2022 (6) TMI 1256 - AAAR - GST

Liaison activities between India and Dubai offices constitute mixed supply of support services attracting 18% GST under Section 2(74)

AAAR Maharashtra held that liaison activities between India office and Dubai office constitute mixed supply of support services under Section 2(74) CGST ... Intermediary (arranges or facilitates supply) - supply under Section 7(1)(a) of the CGST Act - mixed supply and rule of highest-rate component - place of supply under Section 13(5) for events - place of supply under Section 13(2) - location of recipient - consideration inclusive of reimbursements - business - inclusive definition (trade, commerce, vocation) - GST registration and tax liability on import of servicesIntermediary (arranges or facilitates supply) - consideration inclusive of reimbursements - Whether the liaison office qualifies as an 'intermediary' under the IGST Act or is an agent/other person for its head office - HELD THAT: - The authority examined the statutory definition of 'intermediary' and the factual matrix of activities. Although the liaison office acts as an agent of its Dubai head office in representing and promoting the head office, its role for Indian and Dubai businesses is limited to making introductions, sharing information and organizing platforms without arranging or facilitating any actual supply between those businesses. The office does not receive fees from those business entities; its receipts are from the Dubai head office. On these facts the liaison office does not satisfy the essential element of arranging or facilitating an underlying supply between two other persons and therefore is not an 'intermediary' under Section 2(13) of the IGST Act. [Paras 11]The Appellant is not an 'intermediary'.Supply under Section 7(1)(a) of the CGST Act - business - inclusive definition (trade, commerce, vocation) - consideration inclusive of reimbursements - Whether the activities undertaken by the Appellant at the behest of its Dubai head office constitute a taxable 'supply' under the CGST Act - HELD THAT: - The Appellate Authority held that the bundle of activities performed by the liaison office (introductions, information sharing, organizing physical and virtual events, participating as representative) fall within the wide statutory meaning of 'services' and, taken together, amount to economic activity or 'vocation' and therefore 'business' under Section 2(17). Amounts remitted by the head office, even if described as reimbursements, meet the statutory definition of 'consideration'. The combined activities form a 'mixed supply' since individual components are separable and are supplied for a single price. Consequently, the activities satisfy the requisites of 'supply' under Section 7(1)(a). [Paras 12, 13, 21, 22]The Appellant's activities constitute 'supply' under Section 7(1)(a) of the CGST Act.Mixed supply and rule of highest-rate component - place of supply under Section 13(5) for events - place of supply under Section 13(2) - location of recipient - Characterisation of the supplies (taxable v. non-taxable) and the place of supply for the various components of the Appellant's services - HELD THAT: - The Authority analysed the components: event organisation/assistance (seminars, conferences, trade shows) were classified as support services under SAC 998596 and identified as taxable where the events are held; other support activities (information, representation, reporting) fall under SAC 998599. For event-organisation services the place of supply is where the event is actually held under Section 13(5), and since such events are held in India those services are in the taxable territory. Other support services are governed by Section 13(2) and, where the recipient is located abroad, are outside India. As the supplies form a mixed supply, Section 8(b) applies and the mixed supply is to be treated as the component attracting the highest rate of tax. [Paras 14, 16, 17, 18]The Appellant's supplies are a mixed supply comprising taxable event-organisation services (place of supply India) and non-taxable support services (place of supply outside India); the mixed supply is to be treated as the event-based support service attracting the highest rate.GST registration and tax liability on import of services - mixed supply and rule of highest-rate component - Whether the Appellant is required to obtain GST registration and discharge tax on amounts received from the Dubai head office - HELD THAT: - Applying the characterisation and place-of-supply conclusions, the Authority held that the mixed supply will be treated as the event-based support service attracting the highest tax rate (18%). The recipient of services is the Dubai head office and the Appellant receives amounts from it; therefore the Appellant must register under GST and is liable to discharge IGST (as applicable) on the entire amount received from the head office in respect of the mixed supply. [Paras 18, 19]The Appellant must obtain GST registration and discharge IGST on the amounts received from its Dubai head office.Final Conclusion: The Appellate Authority modified the MAAR ruling: the liaison office's activities constitute a mixed 'supply' of services (not an 'intermediary'), with event-organisation services taxable in India and forming the highest-rate component; accordingly the Appellant must obtain GST registration and discharge IGST on amounts received from its Dubai head office. The appeal is dismissed. Issues Involved:1. Whether the activities undertaken by the Appellant can be construed as those of an 'intermediary.'2. Whether the activities undertaken by the Appellant can be construed as 'Supply' under Section 7 of the CGST Act, 2017.3. Whether the place of supply of the impugned activities is within the taxable territory.Detailed Analysis:1. Intermediary Status:The definition of 'intermediary' under Section 2(13) of the IGST Act, 2017 includes a broker, agent, or any 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 was found to act as a link between businesses in India and Dubai by sharing details and making introductions but not arranging or facilitating the actual supply of goods or services. Therefore, the Appellant was not considered an 'intermediary.'2. Supply Under CGST Act:The activities of the Appellant were considered 'services' under Section 2(102) of the CGST Act, 2017. The Appellant undertook various activities such as making introductions, organizing events, and sharing information, which were grouped under 'support services' with Service Accounting Codes 998596 and 998599. These activities were deemed 'mixed supply' as per Section 2(74) of the CGST Act, 2017, attracting GST at the rate of 18%. The Appellant's activities were considered 'Supply' under Section 7(1)(a) of the CGST Act, 2017, as they were made for consideration in the course of business.3. Place of Supply:For event-based services, the place of supply is where the event is held, which in this case is India, making it a taxable territory. For other support services, the place of supply is determined by the location of the recipient, which is outside India, making it a non-taxable territory. The Appellant was found to be providing mixed supply, with the predominant supply being event-based support services, thus making the entire supply taxable at 18%.Conclusion:The Appellant is required to obtain GST registration and pay IGST on the entire amount received from their Dubai Head Office. The activities performed by the Appellant were held to be within the ambit of 'Supply' under Section 7(1)(a) of the CGST Act, 2017, and the Appellant's appeal was dismissed.