Evidence submitted to claim lower GST should mandatorily reflect GST exemption clauses & is subject to reissue by proper authority
Documentary evidence submitted to claim lower GST under notifications adopted from pre-GST era, should mandatorily reflect GST exemption clauses and subject to reissue by proper authority
An advanced ruling is a mechanism whereby taxpayers can get answers or clarifications regarding supply of goods and services, directly from tax authorities and the primary objectives for such a mechanism are to reduce litigation, attract FDI due to transparent tax liability, provide certainty with respect to tax liability and disclose ruling in an inexpensive and transparent manner. The Authority for Advanced Ruling (AAR) constituted by the tax authorities interprets tax laws for the taxpayers and it was created to address any issues faced by taxpayers and assist them by providing a decision on the clarification sought. The AAR’s appellate authority is the AAAR (Appellate Authority or National Appellate Authority for Advanced Ruling). Section 95 to Section 106 in Chapter XVII of CGST Act covers the procedures and rules related to advance rulings. An application is made by the taxpayer on the clarification sought by them. The taxpayer is provided an opportunity of being heard by the AAR. If there is consensus on resolution on the clarification sought between the AAR and taxpayer, an ‘Advance Ruling’ is issued by the AAR and on the contrary, the matter is referred to the AAAR.
The question of law which is address through this AAR is as follows:
- Whether applicability of lower GST rate basis notification under erstwhile Acts continues under GST regime, even though amendments to certifications granting such exemptions have not been made specifying ‘special provisions’ of GST Act.
Facts of the application made to AAR, by taxpayer ‘M/S. Thermo Fisher Scientific India Pvt. Ltd., (applicant)’, dated 18-Sep-2019:
The applicant, M/S. Thermo Fisher Scientific India Pvt. Ltd., is in the business of supplying scientific/technical equipment to research oriented institutions which are registered under the Department of Industrial and Scientific Research (DSIR) such as IITs, public funded research institutions, universities, labs and departments of State and Central Governments, research institutions etc. Applicant transfers the goods imported into bonded warehouse by submitting bill of entry for warehouse without paying IGST or customs duty or clears them through normal route by filing bill of entry for home consumption by paying applicable IGST and customs duty. The applicant is currently paying 5% GST or 5% IGST as applicable as per Notification No. 45/2017-Central Tax (Rate) and Notification No, 47/2017-Integrated Tax (Rate), dated 14.Nov.2017.
The purchase orders raised by the above listed entities have to accompany the following documents and declare that the purchase of the scientific/technical equipment will be used exclusively for research and development purposes. The mandatory documents to be annexed with the purchase orders, to avail the lower GST rate are as follows;
- Certificate of registration with DSIR
- Certificate from the Head of the Department of the entity procuring the goods that the goods will be used only for research purpose
- In the case of entities other than publicly funded research institutions, a declaration that the goods will not be transferred or sold by the entity for a period of 5 years, on installation of the equipment.
The certificate of registrations are valid for a specific period of time and since some were issued in the pre-GST era and mentioned the notification number under which the entities enjoyed lower customs rates namely notification 51/96 Cus dated 23.Jul.1996 and central excise duty exemption under notification 10/97-CE dated 01.Mar.1997. Since many certificate of registrations were valid even under the post-GST era, the applicant had doubts if these certificates were valid documents to avail the lower GST rates. But the government has issued Notification No. 45/2017-Central Tax (Rate) and Notification No, 47/2017-Integrated Tax (Rate), dated 14.Nov.2017 to provide continuing effect to the lower GST rate applicable for the scientific/technical goods, even though the certificates issued to the independent entities were not amended as they still had validity in the post-GST era. The applicant had requested the PO requisitionists to request for amendment to the certificates even if the validity was still applicable. But the requisitionists could not fulfill the requirements as per applicants needs as the DSIR refused to issue fresh certificate of registrations, before expiry of the old one. Therefore the applicant is of the contention that the certificate of registrations which still have validity in the post GST era quoting old notification numbers, can still be considered for availing lower GST rates on the good supplied by them.
Further to reiterate their contention, the applicant quoted few case law in Hemraj Gordhandas Vs. H H Dave reported in 1978, Doce Airlines Pvt. Ltd. Vs. Commissioner of Customs (Prev.) New Delhi reported in 2014 etc.
Observations and final ruling by AAR vide Order No. GST-ARA-45/2019-20/B-15 dated 14.Jun.2021:
During the personal hearing held on 08.Dec.2020, the applicant was requested to present fresh certificate of registration bearing notification numbers as per GST Act, e-mail correspondences denying issuance of fresh certificates of registrations reflecting GST notification numbers from its customers and the relation between Toll India Logistics Pvt. Ltd and the applicant. The applicant presented that their customers could not present fresh certificates of registrations and also that Toll India Logistics Pvt. Ltd is the lessor of the bonded warehouse from where the imported goods are cleared for supply as per PO received.
The AAR acknowledged the facts presented by the applicant and further stated that the Notification No. 45/2017-Central Tax (Rate) and Notification No, 47/2017-Integrated Tax (Rate), dated 14.Nov.2017, clearly mandated the production of the 3 documents mentioned above, while presenting the PO for supply of goods from applicant as in the case of the prior notification under the customs and excise regime.
The AAR mentioned that the notification states that the certificate of registrations have to be signed by an officer of DSIR not below the rank of Deputy Secretary. It further stated that the applicant has not made submission confirming the same. The AAR further stated that the applicant has submitted 9 certificates of registrations, out of which, on 4 certificates the validity period had expired on 31.Mar.2019 but the notification under GST Act for availing lower GST rates were mentioned clearly. Only 1 certificate out of 9, in the name of CSIR-Institute of Minerals and Materials Technology mentioned the central excise notification no. 10/97-Central Excise dated 01.Mar.1997. The declaration that the goods will be used for research and development purposes only was not provided by the applicant. Hence, the AAR contended that in the absence of the requisite documents/certificates, the applicant is ineligible for a blanket exemption providing lower GST rates and would restrict their conclusion only on cases for which proper certificates and complete set of documents as listed in the notification are provided.
The AAR further concluded that the applicant is eligible for the lower GST rate under Notification No. 45/2017-Central Tax (Rate) and Notification No, 47/2017-Integrated Tax (Rate), dated 14.Nov.2017 and they are eligible for lower GST rate if the conditions specified in the notification are met, i.e proper production of valid documentation mentioned in the notification as listed above. In the instant case, the AAR concluded that the applicant cannot claim lower GST rate where the customers certificate of registrations have expires as in the case of 4 institutions mentioned in the prior para and also when the certificate of registrations reflect the notifications under the pre-GST era period.
On the applicants representation made with respect to denial of change of registration certificates, the AAR concluded that the emails attached do not convey anything clearly and since exemption provisions cannot be interpreted loosely, the amended certificate of registrations reflecting appropriate GST notifications are mandatory. And on the applicant’s presentation of various case laws, AAR concluded that they only reflect that the exemption notifications have to be interpreted strictly and it is required that the Certificate of Registrations have to be amended reflecting the notification exemption under the GST regime. The AAR provided a final ruling that the applicant is correct with applying Notification No. 45/2017-Central Tax (Rate) and Notification No, 47/2017-Integrated Tax (Rate), dated 14.Nov.2017 where all the documentations are valid and are provided by the customer as per notification.
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