'Privity of Contract' and Classification of 'Goods Transport Agency' Under GST: Drawing Lessons from Recent ECJ Decision
GST Law Times, (2017) Vol. 7 (December 2017) (pp. J95-J100).
6 Pages Posted: 5 Jan 2018 Last revised: 16 Jan 2018
Date Written: December 21, 2017
Generally 'privity' is a concept in contractual law. However a recent decision of the European Court of Justice (ECJ) has employed the concept of ‘privity’ of contract to opine upon the classification of the supply which makes it both interesting and rare. In this case [L.Č.’ IK v. Valstsienemumudienests [C-288/16], the ECJ has applied the concept of ‘privity’ to determine whether a supplier can claim beneficial tax rate in respect of the service of transportation of goods though that person did not have a direct contractual relationship with either the supplier or the recipient of goods and was engaged as a sub-contractor of the transporter.
Even though this case considers Article 146 of the European Council Directive 2006/112/EC which governs the European Value Added Tax regime, this decision has a critical bearing on the new Indirect tax regime in India i.e. the ‘Goods and Services Tax’ (GST) inasmuch as the principle employed by ECJ is also relevant for interpreting the rate schedule under the GST legislations. In particular this decision has critical bearings on the scope of the 'Goods Transport Agency' service under the GST regime.
Keywords: Privity of Contract, Goods Transport Agency, Value Added Tax
JEL Classification: H25, K34
Suggested Citation: Suggested Citation