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2019 (7) TMI 1105
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.... supply of "Support services" falling under SAC 9985 or "Intermediary service" classifiable under SAC 9961 / 9962 or any other heading? 3) Whether the Marketing services to be provided by the Applicant will be an export of services as defined under Section 2(6) of the Integrated Goods and Services Tax Act 2017? 4) Whether the Handholding services to be provided by the Applicant will be an export of services as defined under Section 2(6) of the Integrated Goods and Services Tax Act 2017? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further, henceforth for the purposes of this Advance Ruling, a reference to "GST Act" would means CGST Act / MGST Act. 2. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- "Mayank Jain (hereinafter referred to as the "Applicant") is an individual exploring business opportunity in providing marketi....
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....gned by the parties is enclosed herewith as Annexure "D Question 1:- Whether the Marketing services to be supplied by the Applicant under the Foreign Immigration Advisor to the Consultant Manager constitutes a supply of "Support services" classified under SAC 9985 or "Intermediary service" classifiable under SAC 9961 / 9962 or any other heading? Statement of facts having a bearing on the question The scope of the services to be provided by the Applicant to the Consultant Manager have been provided under the agreement at Clause I(a) read with Exhibit A hereto. A bare reading of the relevant clauses supra would show that the Applicant is engaged in providing pure marketing services for the benefit of the Consultant Manager. Further, the Applicant is an independent service provider providing services at his own risk and cost. It is also expressly provided therein that neither party shall represent itself to be the agent of the other nor shall either party accept service of legal process or create or assume any obligation of any kind or nature whatsoever on behalf of the other party. Neither shall have the authority to conclude or negotiate any contracts or secure any order....
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.... 4. The first limb provides that an intermediary can be a broker, an agent or any other person. In order to examine this limb, it would be apt to refer to the dictionary definitions of the terms "broker" and "agent". The relevant extract of the various dictionary definitions are as follows: a. Halsbury's Laws of England, 4th Edition, Volume 1, Para 712, Page 424: - A mercantile agent who in the ordinary course of his business is employed to make contracts for the purchase or sale of property or goods of which he is not entrusted with the possession or documents of title [Alapati Ramamurthi, Gelli Krishnamurthy & Co. Vs. J. Ramanujan and Ors. (AIR 1961 AP 408)]. = 1960 (7) TMI 66 - ANDHRA PRADESH HIGH COURT b. Concise Law Dictionary (2008 Edition): - A middlemen or an agent who for a commission on the value of the transaction, negotiates for others the purchase or sale of stocks, bonds, commodities, or property of any kind; or who attends to the doing of business for another; c. Law Lexicon Dictionary (Sumeet Malik): - An agent employed to make bargains and contracts between other persons in the matters of trade, commerce and navigation, by explainin....
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....) of the Act and held that the Legislature did not intend to provide for depreciation only in respect of specified intangible assets but also to other categories of intangible assets, which were neither feasible nor possible to exhaustively enumerate. 8. The principle of ejusdem generis was also upheld by the Apex Court in the case of Assistant Collector of C. Ex. Vs. Ramdev Tobacco Company [1991 (51) ELT 631 (SC)] = 1991 (1) TMI 136 - SUPREME COURT and CCE Vs. Shital International [MANU/SC/0884/2010]. = 2010 (10) TMI 19 - SUPREME COURT Similar view has been affirmed in the following cases: i. CIT Vs. Rani Tara Devi [2013 (355) ITR 457 (P&H)]; = 2013 (3) TMI 53 - PUNJAB & HARYANA HIGH COURT ii. Commissioner of Income tax, Udaipur Vs. Mcdowell & Co. Ltd. [MANU/SC/0964/2009] = 2009 (5) TMI 27 - SUPREME COURT 9. In view of the above, it is submitted that the scope of the term "any other person, by whatever name called" will include a person in the same genus as that of an agent or a broker. Thus, on a combined reading of the dictionary meaning of the terms "broker" and "agene' along with the aforementioned judicial precedents, it can be construed that t....
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....n no way representative of the Consultant Manager, the services would fall outside the purview of the definition of an "intermediary" The Applicant merely is providing marketing and advertising solutions which include sending out pamphlets, posting banners, and using print and electronic media. Nothing amongst these activities mandates there being a communication or any kind of decision making on behalf of the foreign entity. As per the plain words of the Foreign Immigration Advisor Agreement, the Applicant will provide services to the Consultant Manager of his own volition and hence, the services to be supplied by the Applicant to the service recipients fails to comply with the second limb of the definition of the term "intermediary". 14. The activity of sales promotion and marketing are not selling of goods and therefore, such activities would not be classifiable under the said heading. The activities of the Applicant will be in relation to market survey, market intelligence and leads, sales promotion, and customer relation. The Applicant will never participate in the actual sales negotiation or profess to act on behalf of the Consultant Manager or help in concluding the inves....
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....ogistic, marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion, construction or works contract, renting of immovable property, security, testing and analysis;" [Negative List regime] 18. From the above, it can be construed that marketing services, advertisement and promotion services, customer relationship management, evaluation of prospective customers, etc. would qualify to be in the nature of support services only. 19. Thus, plainly, the supply of services to be provided by the Applicant would be classified under tariff entry 9985 as "Business Support Service". Question 2:- Whether the Handholding services to be supplied by the Applicant under the Foreign Immigration Advisor Agreement constitute a supply Of "Support services" falling under SAC 9985 or "Intermediary service" classifiable under SAC 9961 / 9962 or any other Statement of facts having a bearing on the question The scope of the services to be provided by the Applicant to the Consultant Manager have b....
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.... goods or services or both or securities on his own account. 4. For avoiding repetition and to maintain brevity, the Applicant does not reproduce the submissions but humbly prays that the submissions made in respect of Question No. 1 be treated as part and parcel of the present question. 5. In the instant case, the Applicant and the Consultant Manager will act as independent contractors in carrying out the handholding service. Moreover, the Applicant and the service recipient will have no authority to create nor will they assume any obligation on behalf of each other. The services rendered by the Applicant are limited in this respect. Although the Applicant assists the person of interest in filling of the forms, providing direction to get the necessary security Clearances, and getting together all the financial information required as per the Consulting Manager, these duties are purely procedural and do not at any point in time extend to facilitating the investment itself. In simpler terms, the applicant is acting independently for the benefit of the Consultant Manager and has no role whatsoever to play in respect of the facilitation, negotiations, manner and mode of investme....
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....f. The consideration does not in any way change the nature of services to be provided by the Applicant. Per the plain words of the Foreign Immigration Advisor Agreement, the Applicant will provide services to the Consultant Manager of his own volition and hence, the services to be supplied by the Applicant to the service recipients fails to comply with the second limb of the definition of the term "intermediary". 9. Since the services to be provided by the Applicant will be as an independent contractor, the Applicant will automatically fall within the exclusion provided in the third limb of the definition. In view of the above, the applicant will not be construed as an intermediary in terms of Section 2(13) of the IGST Act. 10. The Applicant will never participate in the actual sales negotiation or profess to act on behalf of the Consultant Manager or help in concluding the investment by the prospective investor. In other words, the Applicant will not be engaged as an intermediary. It is also pertinent to point out that in no case will the Applicant be the sole point of contact between the Consultant Manager and the customer. This direct connection between the customer and th....
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....ves but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion, construction or works contract, renting of immovable property, security, testing and analysis;" [Negative List regime] 13. From the above, it can be construed that the services of handholding and assisting in in filling forms, and correct documentation for the proper consideration of application, evaluating prospective customers, etc. would qualify to be in the nature of support services only. 14. Thus, the supply of services to be provided by the Applicant would be classified under tariff entry 9985 as "Business Support Service". Question 3:- Whether the Marketing services to be provided by the Applicant will be an export of services as defined under Section 2(6) of the Integrated Goods and Services Tax Act 2017? Statement of facts having a bearing on the question The Applicant will receive payment in freely convertible foreign exchange i.e., United States Dollar. Statement containing the applicant's interpretation of law 1. In this regard I refer to the definition of the term "export of services" as defined under sect....
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.... the service provider is situated outside India. The services to be provided by the Applicant are in the nature of "Support services" classifiable under HSN code 9985. The place of supply in the instant case would therefore be determined as per the general rule i.e. as per Section 13(2) of the IGST Act. Applying the above to the present case, the place of supply of services shall be the location of the Consultant Manager i.e. outside India. Further, it is pertinent to note that there is no consideration flowing from the Indian customer to the applicant and the beneficiary of the services rendered is directly the Consultant Manager. d. Condition IV - Payment is received in convertible foreign exchange As mentioned in the foregoing paragraphs, the consideration to be charged by the Applicant will be in convertible foreign exchange i.e. United States Dollar. e. Condition V - Supplier of service and recipient of service are not merely establishment of distinct person Explanation 1 to Section 8 inter alia provides that where a person has an establishment in India and any other establishment outside India, then such establishments shall be tre....
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....ration. Consequently, the location of the supplier of service shall be Maharashtra i.e. in India. b. Condition II - Recipient of service is located outside India The term "location of the recipient of services" has been defined under section 2(14) of the IGST Act. As per the said definition, if a supply has been received from a registered place of business or registered fixed establishment, the location of the recipient shall be the respective place of business or fixed establishment. However, in other cases, the usual place of residence of the service recipient Shall be the location of the service recipient. In the instant case, the Consulting Manager will not registered in India and therefore, their registered place of business will be their registered address (i.e. outside India). c. Condition III - Place of supply of service is outside India From (a) and (b) above, it appears that while the service provider will be situated in India, the service recipient will be located outside India. In order to determine the place of supply, I refer to Section 13 of the IGST Act which provides for the place of supply of services in case where either the se....
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....ty of personal hearing. In furtherance of the same, the Applicant is now filing the present submissions for consideration of the Hon'ble Authority. 2. At the outset, it is submitted that the submissions herein are without prejudice, and in addition to the averments taken in the application for advance ruling. Facts in brief 3. The EB-5 Program envisages that an investor is eligible to a permanent residence permit in the United State of America subject to an investment of US$ 500,000 and job-creation in a commercial entity or investment fund, commonly referred to as a "Regional Centre" or a "Company", which is approved and recognized by the Government of the United States of America. 4. The Applicant proposes to enter into an agreement with a person located and registered in the United States of America (copy enclosed as Annexure-D to the application for Advance Ruling), referred to as the Consultant Manager who acts for the Regional Centre. In terms of the same, the Applicant will be providing the following two independent buckets of services, as detailed below: NATURE OF SERVICE Marketing Services Handholding Services e. Collecti....
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....962 or any other heading? b. Whether the Handholding services to be supplied by the Applicant under the Foreign Immigration Advisor Agreement constitute a supply of "Support services" falling under SAC 9985 or "Intermediary service" classifiable under SAC 9961 / 9962 or any other heading? c. Whether the Marketing services to be provided by the Applicant will be an export of services as defined under Section 2(6) of the Integrated Goods and Services Tax Act 2017? d. Whether the Handholding services to be provided by the Applicant will be an export of services as defined under Section 2(6) of the Integrated Goods and Services Tax Act 2017? Contentions Question (a.) 9. In respect of question raised at Paragraph 9.a. supra, reference must be made to the definition of "intermediary" under the Integrated Goods and Services Tax Act, 2017 ("IGST Act"), reproduced below for ready reference: "(13) "intermediary" means a broker, an agent or 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....
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....e been simply defined to mean a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both........., but that is not the case in the present. 12. It is a matter of fact that the Applicant is not acting in any representational capacity either on behalf of the Consultant Manager or the interested individual. The services are supplied on a principal to principal basis by the Applicant to the Consultant Manager. Further, it is undisputed that the Applicant does not negotiate, take decisions or conduct any similar activity. Hence, the Applicant is not an agent/ broker or similar to an agent/ broker and is therefore, not covered in the definition of intermediary under Section 2(13) of the IGST Act. 13. Further to the above, strong reliance is also placed on the Order No. 62221/2018 of the Customs, Excise and Service Tax Appellate Tribunal in M/s. Sunrise Immigration Consultants Private Limited vs CCE & ST, Chandigarh in Appeal No. ST/52205/2015 = 2018 (5) TMI 1417 - CESTAT CHANDIGARH (Annexure "2"). In this case, the facts were that the Appellant provided services to foreign universities by way of preparing ca....
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.... the main service provided by the main service providers namely banks/ university. As the appellant did not arrange or facilitate main service i.e education or loan rendered by colleges/banks. In that circumstances, the appellant cannot be called as intermediary ....." (Emphasis supplied) 14. Aforesaid facts are identical to the present case. In the present case also, the Applicant is nowhere providing services between two or more persons. The Applicant is providing services to Consultants who are paying fees to the Applicant. The Applicant is merely hunting the perspective investors and introduced them to the Consultants and if these perspective investors opts for EB-5 program, the Applicant gets paid which is in nature promoting the business of the Consultants. 15. Further to the above, reliance is also placed on In Re: GoDaddy India Web Services Pvt. Ltd. [2016 (46) STR 806 (AAR)] = 2016 (3) TMI 355 - AUTHORITY FOR ADVANCE RULINGS (Annexure "3") wherein in addition to marketing services, the applicant therein was also providing supervision of customer care service and payment processing services to their parent entity, GoDaddy US, a company registered and incorporated ....
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....d 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." (Emphasis supplied) 16. To similar effect was the order of In Re: Universal Services India Pvt. Ltd. [2016 (42) STR 585 (AAR)] = 2016 (5) TMI 750 - AUTHORITY FOR ADVANCE RULINGS (Annexure "4") under the Finance Act, 1994. 17. At this juncture, it is submitted that the decisions and orders quoted supra, although under the Finance Act, 1994 have substantial persuasive value as held by this Hon'ble Authority in In Re: Asahi Kasei India Private Limited infra. 18. Further reliance is placed on the Order dated 05 September 2018 of this Hon'ble Authority in In Re: Asahi Kasei India Private Limited (Annexure "5") wherein it was held as under: "The concept of intermediary under the GST Act is substantially identical to the concept of intermediary under the erstwhile service tax regime. This concept has been explained in the Education Guide issued by CBEC in the year 2012 as under: In order to determine whether a pe....
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....rty A. 5. All other related services pertaining to above services including, but not limited to, those services with regard to finance, accounting, and patent and legal matters. We clearly find from the scrutiny of clause 15 of the Services Agreement that the relationship between the parties is that of independent contractors meaning that the agreement does not intend to create relationship of principal and agent. The applicant shall not represent itself to be agent of party A and vice-versa. Further applicant have no authority to conclude or negotiate any contracts or secure any orders or maintain any stock of goods on behalf of Party A in this case. On the contrary applicant would provide service on own account to party A to improve functioning of holding company and further augment its business vis a vis sale of all products manufactured and or sold or to be manufactured and or sold in India territory. Thus we find that applicant is not a person who arranges or facilitate supply of services between two or more persons. Thus applying the test mentioned in the Education Guide to the facts of the case we can safely conclude that the proposed service would....
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....d facts are that the Applicant/ supplier of service is resident in India and the Consultant Manager/ recipient of service is resident outside India. Hence, the location of the supplier of services is India and location of the recipient of service is outside India, in terms of Sections 2(15) and 2(14) of the IGST Act. Further, the activities of marketing will be conducted in India itself. This, however, cannot automatically make it to mean that the place of supply of services is in India Place of supply is to be determined only in terms of Section 13 of the IGST Act and there cannot be any other consideration thereto. In terms of Section 13(2) of the IGST Act, place of supply would be the location of recipient of service (Consultant Manager, USA) and hence, clearly outside India. Question (b.) 23. In as far as question raised at Paragraph 9.b. supra is concerned; it is submitted that the handholding services provided by the Applicant are not that of intermediary as evidenced in terms of the judgment of Sunrise Immigration supra. Therein also, the appellant would prepare cases of students and interested persons for obtaining admission/ investment. 24. For the sake of maintai....
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....: Whether the Marketing services to be supplied by the Applicant under the Foreign Immigration Advisor to the Consultant Manager constitutes a supply of "Support services" classified under Sac 9985 or "Intermediary Services" classifiable under SAC 9961/9962 or any other heading: 1. The Applicant seeks to provide such services to their clients (the Company or to their Consultant Managers), located in the United States of America, with the aim of enabling them to receive prospective investors located in India, for obtaining permanent residency in the United States of America. The services provided by the Applicant to the consultant managers shall inter-alia, include: i. Collecting and analysing information i.e market analytics, intelligence, preparing and drafting reports, strategy and providing leads to the Company/Consultant Manager about prospective investors in India, who qualify under Regulation D or Regulation $ promulgated under the Securities Act (of the USA) and are willing to deposit $ or the minimum amount then required, to quality for the EB -5 Program; ii. Marketing of the EB-5 program m India to prospective Investors to participate in such Off....
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.... or both, and an intermediary in between. In the instant case, the Applicant is acting as the facilitator between the Company and the prospective investors. 6. The operative part of the definition of "intermediary" is "who arranges or facilitates the supply of goods or services or both or securities", Thus, an intermediary is one who arranges or facilitates supply of goods or services or both, belonging to the principal. Therefore, the nature of goods or services supplied by the intermediary must be same as goods or services supplied by the principal. An intermediary cannot alter the nature or value of supply, which he facilitates on behalf of his principal, which is found to be valid and true in the present case also. 7, The consideration for an intermediary's supply is separately identifiable from the main supply that he is arranging and is in the nature of fee or commission charged by him. It is not necessary that the intermediary must receive consideration from principal only; he/she can receive her consideration from the third party also. In the instant case also, the Applicant receives a consideration from the Company, in the nature of a fees/ brokerage towards the ....
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....eign Immigration Advisor Agreement constitute a supply of "support services" falling under SAC 9985 or "Intermediary service" classifiable under SAC 9961 /9962 or any other heading? From the facts and issues as stated and discussed in the sub-paras 1-8 of para 'A' above, it appears that the Applicant is authorised by the Company to act and represent them on their behalf and carry out such functions viz. marketing of the EB-5 program in India to prospective investors and to immigration and administrative related duties on behalf of the Company. Therefore, the Applicant by way of acting on behalf of the Company for performing the immigration and administrative related functions of the Company towards their prospective investors, is essentially acting as an agent/representative of the company in India, i.e. the intermediary. Therefore, such services provided by the Applicant to the Company may be appropriately classifiable as 'intermediary services' c. Question 3: Whether the Marketing Services to be provided by the Applicant will be an export of services as defined under Section 2(6) of the Integrated Goods and Services Tax Act 2017? 1. In order t....
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.... in the matter was held on 22.01.2019, Sh. Mayank Jain, applicant appeared and requested for time for reframing the questions consistent with statement of facts. His request was found acceptable and the same was to be complied within 15 days. Applicant has reframed his application and Preliminary hearing in the matter was again held on 02.04.2019, Sh. Mayank Jain, applicant, appeared and requested for admission of his application. Jurisdictional Officer Sh. Hemant Kumar, Inspector, Range-III, Mumbai Central, appeared and made written submissions. The application was admitted and called for final hearing on 24.04.2019, Sh. Dinesh Kumar Agrawal, Consultant and Sh. Mayank Jain applicant, appeared and made oral submissions. The Jurisdictional Officer Sh. M.N. Singh, Suptt., Range-III, Division III, Mumbai Central appeared. Both requested for time to submit written contentions. Accordingly, they were permitted to submit written contentions within 15 days. 05. OBSERVATIONS We have gone through the facts of the case, documents on record and submissions made by both, the applicant as well as the jurisdictional office. The issue put before us is in respect of a future transaction w....
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....capacity of the investor. In addition to the investment of $ 500,000 there will also be administration fees and attorney fees which are charged to the investor. The mediator/ advisor in India, like in this case, the applicant, is paid an amount from such fees only. After the meeting of the investor and the attorneys/ consultants is done the investor receives the terms and condition and fee structures from such attorneys/consultants and then they can be hired and then they will advise on where to make the investments. The consulate also charges administration fees. Keeping the above in mind we now discuss the queries raised by the applicant as below: Question 1:- Whether the Marketing services to be supplied by the Applicant under the Foreign Immigration Advisor to the Consultant Manager constitutes a supply of "Support services" classified under SAC 9985 or "Intermediary service" classifiable under SAC 9961 / 9962 or any other heading? AND Question 2: Whether the Marketing services to be provided by the Applicant will be an export of services as defined under Section 2(6) of the Integrated Goods and Services Tax Act 2017? From a perusal of the agreement submitted by the ap....
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....ocess for the applicant is hand holding i.e., to help the investor fill up forms, helping in preparation of various documents on behalf of the Consultant manager who ultimately identifies the appropriate and profitable projects for investment and advises on the procedure to obtain permanent residence in USA. This in fact an intermediary service in the name of hand-holding service. Another fact of the EB5 program is that in addition to the amount to be invested, the investor has to pay fees to the Consultants/ Attorneys, etc. in USA, out of which the fees are paid to the applicant. The consideration for the services rendered by the applicant will be paid upon successful investment/ repatriation by the investor. The applicant does not provide any services on his own but is acting as an intermediary in the subject case. The term "intermediary" is defined under Section 2(13) of the Integrated Goods and Services Tax Act 2017 ("IGST Act"). The relevant extract of the said definition is set out hereunder: "(13) "intermediary" means a broker, an agent or ant/ other person, whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, bet....
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....s mentioned in (i), (ii), (iv) and (v) above i.e the applicant is situated in India (the supply will be made from Maharashtra where GST registration will be obtained), the Consultant manager is located abroad (The Consultant Manger will be registered in USA under their laws and not in India), the consideration will be received by the applicant in convertible foreign exchange and both, the applicant as well as the Consultant Manager are distinct persons with establishments in their respective countries and not merely establishments of a distinct person in accordance with Explanation 1 in section 8 of the IGST Act, 2017. Now to determine the place of supply we refer to the provisions of Section 13 of the IGST Act, 2017. Sec 13(2) of IGST Act, 2017 is reproduced below - "13(2) The place of supply of services except the services specified in sub-sections (3) to (13) shall be the location of the recipient of services: Provided that where the location of the recipient of services is not available in the ordinary course of business, the place of supply shall be the location of the supplier of services." Section Extract Applicability? 13(3) (3) The place of supply o....