The AAR denies the request for an advance ruling since the applicant is not a supplier.
Facts and Issue of the case.
M/s. Auriga Research Private Limited, (hereinafter referred to as The applicant, No.136, 6th Cross, 2nd Stage, Yeshwanthpur, Bengaluru-560022, having GSTIN 29AABCH1202M1ZR have filed an application for Advance Ruling under Section 97 of COST Act, 2017 read with Rule 104 of COST Rules, 2017 and Section 97 of KGST Act, 2017 read with Rule 104 of KGST Rules, 2017, in FORM GST ARA-01 discharging the fees of RS.5000 each under the CGST Act and the KGST Act.
The Applicant is a Private Limited Company registered under the provisions of Central Goods and Services Tax Act, 2017 as well as Karnataka Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act and KGST/SGST Act respectively). The Applicant is providing Covid-19 Testing facility for all the passengers travelling by air, whether domestic or international. The applicant has sought advance ruling in respect of the following question:- Whether Goods and Service Tax (“GST”) will be levied on Revenue Sharing invoices raised by one party on to another party wherein the outward supply of services is exempt in nature.
The applicant is a Company registered under Companies Act, 1956 (now Companies Act, 2013) and having its registered office at 4/9, Kirti Nagar, Industrial Area, New Delhi. They are providing services for food testing, pharmaceuticals testing, herbal testing, Covid testing etc. for domestic as well as foreign clients. Being a service provider, they arc also registered under the Goods and Services Tax Act, 2017 in various States in India.
Due to sudden surge in Covid-19 cases all over the world, India being no exception, there was a need for establishing testing facilities / labs which are capable enough to test the existence of the virus in one’s body. Therefore, they decided for providing such facilities to the patients who believed that they were infected with corona virus. For establishing a Covid Lab, they approached. Bangalore International Airport Limited, (hereinafter referred to as “BIAL”) a company registered under Companies Act, 2013, wherein the applicant and BIAL entered into Leave and License Agreement dated 01.12.2020. Based upon which the BIAL rented out its space to the applicant for a sum of Rs.16568/- per month for providing Covid testing facilities. The rent is paid by the applicant on monthly basis after deduction of Tax at Source (“TDB”) at the rates applicable under section 194-1 of the Income Tax Act 1961. On the tax invoice generated by BIAL, it is specifically mentioned as License Fee. The applicant states that on 22nd September 2021 another space was taken on rent from BIAL at a monthly rent of Rs.15,776/- (increased to Rs.23,664/- per month). The applicant states that he has also entered into an Agreement dated 23rd September 2020 for Operating a Food Testing Lab (later on Covid Testing Lab) with BIAL for obtaining a space on rent for a sum of Rs.50,000/- per month (now 52,500/- per month). Later on it was agreed between the parties and the space allocated for Food Testing Lab was also converted to Covid Testing Lab at the same terms and conditions. They have entered into an agreement with BIAL for operation of Covid Testing Facility on 2nd September 2021. As per this particular agreement the BIAL will get certain percentage of revenue based upon the turnover of the applicant. The slabs for calculating the revenue share amount were agreed upon and mentioned in the said agreement. Apart from the rent charged from them, BEAL has also made a Revenue Sharing arrangement wherein the applicant will pay BIAL a share on the gross revenue earned during the month.
The revenue earned by them every month is variable in nature. Therefore, the applicant and BIAL have mutually decided the slabs / slab rates on which the revenue will be shared between both the parties, to avoid any future confusion and litigation. The BIAL will raise tax invoices for both rent and revenue sharing separately on them, as per the payment terms mutually decided by the parties. As per the mutually agreed payment terms between BIAL and the applicant, it can be construed that both rent and revenue sharing clauses are separate in nature. Hence separate tax invoices are generated. The BIAL has raised the tax invoices as per mutually agreed payment terms between BIAL and applicant and charged GST @ 18% on the value of its revenue share. The tax invoices are being generated by BIAL bearing SAC 996761 i.e., Airport Operation Services. Considering the facts of the case and the discussions, the applicant is of the view that no GST is to be charged on the Revenue Share Agreement.
Observation of the court
At the outset court would like to make it clear that the provisions of CGST Act, 2017 and the KGST 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.
Court has considered the submissions made by the applicant in their application for advance ruling. We have also considered the issues involved on which advance ruling is sought by the applicant and the relevant facts along with the arguments made by the applicant and also their submissions made during the time of hearing.
The applicant states that they have entered into an agreement with BIAL for operation of Covid Testing Facility on 2nd September 2021. As per this agreement, the BIAL will get certain percentage of revenue based upon the turnover of the applicant.
The applicant states that DIAL raises tax invoices for both rent and revenue sharing separately on them. DIAL raises the tax invoices as per mutually agreed payment terms between DIAL and the applicant and charges GST @ 18% on the value of its revenue share. The tax invoices are being generated by DIAL bearing SAC 996761 i.e., Airport Operation Services. The applicant has also submitted the tax invoices raised (SAC 998592) by them towards each customer for conducting CO ID (RTPCR) test. The applicant states that DIAL raises tax invoices for revenue sharing on them. As per the definition of ‘Supplier’ as per section 2(105) mentioned supra and as per Section 31 which talks about tax invoice, BIAL becomes the supplier since, BIAL is issuing tax invoices to the applicant.
Now court proceeds to examine the admissibility / maintainability of the instant application before going into the merits of the application. In the instant case, we observe that Auriga Research Private Limited, who have filed the application, is not a supplier. Thus the instant application is not admissible and liable for rejection in terms of Section 98(2) of the COST Act 2017.
The application was hereby rejected as “inadmissible”, in terms of Section 98(2) of the CGST Act 2017.AAR-denies-the-request-for-an-advance-ruling-since-the-applicant-is-not-a-supplier.