Export of Services and Zero-Rated Supply Under IGST Act: Landmark Advance Ruling in Manoj Bhagwan Mansukhani Case

Introduction

The case of Manoj Bhagwan Mansukhani, In Re adjudicated by the Authority for Advance Rulings, GST on January 27, 2021, addresses critical questions regarding the classification of services under the Goods and Services Tax (GST) framework in India. The applicant, M/s. Manoj Bhagwan Mansukhani (operating as M/s. Rishi Shipping), sought clarity on whether their services related to handling bulk fertilisers in custom bonded warehouses qualify as an "Export of Service" under the Integrated Goods and Services Tax (IGST) Act, 2017. Furthermore, they inquired about eligibility for zero-rated supply under Section 16 of the IGST Act, contingent on the classification of their services as exports.

Summary of the Judgment

The Authority for Advance Rulings examined whether the services provided by M/s. Rishi Shipping—namely stevedoring, transportation, storage, bagging, stuffing, and subsequent transportation of bulk fertiliser—constituted an "Export of Service" under the IGST Act. The ruling determined that prior to February 1, 2019, these services did not qualify as exports. However, post the amendment introduced by the Integrated Goods and Services Tax (Amendment) Act, 2018, effective from February 1, 2019, the services began to qualify as exports, thus making the applicant eligible for zero-rated supply under Section 16(1)(a) of the IGST Act from that date onwards.

Analysis

Precedents Cited

While the judgment primarily focused on statutory provisions and their interpretations, it implicitly referenced the definitions and conditions outlined in the IGST Act, 2017, particularly concerning "Export of Services" under Section 2(6) and the "Place of Supply" under Section 13. The case also considered the implications of amendments introduced by the Integrated Goods and Services Tax (Amendment) Act, 2018, which expanded the scope of services excluded from certain supply location rules.

Legal Reasoning

The Authority meticulously evaluated the five conditions stipulated under Section 2(6) of the IGST Act to classify the applicant's services as an export. Initially, the services did not meet the third condition regarding the place of supply being outside India, as determined by Section 13(3)(a). The services were not classified as "repairs," and thus the exclusions did not apply prior to the amendment.

However, the amendment introduced two additional exclusions—services for "treatment" and "process." The Authority interpreted the applicant's services as falling under "process," particularly "jobwork," defined under Section 2(68) of the CGST Act, 2017. This reclassification meant that the place of supply, determined under Section 13(2), shifted to the recipient's location outside India, thus fulfilling the third condition for export. Consequently, post-amendment, the services were recognized as exports.

Impact

This judgment significantly impacts businesses engaged in similar service provisions related to export logistics and warehousing. It clarifies the conditions under which such services qualify as exports, especially following legislative amendments. Companies can now leverage this ruling to claim zero-rated supply benefits, optimizing their GST liability. Moreover, the case underscores the importance of staying abreast with legislative changes and understanding their practical implications on service classifications under GST.

Complex Concepts Simplified

Export of Services

An "Export of Service" under the IGST Act refers to services that meet specific criteria, such as the supplier being in India, the recipient being outside India, the place of supply being outside India, payment received in foreign exchange, and the supplier and recipient not being establishments of the same entity. Export of services enjoys tax benefits like zero-rated supply, meaning the supplier can claim refunds on GST paid for inputs used in providing these services.

Zero-Rated Supply

Zero-rated supply pertains to goods or services exported from India, to Special Economic Zones, or supplied to specific entities. Such supplies attract a 0% GST rate, allowing suppliers to claim refunds on the taxes paid for inputs, thereby reducing the overall tax burden.

Place of Supply

The "Place of Supply" determines the location where the service is considered to be provided for GST purposes. It is pivotal in classifying a service as domestic or export. Various sections under the IGST Act outline rules for determining this, which can influence tax liabilities and eligibility for tax benefits.

Jobwork

"Jobwork" involves any treatment or processing of goods undertaken by one person on behalf of another. In the context of GST, activities like packing, unpacking, repairing, or any other processing of goods are considered jobwork, impacting the tax treatment of such services.

Conclusion

The ruling in the Manoj Bhagwan Mansukhani case serves as a pivotal reference for businesses engaged in export-oriented services, particularly those involving warehousing and logistics. By delineating the conditions under which such services qualify as exports, especially in light of legislative amendments, the judgment provides clarity on GST obligations and benefits. Companies must ensure compliance with the outlined conditions to avail themselves of zero-rated supply privileges, thereby enhancing their operational efficiency and tax management strategies.