2026-VIL-26-AAR
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SGST Advance Ruling Authority

GST – Tamil Nadu AAR - Supply of services for agreeing to refrain from competition - As part of the sale, the applicant entered into a non-compete agreement with the purchasers wherein it agreed to refrain from competing with the business of purchasers and cannot do business in all the places where the purchasers are operating. The applicant was paid a non-compete fee for this service - Whether the place of supply of the service rendered by the applicant is outside India – HELD - As per Clause 5 (c) of Schedule II of CGST Act, 2017, the activity of agreeing to the obligation to refrain from an act shall be treated as ‘Supply of Services’. In the instant case, the applicant has agreed to not do business or compete in the places where the purchasers do business i.e., the applicant has agreed to ‘refrain from doing an act’. As such, the activity of the applicant agreeing not to do business amounts to a ‘Supply of Service’. As the activity of the applicant to refrain from performing an act falls under Supply of Service, same is taxable under GST as per Section 9(1) of CGST Act, 2017 - Based on the facts, the place of supply of the service rendered by the applicant to M/s. RFXCEL Corporation, which is located outside India, is outside India as per Section 13(2) of the IGST Act, 2017. On the other hand, the ‘Place of Supply’ of Service in respect of services rendered to M/s. SmartPoint Technologies and M/s. Antares Vision India is within India - Whether the service rendered by the applicant can be deemed to be 'export of services' under in Section 2(6) of the IGST Act, 2017 and therefore be a zero-rated supply – HELD - The service rendered by the applicant to M/s. RFXCEL Corporation, which is located outside India, satisfies all the conditions as per Section 2(6) of IGST Act, 2017 and hence gets covered as “export of services”. As a result, the activity would be zero-rated supply, attracting ‘Nil’ rate of GST - Whether the service rendered by the applicant shall attract payment of any GST and if yes, then the amount of GST that is payable by the Applicant considering the fact that major portion of the service is rendered outside India – HELD - The service rendered by the applicant to M/s. SmartPoint Technologies and M/s. Antares Vision India, both of which are located in India, would fall under either 'Inter-state' supply or 'Intra-state' supply and would accordingly attract applicable GST. The applicant had segregated the non-compete fee based on the domestic and export supply of M/s. SmartPoint Technologies, and the Authority accepted that 98.57% of the non-compete fee received by the applicant would fall under 'export of services' and attract zero-rated GST, while the balance 1.43% would attract applicable GST as inter-state and/or intra-state supply.
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