Appellant's services to Airbus France deemed intermediary services under Section 2(13) IGST Act, disqualifying zero-rated export benefits.

The AAAR Karnataka held that the appellant's services to Airbus France constituted intermediary services under Section 2(13) of IGST Act, 2017, as they facilitated procurement of goods from India without supplying goods on their own account. The services were classified under Heading 998599 as "Other support services" rather than Heading 998399. Since the appellant's activities were performed in India, the place of supply was India under Section 13(8)(b) of IGST Act, disqualifying the services from export status and zero-rated supply benefits.

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Issues Involved:
1. Classification of services provided by the Appellant.
2. Determination of whether the services qualify as "intermediary services."
3. Eligibility of the services as "export of services" and zero-rated supply under GST laws.

Detailed Analysis:

1. Classification of Services:
The Appellant, a subsidiary of Airbus Invest SAS, France, provides two main functions under an "Intra-Group Services Agreement": Procurement Operations and Procurement Transformation & Central Services. The Appellant sought a ruling on whether these activities constitute "Other Support Services" under Heading 9985 or "Intermediary Services" under Heading 9961/9962.

The Authority for Advance Ruling (AAR) classified the activities as "Intermediary Services" under SAC 998599. The Appellant argued that their services should be classified under SAC 9983, as they provide technical expertise, advisory support, and operational assistance, which do not involve facilitating the supply of goods.

The Appellate Authority upheld the AAR's classification, stating that the services provided by the Appellant, including market research, identifying potential suppliers, and continuous assessment of supplier performance, facilitate the supply of goods between Indian suppliers and Airbus France. Therefore, the services are rightly classified under SAC 998599 as "Other Support Services."

2. Determination of "Intermediary Services":
The definition of "intermediary" under Section 2(13) of the IGST Act includes a broker, agent, or any other person who arranges or facilitates the supply of goods or services between two or more persons but does not include a person who supplies such goods or services on his own account.

The Appellant contended that they do not qualify as intermediaries because they provide independent services to Airbus France and are not involved in the actual supply of goods. They emphasized that their role is limited to providing information and technical advisory without participating in the bidding process, negotiating terms, or making payments.

However, the Appellate Authority found that the Appellant's activities, such as identifying potential suppliers, providing technical advisory, and ensuring compliance with Airbus standards, facilitate the supply of goods between Indian suppliers and Airbus France. The Authority noted that the Appellant's role extends beyond mere information gathering and includes facilitating the main supply by ensuring a smooth supply chain. Therefore, the Appellant's services qualify as "intermediary services."

3. Eligibility as "Export of Services":
For services to qualify as "export of services" under Section 2(6) of the IGST Act, the place of supply must be outside India. According to Section 13(8)(b) of the IGST Act, the place of supply for intermediary services is the location of the supplier, which, in this case, is India.

The Appellant argued that their services should be considered as export of services since they fulfill all other conditions, including the recipient being outside India and payment received in convertible foreign exchange. They relied on various judicial decisions and the Education Guide issued by CBIC to support their claim.

The Appellate Authority, however, upheld the AAR's ruling that the services do not qualify as export of services because the place of supply is in India. Consequently, the services are not zero-rated and are subject to GST at the rate of 18%.

Conclusion:
The Appellate Authority upheld the AAR's order, confirming that the services provided by the Appellant are classified as "Intermediary Services" under SAC 998599, do not qualify as "export of services," and are exigible to GST at the rate of 18%. The appeal filed by the Appellant was dismissed on all accounts.

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