GST applicable on Research and Development Services on Goods Physically made available by Foreign Entities: AAR [Read Order]

The Gujarat Authority of Advance Ruling (AAR) ruled that the IGST applicable on Research and Development Services on goods physically made available by foreign entities.

The applicant, M/s.Hilti Manufacturing India Pvt.Ltd. has submitted that they have been granted approval from Development Commissioner (KASEZ) to operate as an 100% Export Oriented Unit (EOU) vide permission. They have been granted permission as per LUT as an 100% EOU to manufacture products such as Easicut diamond impregnated segments, Easicut diamond segmented saw, Continuous type saw, Turbo Type saw, Diamond core bit drills, Aluminium Flange for diamond wheels, Copper washers and blister moulds. They have been granted license for private bonded warehouses under 100% EOU Scheme bearing License No.2/93 with the additional premises Unit-1 and Unit-3 being included in the said license vide amendment to the license and the license has been renewed from time to time.

The applicant has been granted approval from the Development Commissioner (KASEZ) to operate as an 100% EOU. They have been granted permission as per LUT as an 100% EOU to manufacture products such as Easicut diamond impregnated segments, Easicut diamond segmented saw, Continuous type saw, Turbo Type saw, Diamond core bit drills, Aluminium Flange for diamond wheels, Copper washers and blister moulds. They have been granted license for private bonded warehouses under 100% EOU Scheme bearing License No.2/93 with the additional premises Unit-1 and Unit-3 being included in the said license vide amendment to the license and the license has been renewed from time to time.

The applicant has sought the advance ruling on the issue in respect of liability to pay GST on Research and Development Services on goods physically made available by foreign entities.

The coram of Members Sanjay Saxena and Arun Richard held that the Service contract between the applicant and service receiver, applicant’s submissions, even those during the personal hearing, we find that goods were sent by Hilti Aktiengesellschaft (hereinafter referred to as recipient) to the applicant which are required to be made physically available to the applicant, so that applicant conducts various tests and RD activities on the said goods and prepare the results and supply the subject service to the recipient. We find this situation is covered at Section 13(3)(a) of IGST Act. Thus, as per said section 13(3)(a) of IGST Act, the place of supply of the following services shall be the location where the services are actually performed, i.e. location of the applicant. As the services provided by the applicant are in the form of R&D activity undertaken on the sample goods provided by the recipient i.e. the sample goods have to be made physically available by the recipient to the applicant in order to enable the applicant to provide the services. Therefore, the place of supply of service in the present case will be the location where the services are actually performed. The place of supply of services is therefore, Gujarat.

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In Re: M/s.Hilti Manufacturing India Pvt.Ltd. , 2021 TAXSCAN (AAR) 231