Recently, the issue of applicability of Integrated Tax (“IGST”) on services rendered to foreign pharmaceutical companies/ clinical research organizations came before the Authority of Advance Ruling of Maharashtra, wherein it was held that the place of supply and supplier of service being in the same state, Central Goods and Service Tax (“CGST”) and State Goods and Service Tax or Maharashtra Goods and Service Tax (“SGST” or “MGST”) are payable on the said transaction.
Facts & Background:
- M/s Bilcare Ltd. (“the Applicant” or “the Company”) is engaged in an innovation-led packaging solutions provider that partners with the pharmaceutical industry to improve patient healthcare outcomes. The company provides Innovative Pharmaceutical Packaging Solutions, Global Clinical Material Supplies for new drug discovery projects, technology for tracking and tracing, authenticating and Anti-counterfeit solutions for product & people ID authentication and security.
- The Applicant’s Global Clinical Material Supplies (“GCS”) division provides various types of services to its foreign clients. The foreign clients can be a Pharmaceutical Company or a Clinical Research Organization (“CRO”). The standard quotations are submitted to clients and sample PO’s are received from those foreign clients for various services are provided by the GCS division for which the applicant has sought an advance ruling.
- Whether the various services provided to foreign clients i.e. situated outside India and for which the place of supply is in the taxable territory shall be liable to IGST or CGST and SGST for the purpose of levy of Goods and Services Tax (GST) under the GST Law?
- In case it is ruled that IGST is payable, the procedure to be followed for payment of IGST as the GST portal does not permit the payment of IGST where the place of supply is indicated as a state of Maharashtra?
The Authority of Advance Ruling of Maharashtra vide its Advance Ruling No. GST-ARA-117-2018-19/B – 45 dated April 26, 2019, held that:
- Services provided to foreign clients i.e. situated outside India and for which the place of supply is in the taxable territory though the location of the recipient is outside India, the services supplied are in respect of goods which are made physically available by the recipient of the services to the supplier of the services for the services to be performed. Thus, the provisions of sub-section (3)(a) of Section 13 of Integrated Goods and Services Act, 2017 (“IGST Act”), are squarely applicable for the supply in the instant case.
Section 13(3)(a) of IGST Act-
“(a) services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services:
Provided that when such services are provided from a remote location by way of electronic means, the place of supply shall be the location where goods are situated at the time of supply of services:”
- Further, Since the ‘place of supply’ is in taxable territory it is clear that the provisions of Section 2(6) of the IGST Act are not fulfilled in this case and therefore their supply cannot be considered as Export of Services as per the GST Law.
Section 2(6) of IGST Act:
“ “export of services” means the supply of any service when,––
- the supplier of service is located in India;
- the recipient of service is located outside India;
- the place of supply of service is outside India;
- the payment for such service has been received by the supplier of service in convertible foreign exchange 1[or in Indian rupees wherever permitted by the Reserve Bank of India]; and
- the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8”
- Since the ‘place of supply’ and the ‘service provider’ are in the same State, CGST and SGST are payable for this transaction. Therefore, the services are liable to CGST and SGST as the location of ‘supplier of service’ and the ‘place of supply’ is in the same state, in terms of section 13(3)(a) of the IGST Act, 2017.
Citation: [In Re: M/s. Bilcare Ltd. (2019 (7) TMI 43)]