2018 (4) TMI 808 - AAR - GST

Education advisory services for foreign universities don't qualify as export under Section 2(6) IGST Act 2017

The AAR-WB ruled that overseas education advisory services promoting foreign university courses to prospective students do not qualify as export of ... Export of services - place of supply - intermediary service - principal-agent relationship - commission-based remuneration - zero-rated supply - establishment of a distinct personExport of services - intermediary service - place of supply - commission-based remuneration - principal-agent relationship - Whether the services rendered by the applicant to foreign universities qualify as 'export of services' under Section 2(6) of the IGST Act or are taxable supplies because they amount to intermediary services. - HELD THAT: - The Authority examined the contractual terms between the applicant and the foreign university submitted as a prototype agreement and found contradictory clauses describing the applicant both as an 'Education Agent' and as an 'independent contractor' (paragraph 13). Material clauses require the agent to promote courses, assist in recruitment, collect fees from prospective students and forward them to the university, meet enrolment targets, and permit university audit and performance review; payment is commission contingent on students being recruited/enrolled through the agent and the university having received the fees (paragraphs 15-16). The agreement precludes the agent from charging students or deducting fees and restricts promotional activity without prior written approval (paragraph 16). These features demonstrate that promotion is ancillary and the principal supply is facilitating recruitment/enrolment for the university; remuneration tied to recruitment establishes the applicant as representing and acting for the university in the territory (paragraphs 17-18). As an intermediary, the place of supply must be determined under section 13(8)(b) (not section 13(2)), resulting in the place of supply being the territory of India. Because the place of supply is thus not outside India, one of the conditions of Section 2(6)(iii) is not fulfilled and the service cannot be treated as export of services (paragraph 19). The Authority also recorded that determination of whether the applicant is an intermediary falls within its jurisdiction for advance ruling purposes (paragraph 4), and admitted the application (paragraph 6). [Paras 15, 16, 17, 18, 19]The applicant's services are intermediary (recruitment/representation) with promotion incidental; the place of supply is in India and the services do not qualify as 'export of services', hence they are taxable under the GST Act.Final Conclusion: The Advance Ruling holds that the services supplied by the applicant are intermediary services (principal supply being facilitation of student recruitment), the place of supply is India, the conditions for 'export of services' under Section 2(6) of the IGST Act are not satisfied, and therefore the services are not zero-rated but taxable under the GST Act. Issues:1. Whether the services provided by the applicant to foreign universities qualify as 'export' under the IGST Act.2. Whether the applicant is providing intermediary services or acting as an independent service provider.3. Whether the place of supply of the services provided by the applicant is outside India.Analysis:1. The applicant sought a ruling on whether their Overseas Education Advisory services to foreign universities constitute 'export' under the IGST Act. The applicant argued that the services provided, promoting courses to prospective students, meet the criteria for export as per section 2(6) of the IGST Act, with the recipient located outside India and consideration received in foreign exchange.2. The Advance Ruling Authority deliberated on whether the applicant was acting as an intermediary service provider or an independent service provider. The authority noted that the applicant's main service was facilitating recruitment of students for foreign universities, with promotional activities being ancillary. The applicant's consideration was tied to student recruitment performance, indicating a principal supply of recruitment services rather than independent promotion.3. The determination of the place of supply was crucial in deciding the export status of the services. The authority analyzed the applicant's role as a recruitment agent for foreign universities, leading to the conclusion that the services were not 'Export of Service' under the IGST Act. As the applicant was considered an intermediary service provider, the place of supply was deemed to be in India, making the services taxable under the GST Act.Conclusion:The ruling established that the applicant's services did not qualify as 'Export of Service' and were deemed taxable under the GST Act. The decision was valid unless declared void under the relevant provisions of the GST Act.