監督手数料はGSTの課税対象である。実費ベースで徴収されたH&T請負業者の費用はGSTの課税対象外である。

The Authority of Advance Ruling, Karnataka decided in the matter M/s Karnataka State Warehousing Corporation (judgement No. KAR ADRG 14/2021) wherein the applicant has provided the supervision services of loading, transportation and unloading of agriculture produce to the various depositors including Food Corporation of India (FCI). For this purpose, the applicant in turn obtains services of Handling & Transport Contractors. The applicant charges H & T Contractor charges on actual basis alongwith his supervisory charges of 8% of H & T Contractor amount. 

The applicant seeks advance ruling that whether the supervision charges collected by the applicant @ 8% of H & T Contractor charges is liable to GST?

The Applicant contended that supervisory services collected by him are not covered under loading, unloading, packing, storage or warehousing of agricultural produce and therefore, same is not covered under exempted services.

Hon’ble Authority of Advance Ruling held that H & T Contractor charges collected by the applicant on actual basis are not liable to GST as applicant is acting as “Pure Agent” to the extent of such amount. However, supervisory charges collected @ 8% are covered under “Other service” and are liable to GST @ 18%.

In this article,  we have made a detailed analysis of the Advance ruling.

1. Brief facts of the case: 

1. M/sカルナータカ州倉庫公社（KSWC）（以下「申請者」）は、カルナータカ州でGST登録を行っています。申請者は、中央倉庫公社とカルナータカ州政府が折半出資する州政府系企業です。
2. 申請者は他の様々なサービスに加え、農産物の取り扱い・輸送、積み込み・積み下ろしサービスも提供しています。
3. 取り扱い・輸送業務には、鉄道駅での在庫の取り扱い、倉庫への輸送、倉庫内での積み下ろしと適切な積み上げ、必要に応じた袋詰め直し、回収、規格化、および配送時の積み下ろしと積み込みが含まれます。
4. このようなサービスを提供するため、申請者は取り扱い・輸送（H&T）業者を利用しています。
5. 申請者は、政府、準政府、公共部門企業、民間企業など、様々な寄託者にサービスを提供しています。寄託者の一つであるインド食糧公社（FCI）に対してもサービスを提供しています。
6. サービス提供にあたり、申請者はH&T業者に支払う金額と同額に8%のマークアップを加えた金額を請求します。そのため、申請者は寄託者に対して以下の費用を請求しています：
   1. 寄託者から提供されない場合に発生する、麻袋やジュート紐などの梱包材費用など、様々な業務についてH&T業者に支払った実費。
   2. H&T業者の請求額および寄託者に代わって負担したその他の付随費用に対する8%の監督料。

2. Question before Hon’ble AAR:

The applicant sought Advance ruling with respect to following question:

1. 申請者が「取り扱い・輸送」業者から請求された金額の8%の料率で、農産物の積み込み、輸送、積み下ろしの監督に対して請求する「監督料」は、2017年CGST法/KSGST法に基づき課税されるか？
2. 課税される場合、適用される税率およびHSN/SACコードは何か？

3. Legal Extract:

1. Notification No. 12/2017-Central Tax (Rate) dated 28th June, 2017 contains list of services exempted from GST. Entry No. 24(1)(e) is reiterated below:

「...

“

2. Storage and Warehousing service as explained by CBEC in F.No.B11/1/2002-TRU, dated 01-08-20002, is as follows:

“Storage and Warehousing Service for all kinds of goods are provided by public warehouses, private warehouses, by agencies such as the Central WareHousing Corporation, Airport Authorities, Railways, Inland Container Depots, Container Freight Stations, storage godown and tankers operated by private individuals etc.”

3. Definition of “Pure Agent” as per explanation to Rule 33 of CGST Rules, 2017 is as follows:

“Pure Agent” means a person who -

a) Enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both;

b) Neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply;

c) Does not use for his own interest such goods or services so procured; and

d) Receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account.”

4. Contention of the Applicant

The applicant made following contentions:

1. As per Notification No. 12/2017-Central Tax (Rate) under Entry No. 24 or SAC 9986, exemption is available only with respect to loading, unloading, packing, storage or warehousing of agricultural produce and not in respect of supervisory charges.
2. Further, the supervisory charges are not covered in definition of “storage and warehousing services” given under explanation in CBEC in F.No. B11/1/2002-TRU, dated 01-08-2020. 
3. Therefore, Supervisory charges are covered under Entry No.  998619 “Other support services to agriculture, hunting, forestry and fishing” or under the SAC 996799 “Other supporting transport services n.e.c” or under the SAC 999799 “Other services n.e.c” and therefore, such charges would be liable to GST @9% CGST and 9% KGST or 18% IGST.

5. Findings and Discussions of AAR

Hon’ble AAR observed following points:

1. As per agreement between the applicant and depositor, the applicant raises invoice with markup of 8% of the amount charged by H&T Contractor. As applicant is in receipt of consideration, therefore, it is a supply of services in hand of applicant.
2. Also, as per contract entered between the applicant and the depositor, there is no contractual agreement between the H & T Contractor and the depositor and also the applicant is principally providing the H&T Services to the depositor. 
3. As per one of letter issued by FCI (The depositor), it communicated that supervisory charges payable to the State warehousing corporation (“SWC”) has been increased from 5% to 8% w.e.f. 1st April, 2004. The applicant is also one of SWC.
4. Further, Hon’ble AAR clarified the meaning of a valid contract as under:
   1. A contract is an agreement between two or more parties.
   2. A contract can either be written or partial written or oral. Oral agreement or partial written agreement are as valid as written agreement. 
   3. The existence of a contract requires the factual elements of (i) an offer, (ii) an acceptance of that offer which results in a meeting of the minds, (iii) a promise to perform, (iv) a valuable consideration, (v) a time or event when performance must be made (meet commitments), (vi) terms and conditions for performance including fulfilling promises and (vii) performance.
5. The letter provided by FCI qualifies to be a contract and is nothing but the contractual agreement between the applicant and the FCI. As per letter, the applicant procures the H&T services on behalf of the FCI and also charges the H & T Contractor charges separately in his invoice alongwith his supervisory charges.
6. Thus, the applicant without any doubt qualifies to be a pure agent of FCI in this instant Case.
7. Further, applicant is providing supervision services from railhead to warehouse.  Therefore, Hon’ble AAR determined the classification of supervisory services provided by the applicant.
8. Services provided by the applicant are covered under SAC 999799-Other Service n.e.c.

7. Judgement:

As per the aforesaid mentioned analysis the Hon’ble Authority of Advance Ruling concluded that:

1. Services provided by the applicant to FCI are the services covered under SAC 999799 and such category is not covered under any exemption. Therefore, amounts equivalent to 8% of the sum of the actual amount paid to H&T Contractors are exigible to GST @18% as per the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017.
2. Further, H & T Charges collected on an actual basis are not liable to GST being the applicant acting in the capacity of “Pure Agent”.