Intermediary services under SAC 998599 qualify as facilitating supply between parties without own account supply per GST definitions

The AAR Karnataka ruled that the applicant provides intermediary services under SAC 998599 rather than marketing services to foreign affiliates. The authority determined the applicant facilitates supply of goods/services between parties without supplying on its own account, qualifying as an intermediary per GST definitions. However, the AAR declined to rule on whether these services qualify as zero-rated exports, stating that determining the place of supply falls outside its jurisdiction, making it impossible to conclude if the transaction constitutes export of services or inter-state supply.

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Issues Involved:
1. Whether the applicant is acting as an intermediary of McAfee Singapore.
2. Whether the services supplied by the applicant to McAfee Singapore are marketing services or intermediary services.
3. Whether the services supplied qualify as export of services and hence zero-rated.

Issue-wise Detailed Analysis:

1. Whether the applicant is acting as an intermediary of McAfee Singapore:

The definition of "intermediary" under Section 2(13) of the IGST Act, 2017, is analyzed. The term includes a broker, an agent, or any other person who arranges or facilitates the supply of goods or services between two or more persons but excludes those who supply such goods or services on their own account. The applicant's argument that they are not intermediaries because they operate on a principal-to-principal basis is rejected. The ruling emphasizes that the definition includes any person who arranges or facilitates the supply, regardless of the nature of their relationship with the principal.

2. Whether the services supplied by the applicant to McAfee Singapore are marketing services or intermediary services:

The agreement between the applicant and McAfee Singapore is examined. The applicant provides services to support and facilitate the selling, marketing, and distribution of McAfee products. These services include identifying potential business contacts, liaising with customers, advising on compliance with local laws, assisting in product demonstrations, and providing reports to McAfee Singapore. The ruling finds that these activities align with the definition of intermediary services, as they involve facilitating the supply of goods or services between McAfee Singapore and its customers. The services are classified under SAC 998599, which covers business services of intermediaries and brokers.

3. Whether the services supplied qualify as export of services and hence zero-rated:

The applicant argues that the services provided to McAfee Singapore qualify as export of services under Section 2(6) of the IGST Act, 2017. The conditions for export of services include the supplier being located in India, the recipient being located outside India, the place of supply being outside India, the payment being received in convertible foreign exchange, and the supplier and recipient being separate legal entities. While the applicant meets most of these conditions, the ruling states that determining the place of supply is outside the jurisdiction of the Authority for Advance Ruling. Therefore, no advance ruling is given on whether the services qualify as export of services.

Ruling:

1. The services supplied by the applicant to McAfee Singapore are covered under SAC 998599 (if not treated as Export of Services) and attract a tax of 9% under CGST Act, 9% under KGST Act, and 18% under IGST Act.
2. No advance ruling is given on the issue of whether the services qualify as export of services, as it involves the determination of the place of supply, which is outside the jurisdiction of the Authority.
3. The services provided by the applicant are in the nature of services supplied by an intermediary.

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