Indian Subsidiary is Liable to GST under RCM for Support Services Received from Foreign Parent Company: AAAR

Case Details: Appellate Authority for Advance Ruling, Maharashtra IVL India Environmental R&D (P.) Ltd., In re - [2023] 152 taxmann.com 23 (AAAR-MAHARASHTRA)

Judiciary and Counsel Details

• • Dr D.K. Srinivas & Rajeev Kumar Mital, Member
  • Badrinath, Adv. Varun Garg & Gurunathan, CA’s for the Appellant.

Facts of the Case

The appellant was a subsidiary of parent company in Sweden. The appellant and parent company entered into contract with Municipal Corporation for providing project management consultancy services.

The appellant held as liable to pay GST under reverse charge on consideration received from service recipient in India and transferred to Swedish company by the Authority for Advance Ruling (AAR). It filed appeal against the decision of AAR and contended that services were provided by Swedish entity based on its own technical and financial capabilities, bank guarantee was issued on behalf of Swedish entity and appellant was incorporated only to act as a conduit.

AAAR Held

The Appellate Authority for Advance Ruling noted that the appellant in tender document had been termed as consultant and Swedish entity had been termed as parent company and it was mentioned that the payment would be made to consultant for work done by them. In the present case, the Swedish entity act as guarantor of entire arrangement but work was carried out by appellant.

Moreover, the appellant received support services from Swedish entity as without expertise and experience of Swedish entity, such services could not be provided by the appellant. Since, the place of supply was in India and impugned services would fulfil criteria of import of services; therefore, the transfer of monetary proceeds by appellant to Swedish entity was liable to IGST under reverse charge. Thus, the ruling by AAR was upheld.