Applicability of GST on Asian Development Bank (ADB) and International Finance Corporation (IFC).

Circular No.: 83/02/2019-GST
Date of Circular: 1st January 2019
Relevant Sections and Rules:

• ADB Act, 1966: Section 5(1) and Article 56(1) of the Schedule
• IFC Act, 1958: Section 3(1) and Article VI, Section 9(a) of the Schedule
• Judicial Reference: CESTAT Mumbai Final Order in M/s Coastal Gujarat Power Ltd. dated 17.10.2016

Summary of Circular:

This circular clarifies the applicability of GST on services provided by the Asian Development Bank (ADB) and the International Finance Corporation (IFC), based on their respective statutory Acts and judicial interpretation.

1. Statutory Tax Immunity under ADB and IFC Acts:
   • Both ADB and IFC are statutorily immune from all forms of taxation, including GST, under:
     • ADB Act, 1966: Exempts ADB, its income, properties, and operations from all taxation and duties.
     • IFC Act, 1958: Similarly exempts IFC from all forms of taxation and collection obligations.

2. Previous Practice under Service Tax:
   • As per Department of Economic Affairs communication (22.01.2004), services provided by ADB were exempt from service tax, establishing precedent for exemption under GST as well.
3. Judicial Precedent – CESTAT Mumbai:
   • In M/s Coastal Gujarat Power Ltd., it was held that international agreements implemented via sovereign laws override conflicting tax provisions (e.g., Section 66A of the Finance Act, 1994).
   • If the law grants immunity to the service provider, no tax liability can be cast on the recipient
4. Clarification Issued:
   • Services provided by ADB and IFC are exempt from GST under their respective Acts.
   • However, this exemption applies only to ADB and IFC themselves, not to any contractor or agency appointed by or working on their behalf.

Source: Circular No.: 83/02/2019-GST