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Scientific Consultancy Services to a Central Govt. company

Our valuable client had raised the following query on scientific consultancy services provided to a Central Govt. company.

Question - I am doing scientific consultancy in Delhi, my registration is in Kolkata but I am working for a Central Govt. company. You analyze in detail and do accordingly. If nil tax is applicable, please submit the return every month.

Answer – The question has 3 parts enumerated as under:

1. GST applicability on scientific consultancy services to a Central Govt. company
2. Chargeability of GST with respect to services provided in Delhi
3. Rate of tax

a. GST applicability on scientific consultancy services to a Central Govt. company.

The Central Government vide Notification No - No.4/2001-ST dated 09.07.2001 has defined “Scientific or technical consultancy” means any advice, consultancy, or scientific or technical assistance, rendered in any manner, either directly or indirectly, by a scientist or a technocrat, or any science or technology institution or organization, to any person, in one or more disciplines of science or technology. (Section 65(92) of Finance Act, 1994 as amended)

Under GST, the only taxable event is supply of goods or services or both.

The term, “supply” has been inclusively defined in the Act. In order to classify a particular event as supply, the following points may be kept in mind:

                        1. Supply of goods or services.

                        2. Supply should be made for a consideration

                        3. Supply should be made in the course or furtherance of business

                        4. Supply should be made by a taxable person

                        5. Supply should be a taxable supply

                        6. Supply should be made within the taxable territory

Having defined “Scientific or technical consultancy” services and “supply”, we are of the opinion that scientific consultancy services provided to a Central Govt. company is a taxable supply since all the above 6 criteria are fulfilled. Hence “Scientific or technical consultancy service” will be chargeable to GST.

There is no such exemption notification regarding provision of scientific consultancy services to the Central Government company. Government has notified 83 varieties of services which are exempt from GST and scientific consultancy services to a Central Government company does not form part of the list. Hence the service is taxable under GST.

b. Chargeability of GST with respect to services provided in Delhi

Understanding place of supply of services is of paramount importance in order to determine the chargeability of GST. In case of inter-state supply, IGST will be charged and in case of intra-state supply, CGST and SGST will be charged.

Supply of goods and services in the course of inter-State trade or commerce means any supply where the location of the supplier and the place of supply are in different States

Supply of goods and services in the course of intra-State trade or commerce means any supply where the location of the supplier and the place of supply are in the same state.

GST is a destination based tax i.e consumption tax, which implies tax will be levied where goods and services are consumed and will accrue to that state.

There are 2 main points in order to determine the place of supply in case of services:

1. the place of supply of services made to a registered person shall be location of service recipient – Section 12(2)(a) of IGST Act
2. the place of supply of services made to any person other than a registered person shall be:

1. the location of the recipient where the address on record exists
2. the location of the supplier of services in other cases

In the present scenario,

1. place of supply is Delhi assuming  that the service recipient is a registered person
2. location of supplier is Kolkata since the registration of the service provider is Kolkata and bills are raised from the registered office in Kolkata

In this case, then the transaction will qualify as inter-state transaction and IGST will be charged by the service provider in Kolkata.

But if bills are raised from Delhi office, then location of supplier is Delhi and separate registration should be taken in Delhi and then transaction will qualify as intra-state transaction and CGST and SGST will be charged.

There is another concept of ‘Casual Taxable Person’ which means  a person who occasionally undertakes transactions involving supply of goods or services, or both, in the course or furtherance of business, whether as principal, agent or in any other capacity, in a State or a Union territory where he has no fixed place of business. For all such infrequent or one-time transactions, the supplier can obtain registration as a Casual Taxable Person in that state and pay the tax liability in advance on presumption basis. Certificate of registration issued to a casual taxable person will be valid for a period of 90 days and the designated officer can further extend this period by 90 days, provided a reasonable cause is provided by the taxable person.

c. Rate of tax

Disclaimer - The information provided in this document is for general information only. It is based on the information available publicly and the advice received from various professional experts regarding the GST law. The user of this document should be aware that the interpretation or implications of relevant GST rules may change/vary depending upon circumstances applicable to the user.