Pace Setters Business Solutions (P) Ltd. v. UOI & Ors.

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The Tax Publishers 2024 TaxPub(GST) 882 (Del-HC) IN THE DELHI HIGH COURT VIBHU BAKHRU & AMIT MAHAJAN JJ. Pace Setters Business Solutions (P) Ltd. v. UOI & Ors. W.P. (C) No. 7742/2019 3 April, 2024 Petitioner by: Bharat Raichandani, Deepak Khokhar and Chiatanya G. Tripathi, Advoctes. Respondents by: Vivek Goyal, CGSC for UOI/R-1 with Gokul Sharma, Advocate. Akshay Amritanshu, Senior Standing Counsel with Ashutosh Jain and Anjali Kumari, Advocates. JUDGMENT *Vibhu Bakhru, J* The petitioner has filed the present petition impugning Notification No. 30/2012-ST dated 20-6-2012, Notification No. 10/2014-ST dated 11-7-2014 and Notification No. 10/2017-Integrated Tax (Rate) dated 28-6-2017 issued by the Central Government. The said Notifications are hereafter referred to as the impugned Notifications. The petitioners challenge to the impugned Notifications is confined to the extent that they provide for a reverse charge of Goods and Services Tax (GST) on recovery agent services. The petitioner also impugns Section 17(3) of the Central Goods and Services Tax Act, 2017 (hereafter the CGST Act) to the extent that it deems supply of recovery agent services as exempted supplies. 2. According to the petitioner, the provisions of impugned Notifications dated 20-6-2012 and 11-7-2014 are ultra vires the Finance Act, 1994 (hereafter the Finance Act) and the impugned Notification dated 28-6-2017 as well as section 17(3) of the CGST Act, are ultra vires the CGST Act and the Integrated Goods and Services Tax Act, 2017 (hereafter the IGST Act). 3. The petitioner is, inter alia, engaged in the business of providing services as a recovery agent to a Non-Banking Financial Company (NBFC). It is, essentially, aggrieved on account of service tax and GST in respect of the said services being payable on a reverse charge basis. Consequently, the liability to pay the service tax under the Finance Act, and after 1-7-2017, the liability to pay GST, on such specified services, rests on the recipient of services. Pursuant to the Scheme of Service Tax under the Finance Act as well as GST under the CGST Act and the IGST Act, where the tax is payable on reverse charge basis by the recipient of services, the service provider is not entitled to claim any benefit of the taxes paid on input services. The rationale being that since there is no liability for output tax on the service provider, it would not be entitled to claim any set off or credit for the tax paid on inputs. Thus, the petitioner is not entitled to claim any credit for the service tax or GST paid on inputs as it is not liable to pay any service tax or GST on the services of a recovery agent, rendered by it. The petitioner seeks to challenge the scheme of taxation as discriminatory. 4. As noted above, the petitioner is engaged in providing services, inter alia, as a recovery agent. Prior to the roll out of the GST regime with effect from 1-7-2017, the petitioner was registered with the Service Tax Department (Registration No. AADCP7717ST001) as the service provider providing Business Auxiliary Services as defined under section 65(19) of Chapter the erstwhile Finance Act. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers 2024 TaxPub(GST) 882 (Del-HC)

IN THE DELHI HIGH COURT

VIBHU BAKHRU & AMIT MAHAJAN JJ.

Pace Setters Business Solutions (P) Ltd. v. UOI & Ors.

W.P. (C) No. 7742/2019

3 April, 2024

Petitioner by: Bharat Raichandani, Deepak Khokhar and Chiatanya G. Tripathi, Advoctes.

Respondents by: Vivek Goyal, CGSC for UOI/R-1 with Gokul Sharma, Advocate. Akshay Amritanshu, Senior Standing Counsel with Ashutosh Jain and Anjali Kumari, Advocates.

JUDGMENT

Vibhu Bakhru, J

The petitioner has filed the present petition impugning Notification No. 30/2012-ST dated 20-6-2012, Notification No. 10/2014-ST dated 11-7-2014 and Notification No. 10/2017-Integrated Tax (Rate) dated 28-6-2017 issued by the Central Government. The said Notifications are hereafter referred to as the impugned Notifications. The petitioners challenge to the impugned Notifications is confined to the extent that they provide for a reverse charge of Goods and Services Tax (GST) on recovery agent services. The petitioner also impugns Section 17(3) of the Central Goods and Services Tax Act, 2017 (hereafter the CGST Act) to the extent that it deems supply of recovery agent services as exempted supplies.

2. According to the petitioner, the provisions of impugned Notifications dated 20-6-2012 and 11-7-2014 are ultra vires the Finance Act, 1994 (hereafter the Finance Act) and the impugned Notification dated 28-6-2017 as well as section 17(3) of the CGST Act, are ultra vires the CGST Act and the Integrated Goods and Services Tax Act, 2017 (hereafter the IGST Act).

3. The petitioner is, inter alia, engaged in the business of providing services as a recovery agent to a Non-Banking Financial Company (NBFC). It is, essentially, aggrieved on account of service tax and GST in respect of the said services being payable on a reverse charge basis. Consequently, the liability to pay the service tax under the Finance Act, and after 1-7-2017, the liability to pay GST, on such specified services, rests on the recipient of services. Pursuant to the Scheme of Service Tax under the Finance Act as well as GST under the CGST Act and the IGST Act, where the tax is payable on reverse charge basis by the recipient of services, the service provider is not entitled to claim any benefit of the taxes paid on input services. The rationale being that since there is no liability for output tax on the service provider, it would not be entitled to claim any set off or credit for the tax paid on inputs. Thus, the petitioner is not entitled to claim any credit for the service tax or GST paid on inputs as it is not liable to pay any service tax or GST on the services of a recovery agent, rendered by it. The petitioner seeks to challenge the scheme of taxation as discriminatory.

4. As noted above, the petitioner is engaged in providing services, inter alia, as a recovery agent. Prior to the roll out of the GST regime with effect from 1-7-2017, the petitioner was registered with the Service Tax Department (Registration No. AADCP7717ST001) as the service provider providing Business Auxiliary Services as defined under section 65(19) of Chapter the erstwhile Finance Act.