2019 (11) TMI 1454 - AAAR - GST

Appellant's marketing and handholding services qualify as intermediary services under section 2(13) IGST Act 2017

The AAAR held that the appellant's marketing and handholding services constituted intermediary services under section 2(13) of IGST Act, 2017, rather than ... Classification of Services - Marketing services to be supplied by the Appellant under the proposed Agreement - whether supply of “Support services” classified under SAC 9985 or “Intermediary service” classifiable under SAC 9961 / 9962 or any other heading? - Handholding services to be supplied by the Appellant - whether constitute supply of “Support services” falling under SAC 9985 or “Intermediary service” classifiable under SAC 9961 / 9962 or any other heading? - export of services - Handholding services to be provided by the Appellant - Section 2(6) of the IGST Act, 2017. Whether the spectrum of services rendered by the Appellant to the Consultant Manager, located in the USA, would be construed as those of an intermediary as defined under section 2 (13) of the CGST Act, 2017, or otherwise? HELD THAT:- The fact that Agent and Intermediary are the entirely two different concepts in so far as the GST Law is concerned, is evident from the fact that the “Agent” and “Intermediary” are separately defined under CGST Act and IGST Act respectively, having their own meanings assigned to them. In view of this very interpretation, under the GST provisions, it would not be proper to use these two terms, i.e., Agent or Intermediary, interchangeably, as these two terms have completely different essence and characteristics. Thus, it is opined that though there has been mention of the terms agent, broker in the definition of Intermediary as provided under section 2 (13) of the IGST Act, 2017, because of the proximity between these terms, i.e., agent, broker, intermediary, etc., as understood in the common parlance, but under the legal provisions of the GST Act, an agent does not necessarily mean intermediary, unless the conditions prescribed under the meaning assigned to the Intermediary under section 2(13) of the IGST Act, 2017 is satisfied in entirety. i.e. he should be merely acting as facilitator of the supply of goods or services or both between the two or more persons, and not supply of the goods or services or both himself from its own account. Thus, the definition of Intermediary as provide under the IGST Act has given utmost emphasis on the facilitation between two or more persons along with the rider that supply of goods, or, services, or, both, which are being facilitated by such intermediary, should not be undertaken by the intermediary himself. It is observed that all such activities are culminating into the exploration and identification of the prospective investors, who would be investing their money in the EB-5 programme of the USA on the consultancy or advices provided by the Consultant Managers, who will be charging certain consultation fee from such interested investors. Now, it is expressly mentioned in the subject agreement that the Appellant would be receiving a fixed amount of consideration from their client, i.e. Consultant Manager, only after the successful completion of the deal between the Consultant Manager and the prospective customers, who have been identified, persuaded, and ultimately referred by the Appellant to such Consultant Manager after carrying out all these above enumerated activities, viz.- planning, research, surveys, formulation of strategy, sales prospection through various participation in industrial events, which eventually resulted into identification of the pool of prospective investors, interested in the said EB-5 programme - the Appellant is receiving consideration against the actualization of the facilitation of the main services of the investment related consultancy between the Consultant Manager and the prospective investors. In other words, if this supply of the main service, i.e., investment consultancy service, between the Consultant Manager and prospective buyers does not take place due to any reasons, the Appellant is not going to receive any consideration, whatsoever, for any or all activities, undertaken by him. Thus, it is observed that in case of unsuccessful negotiation between the Consultant Manager and the prospective investors, all these aforesaid activities undertaken by the Appellant would not be considered as supply even, as there would not be any consideration in such case, thereby, precluding the entire activities from the scope of the “supply”, as envisaged under section 7(1)(a) of the CGST Act, 2017. All these activities carried out by the Appellant for its client, i.e., Consultant Manager, which are being claimed by the Appellant as the Business Support Services, have got no relevance, when performed independently and in isolation until all these services, when combined together, culminate into the supply of facilitation services between the Consultant Manager and the prospective investors, thereby, making the entire activities of the Appellant as those of an Intermediary as conceived under section 2(13) of the IGST Act, 2017. In the present case, the Appellant is clearly playing the role of Intermediary, as envisaged under section 2 (13) of the IGST Act, 2017. As regards the classification of the services provided by the intermediary, it is stated that the said services of the Appellant, who is acting as an intermediary, would aptly be classified under the Heading 9997 bearing description other services - It is amply evident that all these activities undertaken by the Appellant, which may be in nature of the support services, are ultimately for the facilitation of the main services, i.e. Investment Consultancy/Permanent Residence Advisory services provided by its client, i.e. Consultant Manager and its customers, i.e. prospective investors. Since, the Appellant does not provide the main services, i.e., Investment Consultancy/Permanent Residence Advisory services from his own account, therefore, he may aptly be considered as intermediary under the facts and circumstances of the present case. Once it has been decided that the entire gamut of activities of the Appellant, which are in the nature of the facilitation of the main services between the Consultant Manager and its customers, i.e. prospective investors, are those of an intermediary, we proceed to the determination of the other issues as to whether the activities carried out by the Appellant are export of services or not - Further, to determine the export of services in terms of section 2(6) of the IGST Act, 2017, place of supply of the services has to be determined so as to ascertain whether the supply of services under question can be considered as export of service or not. Now, since the place of supply is beyond the ambit of the advance ruling as discussed, we cannot pass any ruling in relation to the issue of the export. Since the place of supply is beyond the ambit of the advance ruling as discussed above, we cannot pass any ruling in relation to the issue of the export. Accordingly, the Advance Ruling Authority should also have refrained from passing the ruling in the issues of export raised by the Appellant in his application. The entire gamut of activities performed by the Appellant in terms of the subject agreement, are those of an intermediary, which would be classified under the heading 9997 bearing the description 9997. Issues Involved:1. Classification of Marketing services under the proposed Agreement.2. Classification of Handholding services under the proposed Agreement.3. Determination of whether Marketing services constitute export of services as per Section 2(6) of the IGST Act.4. Determination of whether Handholding services constitute export of services as per Section 2(6) of the IGST Act.5. Condonation of delay in filing the appeal.Issue-wise Detailed Analysis:1. Classification of Marketing Services:The Appellant argued that the Marketing services provided under the proposed Agreement should be classified as 'Business Support Service' under SAC 9985, not as 'Intermediary service' under SAC 9961/9962. The Appellant contended that he operates as an independent service provider, not in a representative capacity, and does not have the authority to conclude or negotiate contracts on behalf of the Consultant Manager. The AAR, however, ruled that these services constitute intermediary services, as the Appellant facilitates the supply of services between the Consultant Manager and prospective investors.2. Classification of Handholding Services:For Handholding services, the Appellant maintained that these should also be classified as 'Business Support Service' under SAC 9985. The Appellant emphasized that the services provided are procedural, such as assisting with documentation and coordinating meetings, without participating in sales negotiations or acting on behalf of the Consultant Manager. The AAR disagreed, concluding that these services also fall under the category of intermediary services, as they facilitate the provision of investment-related services by the Consultant Manager to prospective investors.3. Export of Marketing Services:The Appellant argued that Marketing services should be considered an export of services under Section 2(6) of the IGST Act, as all conditions for export are satisfied, including the recipient being located outside India. The AAR ruled otherwise, stating that since the services are intermediary services, the place of supply is within India as per Section 13(8)(b) of the IGST Act, thereby not qualifying as an export of services.4. Export of Handholding Services:Similarly, the Appellant contended that Handholding services should be regarded as export of services under Section 2(6) of the IGST Act. The AAR held that these services, being intermediary services, have their place of supply within India, thus not meeting the criteria for export of services.5. Condonation of Delay:The Appellant filed the appeal with a delay of 2 days, believing the date of receipt of the physical copy of the ruling to be the relevant date. The delay was due to a genuine oversight. The Appellate Authority condoned the delay, noting that the appeal was filed within the permissible period of 60 days, including the maximum condonation period of 30 days allowed under Section 100 of the CGST Act, 2017.Judgment:The Appellate Authority upheld the AAR's ruling that the services provided by the Appellant are intermediary services and classified under heading 9997. It also agreed that these services do not qualify as export of services. The Authority condoned the 2-day delay in filing the appeal. The determination of the place of supply, which is essential for deciding the export status, was deemed beyond the jurisdiction of the Advance Ruling Authority.