2019 (2) TMI 126 - AAAR - GST

Promotion and marketing services for overseas principal classified as intermediary services under Section 2(13) IGST Act

In Re: M/s. Toshniwal Brothers (SR) Private Limited

In Re: M/s. Toshniwal Brothers (SR) Private Limited - 2019 (21) G.S.T.L. 294 (App. A. A. R. - GST) Issues Involved:1. Classification of promotion and marketing services as 'intermediary services'.2. Determination of whether after-sale support services under a composite contract qualify as a composite supply.3. Qualification of the contracts as exports and zero-rated supply under Section 16 of IGST Act, 2017.Detailed Analysis:1. Classification of Promotion and Marketing Services as 'Intermediary Services':The Appellant argued that their promotion and marketing services provided to an overseas entity should not be classified as 'intermediary services' under Section 2(13) of the IGST Act, 2017. They claimed these services were provided on a principal-to-principal basis and did not involve facilitating the supply of goods between two parties.Findings:The Authority determined that the Appellant's activities, which included identifying prospective customers, promoting products, addressing queries, and communicating with the Principal (overseas entity), facilitated the supply of goods from the Principal to the customers in India. These activities fit the definition of 'intermediary services' as they arranged or facilitated the supply of goods between the Principal and the customers. The Appellant was not supplying these goods on their own account but was facilitating the supply, thereby falling within the definition of an intermediary.2. Determination of Composite Supply:The Appellant contended that their after-sale support services, provided under a composite contract with promotion and marketing services, should be treated as a composite supply, with promotion and marketing services as the principal supply.Findings:The Authority examined the contract and found that the after-sale support services were not naturally bundled with the promotion and marketing services. The after-sale support services, such as installation and warranty services, were not required in every case of sale and were contingent upon the successful supply of goods. Therefore, these services were not supplied in conjunction with each other in the ordinary course of business and did not qualify as a composite supply. The price for after-sale support services was separately identifiable, reinforcing their independent nature.3. Qualification of Contracts as Exports and Zero-rated Supply:The Appellant sought a ruling on whether the contracts in question would qualify as exports under Section 2(6) of the IGST Act and be treated as zero-rated supply under Section 16 of the said Act.Findings:The Authority for Advance Ruling (AAR) refrained from answering this question, stating that the determination of the place of supply was outside their jurisdiction as per Section 97(2) of the CGST/KGST Act. The Appellate Authority upheld this decision, noting that the AAR's jurisdiction does not extend to determining the place of supply.Conclusion:The Appellate Authority upheld the original ruling by the AAR, confirming that:1. The promotion and marketing services provided by the Appellant are classified as 'intermediary services'.2. The after-sale support services are not part of a composite supply with promotion and marketing services.3. The question regarding the qualification of contracts as exports and zero-rated supply was outside the jurisdiction of the AAR.The appeal filed by the Appellant was dismissed on all accounts.