The Andhra Pradesh Authority of Advance Ruling (AAR) has ruled that the outward supply of goods procured from an Indian company undergoing liquidation as per the Companies Act, 2013 cannot be treated as ‘Zero-Rated Supplies’ as per Section 16 of IGST Act and the applicant is liable to pay GST.
The bench of K. Ravi Sankar (Commissioner of State Tax) and B. Lakshmi Narayana (IRS, Joint Commissioner of Central Tax) has observed that the applicant is not having any GST registration in India. The transaction done by the applicant does not fall under the definition of export of goods. Hence, the related transactions shall not be considered as Zero Rated Supply under the provisions of the GST Act, 2017.
Background
The applicant is a company is a Singapore based company, duly registered under the local laws and is in the business of power generation and distribution. The Applicant, currently, does not have any place business in India and resultantly is not registered in India under any Act.
The Applicant is in the process of procuring certain goods/ assets as per the agreement from M/S Lanco Kondapallli Power Limited (Lanco) a company which is currently undergoing liquidation in India.
The Applicant is acquiring the said goods/assets for the further transfer of the same to Myanmar after dismantling, as The Applicant does not have any business operations in India. The Applicant ‘s intention to procure the said assets during the liquidation process is to transfer the same to Myanmar.
The Applicant first procures the assets as per the agreement, then dismantle all the assets and then transfer them to Myanmar. The intention of the Applicant is to take the assets out of India to a place outside India. The intention of the Applicant is to take the assets out of India to a place outside India.
Issue Of ‘Zero Rates Supply’ Before AAR
The applicant sought the advance ruling on the issue whether the outward supply of goods procured by the Applicant from an Indian company undergoing liquidation as per the Companies Act, 2013 shall be treated as Zero-Rated Supplies as per Section 16 of IGST Act. Whether the same can be exported under Zero-Rated supplies without payment of tax againstLetter of Undertaking (LUT).
The current application is being filed to seek Advance Ruling with regard to applicability of provisions of section of 16 of the IGST Act, which allows the transaction of export of goods as “Zero Rated Supply” on which effective tax under GST will be NIL. Further, as per the provisions of section 16 of the IGST Act, Zero Rated supplies of goods can be made without payment of GST subject to fulfilment of certain conditions. In the present case, the Applicant intends to take goods outside India and accordingly is of the view that the supply of such goods may be treated as “Zero Rated Supply” and the same can be made without payment of GST after filing a Letter of Undertaking as provided in the GST law.
Conclusion
The AAR noted that definition of “person” under sub-section (84) of section 2 of the CGST Act, 2017 and the definitions of “company” and “foreign company” under Section 2 of the Companies Act, 2013, it is observed that a company incorporated in India and a foreign .company incorporated outside India, are separate “person” under the provisions of cGST Act and accordingly, are separate legal entities. Thus, a subsidiary/ sister concern/ group concern of any foreign company which is incorporated in India, then the company incorporated in India will be considered as a separate “person” under the provisions of CGST Act and accordingly, would be considered as a separate legal entity than the foreign company.
The AAR ruled that the supply subject to the agreement, facts and information furnished by the Applicant is neither exempted nor export of goods/services. The transaction is not treated as Zero rated supplies. The export without payment of tax against Letter of Undertaking (LUT), for the said transaction “does not arise”.
Applicant’s Name: M/s MCM Pacific PTE Ltd.
AAR No.09/AP/GST/2024
Dated: 07-06-2024