CBE&C circular and its background :
Para 2.4.3 of CBE&C’s Taxation of Services : An Education Guide’ published on 20-6-2012 states as follows –
The services provided, both by the so constituted JV or profit sharing association of persons (AOP), as well as by each of the individual persons constituting the JV/AOP will be liable to be taxed separately, subject of course to the availability of the credit of the tax paid by independent persons to the JV/AOP and as otherwise admissible under Cenvat Rules.
This circular should apply in GST also.
CBE&C vide circular No. 148/17/2011-ST dated 13-12-2011 has clarified as follows –
In some cases, the parties conduct business together on revenue sharing basis. Here there is mutuality of interest and they share common risk/profit together. The arrangement is not on principal to principal basis.
Such arrangement is in nature of joint venture. Such joint venture is also recognised as a legal and juristic entity in nature of a partnership. It is a new entity distinct from its constituents. Such ‘new entity’ acquires character of a ‘person’ and the transaction between the ‘new entity’ and the constituents of the new entity (i.e. persons who have come together on revenue sharing basis) will be a taxable service.
In case of Joint venture type arrangement i.e. revenue sharing arrangement, Service provided by each person i.e. ‘new entity’, and constituent of such ‘new entity’ is liable to service tax under appropriate head (like rentingof immovable property or Business Support Service or copyright service as applicable)
Where relations between the parties are on principal to principal basis, the service tax would be leviable on either of the parties based on nature of transaction.
This view has been reiterated in CBE&C circular No. 179/5/2014-ST dated 24-9-2014.
These circulars should apply in GST also.
My comments – In case of ‘UJV’, there is no third legal entity. Thus, the ‘new entity’ as envisaged by CBE&C has no name, no legal existence, no PAN number and no document evidencing its formation, creation or registration. Such non-existent UJV can be ‘person’ only if it has ingredients of ‘Association of Person’.