Kerala HC: Authority for Advance Ruling has the jurisdiction to determine ‘place of supply’ for a transaction
by ReinHeads Team | Mar 4, 2020
Kerala HC: Authority for Advance Ruling has the jurisdiction to determine ‘place of supply’ for a transaction
| Facts |
- ·Sutherland Mortgage Services Inc. (‘the Petitioner’) filed an application for Advance Ruling under Section 97 of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) for determining the GST liability on the services provided by the Petitioner to the customers located outside India
- The Authority for Advance Ruling (‘the AAR’) held that the AAR is a creator of the statute and it has to function strictly within the legal bounds mandated by the CGST Act. Since the issue of ‘determination of place of supply’ does not fall within the ambit of Section 97(2) of the CGST Act, the AAR lacks jurisdiction to entertain the Petitioner’s application
- An appeal to Appellate Authority for Advance Ruling (‘the AAAR’) can be preferred under Section 100 of the CGST Act only if an Advanced Ruling is passed under Section 98(4) of the CGST Act. However, in the instant case, the AAR passed a rejection order under Section 98(2) of the CGST Act
- As a result, the Petitioner filed a Writ Petition before the Hon’ble High Court of Kerala, challenging the rejection order of the AAR
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| Issues before the High Court of Kerala |
- Whether the AAR has the jurisdiction to determine the ‘place of supply’ of a transaction under Section 97(2) of the CGST Act?
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| Discussion & Judgment |
- ·Section 97(2)(e) of the CGST Act provides that an Advance Ruling sought shall be in respect of ‘determination of liability to pay tax on any goods or services or both’. On a plain reading of the above, it appears that the same is in general/ wide term, unlike other clauses of the said section
- ·In light of the dynamic scenario in the fast changing global economy, where foreign investments are promoted in India, the Parliament has taken a proactive role with a very wide vision and mandated a provision [i.e., Section 97(2)(e)] empowering an applicant to seek Advance Ruling to determine the liability to pay tax and maximise their efficacies accordingly
- Even though the issue relating to determination of place of supply is not expressly enumerated under the clauses of Section 97(2) of the CGST Act, the issue relating to determination of place of supply would come within the ambit of ‘determination of liability to pay tax on any goods or services or both’ as envisaged under Section 97(2)(e)
- The AAR has missed the 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 issue is not expressly enumerated in Section 97(2)
- Thus, the High Court held that the AAR has the power to determine the place of supply of a transaction under Section 97(2)(e) of the CGST Act and thereby the view taken by the AAR is legally wrong and liable to be quashed
- Consequently, the application is remitted to the AAR for fresh consideration and decision
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