Applicant's activities qualify as intermediary services under IGST Act 2017, not composite supply of goods and services.

The AAR Maharashtra ruled that the applicant's activities constitute intermediary services under IGST Act, 2017. The applicant, acting on behalf of overseas OEMs/Machinists, identifies and engages third-party Indian manufacturers to produce patterns and tools for camshaft manufacturing. The applicant facilitates connections between overseas clients and Indian vendors, provides designs on behalf of overseas customers, and closely works with manufacturers to develop required patterns. Since the applicant operates as a representative connecting parties rather than providing services on its own account, with tool ownership remaining with overseas OEMs, the supply qualifies as intermediary services rather than composite supply of goods and services.

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Issues Involved:
1. Classification of the activity of design and development of patterns used for manufacturing camshafts.
2. Determination of whether the activity constitutes a composite supply with the principal supply being services.
3. Examination of intermediary services under GST laws.

Detailed Analysis:

Issue 1: Classification of the Activity
The applicant, a manufacturer of camshafts, engages in transactions with overseas OEMs/Machinists for designing and developing patterns and tools required for manufacturing camshafts. The OEMs/Machinists outsource tasks such as assistance in designing, identifying third-party vendors, and coordinating with these vendors to the applicant. The applicant charges a fee for these services. The primary question is whether this activity constitutes a composite supply with the principal supply being services.

Issue 2: Composite Supply and Principal Supply Determination
According to Section 2(30) of the CGST Act, a composite supply consists of two or more taxable supplies of goods or services naturally bundled and supplied in conjunction with each other, where one is the principal supply. The applicant contends that the activity is a composite supply with the principal supply being services, as the value derived from the activity is driven by the assistance rendered in manufacturing process planning rather than the value of the material used for manufacturing the tools.

Issue 3: Examination of Intermediary Services
The applicant's role involves identifying and engaging third-party vendors on behalf of the overseas OEMs/Machinists for manufacturing patterns and tools. This activity involves coordinating and facilitating the supply of goods (patterns and tools) between the third-party vendors and the overseas OEMs/Machinists. Under Section 2(13) of the IGST Act, an intermediary is defined as a person who arranges or facilitates the supply of goods or services between two or more persons but does not supply such goods or services on their own account.

Findings and Conclusion:
1. Nature of Supply: The applicant's activities are classified as the supply of services, specifically intermediary services, as they facilitate the supply of patterns and tools between third-party vendors and the overseas OEMs/Machinists.
2. Intermediary Services: The applicant meets the criteria for intermediary services as they are involved in arranging the supply of goods (patterns and tools) and providing ancillary services of designing and development on behalf of the overseas OEMs/Machinists. The applicant does not supply these goods or services on their own account.
3. Order: The Authority for Advance Ruling concluded that the activity of design and development of patterns used for manufacturing camshafts for a customer is a supply of service in the form of intermediary services.

Summary:
The Authority for Advance Ruling, Maharashtra, held that the activity of designing and developing patterns for manufacturing camshafts, performed by the applicant for overseas OEMs/Machinists, constitutes a supply of services in the form of intermediary services. This classification is based on the applicant's role in facilitating the supply of patterns and tools between third-party vendors and the overseas customers, thus meeting the criteria for intermediary services under the GST laws.

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