Offshore supplies taxable in India in case of composite contract for supply and services: AAR

MUMBAI: The Authority of Advance Ruling ( AAR) recently held that the entire revenue of a company registered in Singapore from supplying goods or rendering services in India is taxable in India.

The contract under consideration was awarded to L&T, which in turn awarded a sub contract to the Singapore Company. The Singapore company was required to design the curtain wall and façade, supply all materials, erect, install, inspect, test and commission the entire subcontract, a research report by Nangia and Co, a tax consultancy, said.

The Singapore company was of the view that the scope of work could be broadly divided into two aspects—offshore supply of goods and installation and other work to be executed at the airport.

AAR held that the entire money received by the Singapore company was taxable in India since the contract was a composite one and there was no evident division in the contract for supply of services.

“This ruling shall impact all foreign companies executing EPC (Engineering, Procurement, and Construction) contracts in India. The observation of AAR shall act as a guiding factor for those planning to enter into an EPC contract in India, although an AAR is only binding on the applicant and that too for the specific case,” Rakesh Nangia, managing director, Nangia & Co said.