Synopsis: The Hon’ble AAR, Karnataka in the matter of M/s Juniper Networks Solution India Private Limited has held that the delivery of spares by the Applicant (JNSIPL Karnataka) to the ultimate consumer on account of JNSIPL, Maharashtra, where invoice is raised against JNSIPL Maharashtra and the goods are delivered to the ultimate consumer, would not amount to a supply to the ultimate consumer under GST.
M/s Juniper Networks Solution India Private Limited (“the Applicant” or “JNSIPL Karnataka”) is engaged in import and stile of networking equipments to customers in India and maintenance contracts (“AMC”) pertaining to the equipments supplied.
The Applicant provides AMC services in respect of equipments supplied to the customers across India. These AMC Contracts are executed by JNSIPL Maharashtra. Applicable GST is discharged by JNSIPL Maharashtra on issuance of an invoice for such AMC services.
As one of the obligations under the AMC, JNSIPL Maharashtra is required to deliver spares to the location, as directed by the customer, when required. These spares are imported by JNSIPL Maharashtra and supplied to JNSIPL Karnataka on payment of GST. The same is occasioned to reduce the downtime in delivery of spares. Considering the nature of equipment, it is quintessential to make available the spares to the customers in a very short time.
On receipt of the request, the spares held with the Applicant are delivered to the location as directed by JNSIPL Maharashtra’s customer. No consideration is received by the Applicant for the deliveries occasioned by them. An invoice for the above is issued by the Applicant to JNSIPL Maharashtra for supplies made to the customer as a Bill to Ship to document.
Whether delivery of spares by JNSIPL, Karnataka (i.e. the Applicant) would constitute a supply under Schedule I of the CGST Act, 2017 (“CGST Act”), by the Applicant to JNSIPL Maharashtra?
The Hon’ble AAR, Karnataka in Advance Ruling No. KAR ADRG 96/ 2019 dated September 27, 2019 held as under:
- On examination of the transaction, it is found that the contract of AMC is between JNSIPL Maharashtra & ultimate consumer and the Applicant is not a party to it. JNSIPL Maharashtra is paying the taxes on these services and they shall be responsible for the delivery of the services to the consumer. The Applicant, on request, to execute the contractual obligation, delivers the goods from his account to the ultimate consumer and raises the invoice on JNSIPL Maharashtra. The Applicant charges IGST on the invoice as it is an inter-state supply, which is deemed to be a supply even without consideration.
- The delivery of the spares is a bill to ship to transaction and the ultimate delivery of the spares is on the account of JNSIPL, Maharashtra to the consumer for the purpose of AMC services undertaken by JNSIPL, Maharashtra on which IGST is paid in Maharashtra, rightly so.
- The supply by the Applicant is not to the consumer, but to JNSIPL, Maharashtra and the delivery is to the ultimate consumer on account of JNSIPL, Maharashtra.
- Since, the delivery of spares by the Applicant to the ultimate consumer on account of M/s JNSIPL Maharashtra, where invoice is raised against M/s JNSIPL Maharashtra and the goods are delivered to the ultimate consumer of M/s JNSIPL Maharashtra, would not amount to a supply to the ultimate consumer under the CGST Act. However, the supply is made to M/s JNSIPL Maharashtra and invoice needs to be raised on them.