Temporary Holding of Spare Parts by Service Engineers Not ‘Place Of Business’ or ‘Fixed Establishment’: AAAR [Read Order]

In a recent ruling, the Odisha State Appellate Authority for Advance Ruling (AAAR) held that temporary holding of spare parts and tool kits by Field Service Engineers (FSEs) in Odisha does not amount to a “place of business” or a “fixed establishment” under the GST law.

The case arose after Thermo Fisher Scientific India Private Limited challenged an order passed by the Odisha Authority for Advance Ruling (AAR). The AAR had held that temporary storage of spare parts and tool kits in Odisha constituted a “place of business” in Odisha under Section 2(85) of the CGST Act and also treated the appellant’s presence in the State as a “fixed establishment” under Section 2(50).

Before the AAAR, the appellant argued that it did not maintain any warehouse or stock in Odisha and that the spare parts were dispatched from its mother warehouse in Bhiwandi, Maharashtra. It also argued that any spare parts temporarily kept with FSEs in Odisha were minimal in quantity and were only retained for operational convenience, mainly to ensure faster service.

The appellant's counsel further explained that such spare parts were generally returned within 27 to 60 days and were not stored as regular inventory.

After examining the statutory definitions of “place of business” under Section 2(85) and “fixed establishment” under Section 2(50), the two-member bench comprising Ms. Yamini Sarangi (Member, State Tax) and Shri P.R. Lakra (Member, Central Tax) observed that the temporary retention of spare parts by service engineers could not be treated as maintaining a place from where business was carried on. The AAAR observed that the appellant had no separate infrastructure or permanent set-up in Odisha for storage of goods.

The AAAR also observed that a “fixed establishment” requires a sufficient degree of permanence and a suitable structure in terms of human and technical resources. It pointed out that the appellant’s activities in Odisha were limited to service execution through employees, while contracts, invoicing, and receipt of consideration were handled by the Head Office in Maharashtra.

In view of these findings, the Odisha AAAR held that temporary holding of spare parts and tool kits in Odisha did not create either a “place of business” or a “fixed establishment” in the State.

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