The Karnataka Appellate Authority for Advance Ruling ( AAAR ) has quashed an advance ruling against online apparel platform Myntra wherein the AAR held that 18% GST leviable on the sale of internet advertisement space.
The Appellant, Myntra is an e-commerce operator engaged in the business of selling garments and lifestyle products through its portal. The Appellant has provided space on its web portal for advertisements of a foreign entity for which it receives consideration. Myntra had approached the Advance Ruling Authority for a ruling on whether the activity of providing space for advertisements of a foreign entity is taxable and if so what is the classification and rate of tax of the transaction with the foreign entity; that the Authority had given a ruling on the classification of service and rate of tax but had refrained from giving a ruling on the taxability of the activity.
Before the Appellate Authority, Myntra contended that even though the Authority had held that all other conditions for export of service were satisfied, they did not give a ruling on place of supply on the grounds that determination of tax liability will entail examining the provisions of place of supply which is not a subject covered under Section 97(2) of the Central GST Act.
A coram of Members Ms. Ranjana Jha and Ms. Shikha C observed that the services provided by them qualifies in all respects as an ‘export of service’. There is no disagreement with the findings of the Advance Ruling Authority that they meet the conditions in clauses (i), (ii), (iv) and (v) of Section 2(6) of the IGST Act which defines ‘export of service’; that they also meet condition (iii) of the definition in as much as the place of supply is outside India and they justified this by relying on Section 13(2) of the IGST Act which they claim is applicable in their case. He submitted that no other sub-section in Section 13 applies to them.
While remanding the matter back to the AAR, the Appellate AAR held that “A plain reading of the above shows that determination of place of supply is not a subject matter covered under Section 97(2) of the CGST Act. However, the Appellant has strongly relied on the Kerala High Court decision in the case of Sutherland Mortgage Services Inc vs Principal Commissioner reported in 2020 (35) G.S.T.L 40 wherein it was held by the High Court that even though the issue relating to determination of place of supply is not expressly enumerated in any of the clauses as per clauses (a) to (g) of Section 97(2) of the CGST Act, the issue relating to determination of place of supply, would come within the ambit of the larger issue of ‘determination of liability to pay tax on any goods or services or both’ as envisaged in clause (e) of Section 97(2) of the CGST Act.”
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