc as well as the other decisions relied upon by the Appellant do not come to their assistance.

15. We do not hesitate to state that M/s Beacon, US is well within its rights to seek an advance ruling whether the service supplied by them to M/s Workplace Options India Pvt Ltd is liable to tax and if so whether the tax is to be paid by the latter under reverse charge treating it as an import of service. As regards this appeal, we hold that the lower Authority was correct in dismissing the application on the grounds of lack of jurisdiction.

16. In view of the foregoing, we pass the following order.

ORDER

We uphold the order No. KAR ADRG 52/2021 dated 29/10/2021 passed by the Advance Ruling Authority and the appeal filed by the Appellant M/s. Workplace Options India Pvt Ltd, stands dismissed on all accounts.