Service Recipient Liable To GST-The learned Senior Counsel appearing on behalf of the Petiotioner, pointed out that the liability towards GST, if any, could not be foisted upon the Applicant, and therefore, the MCGM ought to be directed to pay the amount of Rs.67,94,965.02 to the Applicant.

The first submission was that there is no liability to pay any GST as the GST law/regime came into force much after the contract between the Applicant and the MCGM was concluded and even the Arbitral Award was passed long before the GST law/regime was brought into force. The GST law had no application to the facts of the present case as it does not have any retrospective effect

The second submission canvassed by Petitioner was that under the CGST Act as well as under the IGST Act, there was a Reverse Charge Mechanism (“RCM”) under which it was the liability of the MCGM to make payment of the GST.

Applicant is not liable to pay any GST because the Applicant is a foreign entity and by virtue of a Notification issued by the Government of India dated 28th June 2017 [under Section 5(3) of the IGST Act], it would be the liability of the MCGM to pay the GST.

Petitioner submitted that in the case of normal taxable supply, the supplier issues a tax invoice to the recipient of the goods or services and receives the amount from the recipient along with the GST and then discharges his GST liability to the Government. This is referred to be as the “forward charge”. In case of a “reverse charge” the supplier of the services or goods does not charge GST on the invoice and receives the amount from the recipient without any GST

Petitioner submitted that the objective of shifting the burden of paying GST to the recipient is

(i) to widen the scope of levy of tax on various unorganized sectors,

(ii) to exempt specific classes of suppliers and

(iii) to tax the import of services (since the supplier is based outside India)

Mr. Andhyarujina then pointed out that in exercise of the powers conferred by sub-section (3) of Section 5 of the IGST Act, the Government has notified the categories of supply in which the specified recipient of the services is liable to pay the GST under the RCM.

Services on which GST is paid on Reverse Charge Basis:

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Petitioner further submitted that under the provisions of the GST regime, the recipient of the service (in the present case MCGM) can avail of Input Tax Credit for the GST paid under the Reverse Charge Mechanism. The only condition is that the goods and services are used or will be used for business or furtherance of business.

Looking to the overall facts of the matter, petitioner submitted that there is absolutely no justification for the MCGM to withhold the amount of Rs.67,94,965.02 towards the alleged liability of GST from the Applicant.

 The applicant contended that the liability for GST, if any, could not be foisted upon the applicant. Therefore, the MCGM ought to be directed to pay the amount to the applicant. The applicant made two-fold arguments.

Respondent submitted that the GST regime came into effect in the year 2017 and it is true that it was not in existence at the time when the Arbitral Award was passed on 23rd June 2014.

However, the said Award was under challenge, and during the period of such challenge, the GST regime was introduced. In this regard, respondent drew my attention to Section 15 of the CGST Act read with Section 20 of the IGST Act.

Respondent submitted that for the purposes of the present dispute, Section 15(2)(d) of the CGST Act [read with Section 20 of the IGST Act] is relevant, which inter-alia provides that the value of supply shall include interest or late fees or penalty for delayed payment of any consideration

Respondent submitted that considering that interest is being paid after the GST regime was brought into force, GST would be applicable on the interest component of the Arbitral Award, and which would have to be paid to the Government.

Under which it was the liability of the MCGM to make payment of the aforesaid GST liability, respondent submitted that under clause 3 of the Contract between the parties, it was agreed that all taxes were to be borne by the Applicant.

The MCGM submitted that GST is payable on the interest component under the Arbitral Award as it is awarded in favour of the Applicant because of the delay on the part of the MCGM to make payment. The interest is being paid after the GST regime was brought into force. GST would be applicable on the interest component of the arbitral award, which would have to be paid to the government.

The MCGM has not claimed any Input Tax Credit on the amount of Rs.67,94,965.02 and therefore there is no question of a double benefit or unjust enrichment on the part of the MCGM.

Respondent submitted that in any event, MCGM’s output liability towards payment of GST is miniscule as the MCGM is providing most of the services which are exempt from tax and no Input Tax Credit can be availed on exempted services