The court ruled that GST does not apply to services executed outside India's territory, affirming that the taxpayer's activities in Maldives constituted a fixed establishment subject to local laws.

ORDER :

Sujoy Paul, J.

This Writ Petition filed under Article 226 of the Constitution impugns the Order-in-Appeal (OIA) No.AAAR/04/2022 dated 16.07.2022, whereby the view of the Advance Ruling Authority dated 05.08.2021 (Annexure P-18) was affirmed.

Petitioner’s case:-

2. The Government of India (GoI) entered into Memorandum of Understanding (MoU) with Government of Maldives for constructing a Police Academy funded by the GoI. In turn, the GoI appointed respondent No.2 i.e., National Buildings Construction Corporation Ltd., (NBCCL) to execute the construction of Police Academy by itself or through a contractor. NBCCL awarded contract to the petitioner.

3. In order to complete the work at Republic of Maldives (Maldives), the NBCCL set up an office and in turn the petitioner also set up their office at Addu city, Maldives. The Authorized Dealer Bank {Oriental Bank of Commerce (OBC)}, which is acting on behalf of Reserve Bank of India approved the establishment of branch office of petitioner in Maldives.

4. The stand of the petitioner is that it exported various goods to its Maldives office. The turnover of such goods was declared under the GST as ‘zero rate supplies’. The petitioner treated the consideration received towards ‘works contract service of construction’ which was completely executed in the territory of Maldives through their Maldives establishment as outside the scope of GST laws of India. Respondent No.2 did not pay GST on the construction to the petitioner and also opined that supplies rendered outside India are beyond the purview of GST.

5. Learned counsel for the petitioner placed reliance on agreement dated 08.07.2016 (Annexure P-5) to show that NBCCL has awarded contract to the petitioner for setting up of the Institute of Security and Law Enforcement Studies (ISLES) at Addu city, Maldives. Clause 1.1 of the said agreement clearly shows that construction was to be carried out in Addu city, Maldives. The Ministry of External Affairs, GoI, New Delhi, issued certificate dated 14.07.2016 (Annexure P-7), which makes it clear that NBCCL working under the aegis of Ministry of Urban Development has been appointed by the Ministry of External Affairs, GoI, New Delhi, as ‘Executing Agency’ for construction of ISLES at Addu city, Maldives. The petitioner has been duly awarded contract by NBCCL on behalf of Ministry of External Affairs, GoI, New Delhi, for implementation of said project. In turn, the petitioner got ‘Certificate of Re-registration’ dated 22.02.2017 (Annexure P-8), which was issued by the Registrar of Companies, Ministry of Economic Development, Republic of Maldives. The petitioner also entered into a rental agreement in order to have a ‘fixed establishment’ in Maldives. The petitioner during the time of construction of said building got employment approval from the Maldives Government in Addu city for its number of employees. Few of such documents are also placed on record as Annexure P-9.

6. Much emphasis is laid on the agreement of petitioner with Ministry of Economic Development, Republic of Maldives dated 18.04.2017 (Annexure P-10). The petitioner got itself registered under Maldivian GST Law and notification dated 19.02.2020 (Annexure P-11) was issued. A letter dated 27.12.2017 (Annexure P-13) is relied upon to submit that the OBC informed the petitioner that consideration for proje