Services provided by IFC and ADB exempt from GST: CBIC [Read Circular]

Asian Development Bank & IFC GST

The Central Board of Indirect Taxes and Customs (CBIC) has clarified that the services provided by the Asian Development Bank (ADB) and International Finance Corporation (IFC) are exempted from the Goods and Services Tax ( GST ) regime.

According to the ADB Act, 1996, the Bank, its assets, properties, income, and its operations and transactions shall be exempt from all the taxation and from all customs duties. The Bank shall also be exempt from any obligation for payment, withholding or collection of any tax or duty.

DEA had already conveyed vide letter No. 1/28/2002-ADB dated 22-01-2004 addressed to ADB that taxable services provided by ADB are exempted from service tax.

Similarly, IFC Act, 1958 also provides that the Corporation, its assets, properties, income and its operations and transactions authorized by the Agreement, shall be immune from all taxation and from all customs duties. The Corporation shall also be immune from liability for the collection or payment of any tax or duty.

In 2016, the CESTAT Mumbai in the case of M/s Coastal Gujarat Power Ltd had held that when the enactments that honor international agreements specifically immunize the operations of the service provider from taxability, a law contrary to that in the form of Section 66A of Finance Act, 1994 will not prevail.

The CBIC Circular said that “With the provider being not only immune from taxation but also absolved of any obligation to collect and deposit any tax, there is no scope for subjecting the recipient to tax. There is no need for a separate exemption and existing laws enacted by the sovereign legislature of the Union suffice for the purpose of giving effect to Agreements.”

“Accordingly, it is clarified that the services provided by IFC and ADB are exempt from GST in terms of provisions of IFC Act, 1958 and ADB Act. The exemption will be available only to the services provided by ADB and IFC and not to any entity appointed by or working on behalf of ADB or IFC,” the circular said.

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