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We hold that the testing services being provided by the applicant in the present case is liable to IGST and cannot be treated as zero rated supply.

Shanti Prime Publication Pvt. Ltd.

Levy of IGST—zero rated supply—In the instant case, question before authority is that Whether in the facts and circumstances of the case, the Applicant is liable to pay Integrated Goods and Services Tax on the testing services provided to its overseas group entities, being a zero-rated supply?

it is seen that the supplier of service is in India and the receiver of the service is outside India and therefore as per Section 7(5) of the IGST Act we find that the supply of service in this case shall be treated as a supply of service in the course of Inter-State trade.

There is no doubt that the, supply of service in the present case satisfies clauses (i), (ii), (iv) and (v) of Section 2(6) of the IGST Act. However to qualify as an export all the conditions must be satisfied and therefore we now take upon ourselves to discuss whether the applicant also satisfies clause (iii) i.e. whether the place of supply in the subject case is outside India. We agree with the applicant that the “place of supply” is relevant to decide the taxability and the Status of taxability of the testing services provided by them to their overseas clients and would therefore require detailed examination.

As per Section 13(2) generally, the place of supply of services shall be the location of the recipient of services except in case of the services specified in sub-sections (3) to (13) of Section 13 of the IGST Act.

In the subject case the prototypes are made physically available by the recipient of services (the overseas clients) to the supplier of services (the applicant). The applicant is providing testing services on physical product samples i.e. prototypes, made available to them in India by their overseas clients in respect of prototypes after due examination and testing of these prototypes. From a reading of the agreement it is very clear that the testing activities that are carried out include Functional tests, Electrical tests, Mechanical tests, Life cycle tests, Endurance tests, Illumination tests, Environmental tests, Software tests, Product robustness tests, etc. - The facts and situation in the present case clearly attract the provisions of Section 13 (3)(a) of the IGST Act and therefore it can be inferred that the said services of testing of the protypes, which are physically made available by the service receiver to the service provider, are provided in India and therefore liable to tax.

In the present case it can safely be inferred from a reading of the provisions of Section 13(3) that the services supply of which has been rendered by the applicant to their overseas client as per the agreement is taxable under IGST Act.

Applicant relied on the case of COMMISSIONER OF SERVICE TAX, MUMBAI-III VERSUS M/S. SGS INDIA PVT. LTD. [2014] [BOMBAY HIGH COURT], but the facts in that case was entirely different - In that case the overseas clients of SGS used the services of SGS in inspection/ test analysis of the goods which the clients located abroad intended to import from India. The tests were conducted on sample goods and the said goods were not made physically available by their overseas client. In fact the overseas clients would import the goods only after the goods were tested by SGS and a report was sent to that effect. The import would occur only the reports sent were found to confirm that the goods imported complied with requisite specifications and standards, In the subject case the situation is different. Here the overseas client had made the goods physically available to the applicant in order to enable them to conduct the tests. If the goods were not made physically available to the applicants for testing purposes, the tests could not have been conducted and therefore no reports could be generated - thus, the facts of the SGA case are different from the facts of the subject matter.

Ruling— In view of the discussion made under ‘Observations’ above we hold that the testing services being provided by the applicant in the present case is liable to IGST and cannot be treated as zero rated supply. [2018] 4 TAXLOK.COM 071 (AAR-Maharashtra)


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