APPLICABILITY OF GST ON ASIAN DEVELOPMENT BANK AND INTERNATIONAL FINANCE CORPORATION
The Goods and Services Tax
Act, 2017 came into force in India with effect from 1.7.2017.
The Central Government has
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 Central Government has
also clarified that 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 ADB or
IFC.
The relevant Circular No.
83/2019-GST dated 1.1.2019 is given below for ready reference:
F.
No. 354/428/2018-TRU
Government of India
Ministry of
Finance
Department of Revenue
Tax research Unit
*****
North Block, New Delhi, Dated the 1st January,
2019
To
The Principal Chief Commissioners/
Chief Commissioners/
Principal
Commissioners/ Commissioner of
Central Tax (All) /
The Principal
Director Generals/ Director
Generals
(All)
Madam/Sir,
Subject: Applicability of GST on Asian Development Bank (ADB) and International
Finance Corporation (IFC) - reg.
Representations have been received seeking clarification regarding applicability
of GST on Asian Development Bank (ADB) and International Finance Corporation (IFC). The
matter has been examined.
2. The ADB Act, 1966 provides that notwithstanding anything to the contrary contained in any
other law, 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 [Section 5 (1)
of the ADB Act, 1966 read with Article 56 (1)
of the schedule thereto refers]. DEA has 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.
2.1 Similarly, IFC Act, 1958 also provides that notwithstanding anything to the contrary
contained in any other law, the Corporation, its assets, properties, income and its operations
and
transactions authorised 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 [Section 3 (1)
of
IFC Act, 1958 read with Article
VI,
Section 9 (a) of the
Schedule thereto
refers].
3. CESTAT Mumbai vide final order dated 17-10-2016 in the case of M/s Coastal Gujarat Power Ltd. has held that
when the enactments that honour 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. 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.
4. 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.
5. Difficulty if any, in the implementation of this Circular may be brought to the notice
of the Board.
Yours Faithfully,
(Shashikant Mehta) OSD, TRU
Email: shashikant.mehta@gov.in
Tel: 011 2309 5547