TaxTMI 
TaxTMI 
2019 (7) TMI 1388
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....s, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST Act. 2. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- STATEMENT OF THE RELEVANT FACTS HAVING A BEARING ON THE QUESTION(S) ON WHICH THE ADVANCE RULING IS REQUIRED 1. This Application is being preferred on behalf of Cummins Technologies India Private Limited ("CTIPL/the Applicant"), a company incorporated in India under the provisions of the Companies Act, 1956 having its registered office at Cummins India Office Campus, Tower A, 2nd, 4th & 8th floor, Survey No. 2 1, Balewadi, Pune - 411045 2. The Applicant is a group company of Cummins Inc. ("Cummins") situated in Columbus, Indiana and as such is engaged in manufacture and sale of products and provide services relating to turbo technologies, emission solutions, etc. The Applicant is duly registered under the Central Goods and Service Tax Act, 2017 ("CGST Act") and Maharashtra Goods and Service Tax Act, 2017 ("MGST Act") bearing GSTIN....
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....vity essentially involves analyzing trends in performance of the product to predict and improve its reliability • - Based on predictions relating to performance of the product, the Applicant prepares maintenance modules inter alia scheduling replacement of parts, periodic maintenance, cleaning, over-hauling etc for the engines sold by the group company 3. HMLD support • Analyzing statistical data relating to warranty, product failure rate, time lag to service, etc. this information enables the group company to minimize the costs relating to warranty • Preparation of reports on failure rate prediction, supplier's warranty, gap charts. This information enables group company to improvise in efficiently providing warranty services 4. HR support • Undertaking HR functions relating to recruitment, employee remunerations and compensations, employment policy benefits etc. for group company • The Applicant provides relevant information of the prospective employee, however the actual decisions relating to recruitment are taken by the group company by itself 5. IT support • The Applicant undertakes....
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....dentify potential procurement opportunities at lower costs • The Applicant also updates the records of group company relating to costs of procurement, supplier database 9. Quality support • The Applicant analyses reliability of its product, reasons for failure and updates relevant information with the group company to enable its service engineer to address any issues relating to the product effectively • It also extracts periodical reports to evaluate performance of the product and analyses if it necessitates any peculiar measures for group company to perform its obligation under warranty clauses • The Applicant also analyzes discrepancies reported by customer relating to shipments e.g. short fall in quantity, error in invoice, etc. and assists the group company to address the same 10. Sales & Marketing • The Applicant prepares product sales training module which can be referred by the sales personnel of the group company • The service also involves configuring tool to quote product price and accordingly prepare communication strategy • It also undertakes market research for ident....
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....icable. 7. When these services are provided by the Applicant to an overseas group company, the transaction merits analysis qua 'export of service' to determine if the liability to pay tax on these supplies can be assessed based on taxability as accorded to 'Zero rated supply 8. In this regard submissions enumerated below may please be considered relevant for the present Advance Ruling. 3a. STATEMENT CONTAINING THE APPLICANT'S INTERPRETATION OF LAW AND/OR FACTS, AS THE CASE MAY BE, IN RESPECT OF THE QUESTION(S) ON WHICH THE ADVANCE RULING IS REQUIRED 1. ISSUE FOR DETERMINATION 1.1 The question/issue before Your Honour for determination is: Whether the liability to pay tax on the subject supplies can be assessed based on taxability as accorded to Zero rated supply'? 2. SUBMISSIONS ON INTERPRETATION OF LAW IN THE PROPOSED FACT SITUATION SUBJECT SUPPLY QUALIFY AS 'EXPORT OF SERVICE' AND MERITS TAXABILITY ACCORDED TO 'ZERO RATED SUPPLY 2.1 The term 'Zero rated supply' is explained under Section 16 of the Integrated Goods and Services Tax Act, 2017 ('IGST Act') to include export of goods, export of services, and supply of goods and/or services to SEZ. It is ....
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.... (d) in absence of such places, the location of the usual place of residence of the recipient; 2.5 On reading the above referred definitions in conjunction with each other, the Applicant submits that where a supply is made for a consideration then the person responsible to make the payment of consideration is to be treated as 'recipient', and the registered place of business of such recipient is to be treated as the 'location of recipient'. It further provides that if the services are not received at a registered place of business, recipient's usual place of residence shall be treated as the 'location of recipient'. 2.6 In view of the above where overseas group company is responsible for making payment of consideration to the Applicant, it qualifies as recipient, Further, since such group company is not registered under Goods and Service Tax (GST') in India, the usual place of residence, i.e. respective location where these group companies are incorporated, qualify as the 'locations of recipient'. Subject supply is classifiable as 'export of service' 2.7 Based on the fact that location of recipient in the subject supply is determined to be outside India, place ....
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.... zero rated supply. Thus, without prejudice to the submissions in forgoing paragraphs, the Applicant further seeks clarification that 'supply chain support' & 'support to customer' do not merit classification as intermediary service to re-affirm applicability of Zero-rated taxability based on the submissions herein below SUBJECT SUPPLY DO NOT MERIT CLASSIFICATION AS 'INTERMEDIARY SERVICES' 2.11 The term intermediary referred under Section 13(8)(b) is defined under Section 2(13) of the IGST Act and the same is reproduced below for easy 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 services or both or securities on his own account 2.12 It is submitted on a scrutiny of the referred definition, that a broker or agent or any other person partakes the character of an intermediary if: vi. He arranges or facilitates supply between two or more persons; and vii. The activities undertaken by him are not in the nature of a supply ....
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....ustomer, subject supply is not in the nature of any facilitation or arrangement as necessitated by the definition of intermediary'. These activities to be undertaken by the Applicant while providing subject supply are therefore not in the nature of merely facilitating or arranging any supply. 2.18 Independent existence of the Applicant's obligation can further be substantial as by relevant clauses of the agreement which clearly state that the Applicant is not an agent of group company. We have reproduced one sample clause from the Applicant's agreement with one of its group company viz. Cummins Limited: 10. Relationship of the Parties For the purpose of this agreement, nothing herein shall be construed to place the parties in a relationship of partners, joint ventures, principal and agent, or employer and employee; and neither party shall have the power to obligate or bind the other in any manner whatsoever. 2.19 The Applicant also submits that, remuneration of an intermediary is proportionately Inked with the transaction between the parties which the intermediary arranges or facilitates. Such consideration may also become payable based on successful complet....
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....is 14. It has been ruled by us that in the present case, proposed service to be provided by the Applicant to GoDaddy US is business support service and not intermediary service in terms of Rule 2(f) of POPS It is observed that said proposed service does not fall under any of the Rules of POPS but for Rule 3. Rule 3 of POPS inter alia envisages that the place of provision of a service shall be the location of the recipient of service. 15. In view of above, we rule as under; In the facts and circumstances of the case, the place of provision of business support service provided by the Applicant, is outside India in terms of Rule 3 of the Place of Provision of Service Rules, 2012 2.23 Uniformity in the facts of the above ruling and the present matter is tabulated below: FACTS OF THE RULING FACTS OF THE PRESENT APPLICATION Godaddy India would provide information, advice and support to the marketing team of GoDaddy US regarding various events taking place in India where advertisements can be broadcasted The Applicant provides the analysis and other support services necessary for group company to ensure qualitative uniformity and standardization The con....
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....arkup and for this activity an earmarked consideration was agreed between the parties. While passing the ruling, the authorities observed that the payment processing activity is undertaken by the Applicant on its own account and thereby would not qualify as an 'intermediary' relevant portion of the said Ruling is extracted below: Therefore, it transpires that the main service provided by WWD US to the customers in India is domain name registration, web hosting services, etc. The Applicant is not at all concerned with respect to this service. However, service provided by the Applicant to WWD US is processing of payments, which is the main service. Further, the Applicant is providing this service to WWD US on his own account for a fee equal to the operating costs incurred by the Applicant plus mark-up of 13% on such costs.. ...Further, the definition of "intermediary" as envisaged under Rule of POPS does not include a person who provides the main service on his own account. In the present case, the Applicant is providing main service, i.e., "business support services" to WWD US and on his own account. Therefore, the Applicant is not an "intermediary" and the service....
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....gies, emission solutions, etc. Apart from these, the Applicant possesses necessary manpower and expertise at the best competitive cost to provide various support services as enumerated above to its group companies in India and abroad. 4. The Applicant submitted that they have entered into Agreements with various group companies for providing its services on principal-to-principal basis. These services are provided to group companies and billed out on the basis of cost of providing services plus pre-agreed mark-up for each of the service to be provided. The services referred above being provided by the Applicant for consideration, partake the character of 'supply' as defined under Section 7 of the CGST Act, 2017. Accordingly, whenever these services are provided by the Applicant to group companies in India, the Applicant discharges it liability to pay Integrated Tax or Central and State Tax as may be applicable. When these services are provided by the Applicant to an overseas group company, the transaction merits analysis qua 'export of service' to determine if the liability to pay tax on these supplies can be assessed based on taxability as accorded to 'Zero rated supply'. 5.....
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....s appears to be not maintainable and is not required to be admitted, as the law is fairly clears in the concerned matter. They should be advised to follow the law enumerated in this regard in letter and spirit. 04. HEARING Preliminary hearing in the matter was held on 02.04.2019. Sh. Vivek Bhaj, C.A. appeared and requested for admission of their application. Jurisdictional Officer Sh. B. K. Mishra, Suptt., Division-V, Pune also appeared and made written submissions The application was admitted and called for final hearing on 07.05.2019. Sh. Rohit Jain, Advocate appeared, made oral and written submissions. Jurisdictional Officer Sh B. K. Mishra, Suptt., Division-V, Pune appeared. 04. OBSERVATIONS 4.1 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. 4.2 The applicant has sought clarification in respect of various services rendered by them to their group company situated abroad, as to whether such services being supplied by them for consideration to an overseas group company, the liability to pay tax on the subject supplies can be assessed based on taxability as accorded ....