TaxTMI 
TaxTMI 
2019 (4) TMI 1543
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....B-59 dated 07.07.2018. = 2018 (11) TMI 959 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA BRIEF FACTS OF THE CASE A. The Appellant M/s. Vservglobal Private Limited (hereinafter referred to as 'Appellant'), is an Indian Company having its office at Mumbai. The company is incorporated to provide back office support services to overseas companies (hereinafter referred to as 'Clients'). On 30th December, 2017 Appellant entered into an agreement with M/s. Vikudha Overseas Corporation Ltd., Hongkong (hereinafter referred to as 'Client') to provide back office administrative and accounting support. B. Client is engaged in Trading of Chemicals and other products in International Trade. The Client either itself or through some other companies identifies potential buyers / suppliers and negotiate with them. The Appellant have no role until the Purchase /sale order is finalized by the client. The Appellant comes into picture only after finalization of Purchase / Sale order by a Client to provide back office support. C. The Appellant approached Hon'ble Authority for Advance Ruling to decide as to whether the aforesaid services rendered qualify as 'Zero ....
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....ducted in India. For example, a set of shipping documents like Invoice, Packing list etc. prepared by the Appellant in respect of a consignment purchased from South Korea and sold in Tanzania were annexed with the said rejoinder. d. In its comments, the concerned officer had claimed that the Appellant was not receiving consideration in convertible foreign exchange. To show that the Appellant was receiving consideration in convertible foreign exchange, copies of Invoice issued, Telegraphic transfer, FIRC, bank statement are annexed herewith. G. The Hon'ble Authority for Advance Ruling in the impugned Ruling found that the activities undertaken indicate the Appellant as a person who arranges or facilitates supply of goods or services or both between the overseas client and customers of the overseas client, and therefore covered under the definition of 'Intermediary' as contained under IGST Act and therefore, the place of supply of services is the location of Appellant which is in India. On this basis, the Hon'ble Authority ruled that the services being provided by Appellant are not 'Zero Rated Supply'. Feeling aggrieved, hence the instant Appeal. ....
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.... colour from the associated terms - 'broker' or 'agent' and, therefore, this expression would cover only those persons whose activity is akin to the activity of brokers or agents which results in or may result in finalization of some sale/purchase deal on behalf of the client. 6. The Rule of construction 'noscitur a sociis' as explained by Macmillan means, "The meaning of a word is to be judged by the company it keeps'. Gajendragadkar, J. explained the scope of the rule in State v. Hospital Mazdoor Sabha (1960-2 S.C.R. 866) = 1960 (1) TMI 32 - SUPREME COURT in the following words: "This rule, according to Maxwell, means that, when two or more words which are susceptible of analogous meaning are coupled together they are understood to be used in their cognate sense. They take as it were their colour from each other, that is, the more general is restricted to a sense analogous to a less general. The same rule is thus interpreted in "Words and Phrases" (Vol. XIV, p. 207) : "Associated words take their meaning from one another under the doctrine of noscitur a sociis, the philosophy of which is that the meaning of a doubtful word may be ascertaine....
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....e or sale of stocks, bonds, commodities, or property of any kind, or who attends to the doing of something for another." Similarly, in Baring Vs. Corrie, (1818) 2 Barn. & Ald. 137, "A broker is an agent employed to negotiate and make contracts on behalf of his principle, and in general, contracts of purchase and sale." 9. The term 'agent' has been defined in Section 2(5) of the Central Goods & Service Tax Act, 2017 in the following words. "(5) "agent" means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another; 10. Thus, as per above and in commercial understanding the terms 'broker' and 'agent' means someone who negotiates and /or assist in broking a contract for supply of goods and / or services between two or more persons. Therefore, as per the Rules of 'noscitur a sociis' and 'ejusdem generis', the term 'any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two....
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.... a measure of cost cutting. Such Indian Cos. providing back office support would not be able to compete with their counterparts in neighboring countries if GST @ 18% is imposed. 13. If the language used is capable of bearing more than one construction, in selecting the true meaning, regard must be had to the consequences resulting from adopting the alternative construction. A construction that results in hardship, serious inconvenience, injustice, absurdity or anomaly or which leads to inconsistency or uncertainty and friction in the system which the statute purports to regulate has to be rejected and preference should be given to that construction which avoids such result. Kind attention is invited to the judgment of Hon'ble Madhya Pradesh High Court in Brij Gopal Vs. State of M.P., 1978 MPLJ 70 = 1977 (11) TMI 140 - MADHYA PRADESH HIGH COURT, wherein the Hon'ble High Court held as under. "It is a well-settled principle of construction of the Constitution that when two constructions are possible, the Court must adopt that which will ensure smooth and harmonious working of the Constitution and eschew the other which will lead to absurdity or give rise to practic....
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.... Goods & Service Tax Act, 2017 and therefore tax would be levied in terms of Section 8 of the Act, ibid. Above referred statutory provision are reproduced below for ready reference. "(30) "composite supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply; Illustration. - Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply; Tax liability on composite and mixed supplies. - The tax liability on a composite or a mixed supply shall be determined in the following manner, namely: - a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and (b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax." 15....
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....cipal to principal basis. Those services were proposed to be provided with the sole intention of promoting the brand GoDaddy US in India and thus augmenting its business in India. Therefore, those services proposed to be provided by the applicant, would support the business interests of GoDaddy US in India. The said service was proposed to be provided as a package. Hon'ble Authority accepted that the said services are bundled in natural course of business. The relevant portion of the said Ruling is reproduced below for ready reference. "11. Applicant proposes to provide support services in relation to marketing, branding, offline marketing, oversight of quality of third party customer care centre and payment processing, on principal to principal basis. These services are proposed to be provided with the sole intention of promoting the brand GoDaddy US in India and thus augmenting its business in India. Therefore, these services proposed to be provided by the applicant, would support the business interests of GoDaddy US in India. 20. It has been submitted by the applicant that services to be provided by the applicant are not peculiar only in applicant's case but ....
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....on of Advance Ruling Authority, New Delhi in case of Godaddy India Web Service Pvt. Ltd. reported as 2016 (46) STR 806 (AAR) dated 04.03.2016 = 2016 (3) TMI 355 - AUTHORITY FOR ADVANCE RULINGS (in short Godaddy). We have gone through the facts of the case and the ruling and we find that facts of the present case are different and not similar to facts of M/s. Godaddy. In case of Godaddy the provision of support services was admittedly on principle to principle basis and were provided with sole intention of promoting the brand Godaddy US in India for augmenting its business. In the present case we find that the activities undertaken by the applicant are for and on behalf of client to facilitate supply of goods and services between the clients and their customers. In view of this, we are of the opinion that the judgment cited by the applicant is not applicable to the facts of the present case." 23. The Appellant submitted that there are host of grave errors in the portion of Impugned Ruling, as reproduced above. When marketing, branding, overseeing customer care, payment processing etc. are support services then, there is no reason to treat administrative and accounting support giv....
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....a principle of law laid down in a case will not be followed in future." 25. In the impugned ruling, it is also stated that they have not examined the contention of jurisdictional officer with regard to condition No. (v) as to distinct person which require more specific and detailed examination. The said condition is read as follows. "(v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;" The explanation 1 in section 8 reads as under. "Explanation 1. - For the purposes of this Act, where a person has, - (i) an establishment in India and any other establishment outside India; (ii) an establishment in a State or Union territory and any other establishment outside that State or Union territory; or (iii) an establishment in a State or Union territory and any other establishment registered within that State or Union territory, then such establishments shall be treated as establishments of distinct persons" From the combined reading of above, it is clear that the aforesaid condition is attracted if both the supplier and r....
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....any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account; 31. Hence, a person is covered under the aforesaid definition of "intermediary" if following three conditions are satisfied. (a) He must be a 'broker' or an 'agent' or 'any other person by whatever name called, who arranges or facilitates the supply of goods or services or both or securities'. (b) The supply arranged or facilitated must be between two or more persons. (c) He should not be the person who supplies the goods or services or securities on his own account. 32. Now, in order to understand the nature of services being supplied by the Appellant to its Client, we refer to the Article 2 of the Agreement dated 30.12.2017 entered by the Appellant with its client M/s. Vikudha Overseas Corporation Ltd., which deals with the nature and scope of the work undertaken by the Appellant, reproduced herein below: "The party B (which in this case is the Appellant) ....
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....ing back office administration and accounting services, the Appellant is also providing several other significant services, which are actually facilitating the supply of the goods between its Client i.e. M/s. Vikudha Overseas Corporation Ltd., Hongkong and the suppliers, or the customers of its Client, as the case may be. The services, namely, (i) sending SC (Sales Contract) & PI (Proforma Invoice) to customer & getting Sl (Shipping Instructions) from them; (ii)sending PO (Purchase Order) to supplier & seeking PI (Proforma Invoice) & sharing Sl (Shipping Instructions) with them; (iii) liaising with the supplier for Cargo Readiness; (iv) liaising with Inspection Authorities if pre-shipment inspection is needed; (v) informing customer on tentative schedule; (vi) Providing forwarder/carrier nomination to supplier if the goods are being supplied on FOB; (vii) Seeking carrier booking details and sharing the same with the suppliers and customers;(viii) Following up for smooth SOB (Shipped on Board) with supplier and forwarder;(ix) Getting Draft BL (Bill of Lading) prior to sailing;(x) Following up, for full shipping documents, with supplier;(xi) Arranging Inspection Certificates if appli....
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.... 380 per purchase/sale transaction handled, subject to minimum of US$10,000 per month. This pattern of the remuneration received by the Appellant reveals that the consideration being received by the Appellant is solely based on the number of the purchase/sale transactions handled by them. By looking carefully at the nature of the services provided by them, it is abundantly clear that they are invariably facilitating the supply of goods between their client and its suppliers/buyers, while they are liaising with client's buyers/suppliers with respect to delivery, transportation of goods, and settlement of payment between them, thereby satisfying the first criterion of the intermediary i.e. arranging or facilitating the supply of goods. 35. Since, the Appellant is doing the above work on behalf of their client and the said supply of goods is invariably between two persons, i.e. between their client and its buyers/suppliers of goods, thereby, satisfying the second criterion of the intermediary. 36. Further, the Appellant is not providing the goods in question, either to its client's buyers or to its client's suppliers on his own account. The goods in the question inva....
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....ndled and supplied in conjunction with each other in the ordinary course of business.' Although the same is not defined in CGST Act or IGST Act, yet we note that the concept has been carried forward from the Service Tax law. Hence, we take the reference to Taxation of Services: An Education Guide (June 20, 2012), which provides that, to demonstrate that a service is supplied in conjunction with each other in the ordinary course of business, the supply of services should meet some of the following criterion which are indicative, not conclusive: • The perception of the recipient of service:- If the recipient of the services perceives and expect the services being received by them as one package for better enjoyment of the services being offered by the service providers operating in that particular industry, then those services may be considered as naturally bundled in the ordinary course of business. In the instant case, the Appellant during the course of personal hearing have emphasized that their clients also expect the entire gamut of services to be provided in one package so as to suit their business needs. Applying this parameter, it may verily be inferred that ....