Order date – 01 December 2022

Facts –

• The Applicant, M/s IVL India Environment R&D Private Limited, is a also a wholly owned subsidiary of a foreign company incorporated under the law of Sweden, namely IVL Sweden.
• IVL Sweden was successfully awarded the tender for Project Management Consultancy Services by the Municipal Corporation of Greater Mumbai (MCGM). Since as per the biding the contract could only be executed by a wholly owned subsidiary of IVL Sweden. The Applicant Company was incorporated in order to execute the contract.
• The Applicant has executed a contract with MCGM governing the scope of work, payment terms and general conditions of contract. The Applicant is transferring monetary proceedings to IVL Sweden.

Issue –

• Whether mere transfer of monetary proceedings without underlying import of service will be liable for payment of IGST under reverse charge mechanism under entry no.1 of Notification No.10/2017 IGST (Rate) dated 28.06.2017?

Order –

• The AAR finds that from the submission made by the applicant it is clear that the applicant is the one which is performing the service at the ground level and the entire support for such service is provided by IVL Sweden who has obtained the contract on the basis of its own credentials and work experience and it is a fact that the applicant cannot provide the services under the contract without receiving support service from IVL Sweden.
• Hence the AAR finds that services received by the applicant from IVL to further perform its services under contract, for which monetary precedes flows from the applicant to IVL Sweden.
• It is clear from Sr. No. 1 of Notification No.10/2017 IGST (Rate) dated 28.06.2017, since support services are being supplied by IVL Sweden located in a taxable territory to the applicant the whole of integrated tax leviable under section 5 of the IGST Act, shall be paid on reverse charge basis by the recipient of the such services i.e. the applicant.
• Thus the applicant has to pay GST on monetary proceeds which is being transferred to IVL Sweden.