2025 (9) TMI 1074 - AAR - GST

Intermediary services under Section 2(13) IGST Act taxable as IGST; Section 13(8)(b) fixes place of supply in India

AAR held the applicant's activities constitute intermediary services under Section 2(13) IGST Act rather than independent consultancy (marketing, ... Classification of services - services rendered is intermediary services as defined under Section 2(13) of the IGST Act, 2017, or whether they are considered independent services of Marketing /Recruitment /Referral Consultant? - whether the services rendered by them can be treated as export of service as defined as per the IGST Act? - HELD THAT:- In the instant case the main supply is made by the foreign Universities to the Indian students. The ancillary supply is the services provided by the taxpayer by facilitating or arranging the main supply. The Circular clarifies that the phrase “such goods or services” refers to the main supply being arranged or facilitated. Therefore, where a person supports or facilitates a transaction between two other persons, without supplying the same service themselves, they fall within the scope of “intermediary”. The applicant is not providing education services themselves. They are instead engaged in facilitating the flow of education services from foreign universities to Indian students. Their services comprising marketing, counselling, student referral, and admission-related support etc are directed toward enabling this main supply of education to occur - The fact that the applicant receives payment from the foreign university only upon successful recruitment of a student further supports the conclusion that the applicant's role is contingent on arranging the supply. The fact that the service fee is commission-based rather than fixed lends further weight to the conclusion that the applicant's services are in the nature of intermediary services. Whether the applicant can be regarded as a consultant, particularly marketing, recruitment or referral consultant, as claimed? - HELD THAT:- There is nothing on record to indicate that the foreign universities have sought or received any strategic, brand-positioning, market-entry or policy-level advice from the applicant. The applicant has not demonstrated that it undertook any independent market research, curriculum benchmarking, institutional promotion strategy or Similar expert-driven engagement. Instead, the applicant's role is limited to execution level facilitation promoting pre-defined programs, referring students, and providing application assistance. This excludes it from the scope of a true consultancy engagement as understood in commercial and tax parlance - the nature and structure of the applicant's role characterized by targeted 'facilitation, commission-based income, lack of strategic autonomy and transactional dependence on student admissions does not support classification as a consultant in any of the claimed categories. Instead, the applicant clearly meets the definition of an intermediary as per Section 2(13) of the IGST Act, 2017, being a person who arranges or facilitates the supply of services (i.e., education) between two other persons, namely the foreign university and the student. The legal position is thus reinforced: the services rendered are intermediary services, not consultancy, and are accordingly taxable under GST. The contractual arrangement and the applicable legal framework including Section 2(13) of the IGST Act and CBIC Circular No. 159/15/2021-GST dated 20.09.2021, the applicant is engaged in the supply of intermediary services and is not providing services on its own account. Consequently, the services rendered are taxable under the IGST Act and do not qualify for the exemption applicable to export of services. Whether the services provided to foreign educational institutions can be classified as “export of services” under Section 2(6) of the IGST Act, 2017? - HELD THAT:- Section 13(8)(b) of the IGST Act states that the place of supply for intermediary services is the location of the supplier. Since the applicant is located in India, the place of supply is also in India. As one of the key conditions for export of services is that the place of supply must be outside India, this condition is not satisfied. Consequently, the services rendered by the applicant do not qualify as export of services and are taxable under GST in India. ISSUES PRESENTED AND CONSIDERED 1. Whether the marketing, recruitment and referral services provided by an Indian education consultant to foreign universities/colleges constitute 'intermediary' services under Section 2(13) of the Integrated Goods and Services Tax Act, 2017, or are independent supplies of marketing/recruitment/referral consultancy. 2. If classified as intermediary services, whether such services qualify as 'export of services' under Section 2(6) of the IGST Act, 2017 and thereby escape GST liability. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Classification: Intermediary vs. Independent Consultant Legal framework: Section 2(13) IGST Act defines 'intermediary' as a broker/agent/any person who arranges or facilitates supply of goods or services between two or more persons, excluding a person who supplies such goods/services on his own account. CBIC Circular No. 159/15/2021-GST provides guiding principles and illustrative scenarios distinguishing intermediary supplies (ancillary facilitation) from principal supplies (own-account services). Precedent treatment: A consistent line of AAR/AAAR decisions has treated student recruitment/marketing services that facilitate supply of education by a foreign university to Indian students as intermediary services where the supplier does not supply the main service on its own account. Some decisions and a CESTAT order under the erstwhile Service Tax regime arrived at contrary results on narrower facts; a recent Telangana AAR reached an outlying conclusion on similar facts. Interpretation and reasoning: Substance prevails over contractual form. Examination of the recruiting/service agreement revealed (i) commission-based remuneration contingent on successful student enrollment; (ii) operational and marketing control and guidelines imposed by the foreign institution (branding, pre-approvals); (iii) obligation to refer and submit student applications for university consideration; (iv) absence of standalone, fixed-retainer consultancy engagements or independent market/strategic advisory functions; and (v) promotional/operational expenses borne by the contractor with only pre-approved reimbursements. These features demonstrate facilitation of the university's supply of educational services rather than independent supply on the applicant's own account. The applicant's income being contingent on tuition payments and conversion indicates the applicant's role is ancillary and facilitative to the primary supply (education) and not a principal supply of consultancy services. Ratio vs. Obiter: Ratio - where a service provider (a) markets, screens and refers students exclusively for tied-up foreign institutions, (b) operates under contracting terms and university control, and (c) is remunerated by commission contingent on student enrollment, such provider meets the statutory definition of 'intermediary' under Section 2(13). Obiter - observations distinguishing isolated earlier tribunal or AAR decisions under different statutory regimes or materially different fact patterns. Conclusion: The service provider's activities constitute intermediary services within the meaning of Section 2(13) IGST Act, 2017 and not independent marketing/recruitment/referral consultancy supplied on its own account. Issue 2 - Export of Services: Whether intermediary services qualify as export Legal framework: Section 2(6) IGST Act defines 'export of services', requiring, inter alia, that the supplier is in India, recipient is outside India, place of supply is outside India, payment is in convertible foreign exchange, and supplier is not merely a branch/establishment of a person in India. Section 13(8)(b) IGST Act provides that for intermediary services the place of supply is the location of the supplier. Precedent treatment: Judicial and quasi-judicial authorities have upheld the competence of Parliament to treat place of supply of intermediary services as the supplier's location and have applied Section 13(8)(b) to tax intermediary supplies located in India. AAR/AAAR precedents applying Section 13(8)(b) treat similar recruitment/marketing commissions as taxable in India where the intermediary is located in India. Interpretation and reasoning: Since intermediary services by statutory definition have their place of supply at the supplier's location (Section 13(8)(b)), and the supplier is located in India, the place of supply is India. One of the essential conditions for export of services is that the place of supply be outside India. Even where other conditions (foreign recipient, payment in foreign exchange) are met, the place-of-supply rule for intermediaries prevents these services from qualifying as exports. The contingency of commission payment upon enrollment and the integrated nature of services with the education supply chain strengthen the conclusion that place-of-supply rules apply to make the supply taxable in India. Ratio vs. Obiter: Ratio - intermediary services supplied by a person located in India have their place of supply in India under Section 13(8)(b) and therefore do not meet the place-of-supply criterion for 'export of services' under Section 2(6). Obiter - commentary on alternative fact patterns where truly independent consultancy, retainer-based marketing, or standalone services to non-enrolled individuals could qualify as exported services if all statutory export conditions including place of supply are satisfied. Conclusion: The intermediary services do not qualify as 'export of services' because the place of supply is India under Section 13(8)(b); therefore such services are taxable under IGST/GST and do not qualify for export exemption. Ancillary issues and clarifications On contractual form vs. substance: The contractual label 'principal-to-principal' or a clause disclaiming agency or partnership does not determine character; substance and actual functional attributes govern classification for GST purposes. On consultant characterization: 'Consultant' lacks a statutory definition and must be assessed commercially; features such as strategic advisory, retainer-based remuneration, autonomy and independent client base would support a consultancy classification. Absence of those features and presence of targeted, commission-linked facilitation weigh against classification as a consultant. On separability of services to students: If the intermediary were to supply distinct services directly to students (e.g., chargeable, independently billed visa services), those could constitute separate taxable supplies to students. In the absence of evidence of such independent supplies, support services forming part of admission facilitation are ancillary to the intermediary role. On precedent weight: Decisions under prior Service Tax law or isolated AARs with narrow facts do not displace the interpretative consensus under GST where statutory definitions (Section 2(13), Section 13(8)(b)) and application to the contractual substance were considered by multiple authorities. Overall Conclusions 1. The described marketing, recruitment and referral activities amount to intermediary services as defined in Section 2(13) IGST Act, 2017. 2. Such intermediary services, with place of supply at the supplier's location in India under Section 13(8)(b), do not satisfy the place-of-supply requirement for export under Section 2(6) IGST Act and therefore do not qualify as export of services exempt from GST.