TaxTMI 
TaxTMI 
2019 (10) TMI 565
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....uestion: Whether the activities carried out in India by the applicant would render the applicant to qualify as an "intermediary" as defined under Section 2(13) of the Integrated Goods and Services Tax Act, 2017 (hereinafter "IGST Act, 2017") and consequently be subject to the levy of GST? 3. The applicant furnishes some facts relevant to the stated activity: a. The applicant states that he is a 100% Export Oriented Unit (EOU) under the Software Techn010U Park of India (STPI) scheme and is a wholly owned subsidiary of Infinera Corporation, USA (hereinafter "Infinera USA") and is registered under the Companies Act, 1956, with the Corporate Officer located at Bangalore. b. He is predominantly engaged in software development services, which included embedded and network management, technical documentation, systems verification testing and associated hardware design for the products developed by Infinera Corporation. In addition, the applicant also provides pre-sale marketing services for the optical networking equipment developed by Infinera Corporation. c. The present application is only pertaining to the pre-sales marketing services provided by ....
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....roker, 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." He states that it is evident that there are three major aspects of the definition of the term "intermediary" under GST Law: (a) The person should be a broker, an agent or any other person, by whatever name called; (b) The person should arrange or facilitate the supply of either goods or services or both, or securities - between two or more persons; and (c) A person who supplies such goods or services or securities on his own account shall not be covered under the ambit of the term "intermediary". h. The applicant submits that he is not an agent as per the definition of the term given in Section 2(5) of the Central Goods and Services Act, 2017. He summarizes the character of a "broker" or a "commission agent" as i. Making of a contract for purchase or sale of goods or provision of service between two or more persons (for a broker) ii. Acting on beh....
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....f supply of goods and/or services by an intermediary. This is because the definition contemplates two activities: the supply of goods and/ or services by one person and the provision of intermediary service by the intermediary to the said person. He also describes the concept of "commission agent" and states that an "intermediary" can only be a person who actually arranges or facilitates a main service - and not merely a person who markets a product belonging to the seller. A possible interpretation could be advanced that 'an intermediary should mediate the actual supply of goods and not merely market the goods or services vis-ä-vis a prospective customer". Hence the applicant claims that while an intermediary may undertake a whole host of marketing and sales promotion services as well, in order to fulfil his role as an "arranger" or "facilitator", mere undertaking of marketing or sales promotion by an entity without any role in the actual arrangement or facilitation would not render such entity to be an intermediary in terms of definition provided under section 2(13) of the IGST Act. j. As per the applicant's arrangement with Infinera USA, the primary respon....
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....pplicant has placed reliance on the Order of Advance Ruling issued by the Hon'ble Authority for Advance Rulings under the erstwhile Service Tax Law in the following cases- i. GoDaddy India Web Services Pvt. Ltd, and ii. The Universal Services India Pvt. Ltd. The applicant contends that the definition of "intermediary" envisages an actual arrangement or facilitation of supply of goods or services or both by an intermediary and does not refer to merely persons who engage in the marketing of a product which is offered by a seller, it may be understood that merely engaging in promotion or marketing of a particular product does not, by any stretch of imagination, imply that there is an actual arrangement being made or a facilitation being offered with respect to the supply of such goods or services or securities, as the case may be. The applicant has always been solely conducting preliminary market study / research and providing such information to Infinera USA. He has always been responsible solely for following up with customer leads provided by Infinera USA, in the form of sales presentations, customer education about the features of the offered product....
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....ilitate the aforesaid technical activity and in fact has a team of only four employees having expertise in the marketing field. b. The applicant reiterates that he does not enter into any negotiation of contractual terms and price of Infinera USA products to be sold to the customers. For the activities of the applicant, the applicant gets compensated on a cost-plus basis irrespective of whether or not the marketing carried out by Infinera India leads to a sales order or not. PERSONAL HEARING / PROCEEDINGS HELD ON 29.05.2018. 5. Sri Sivarajan K, authorised representative of the applicant appeared for personal hearing proceedings held on 29.05.2018 & reiterated the facts narrated in their application. 6. FINDINGS & DISCUSSION: 6.1 We have considered the submissions made by the Applicant in their application for advance ruling as well as the submissions made by Sri Sivarajan K, authorised representative of the applicant during the personal hearing. We have also considered the issues involved, on which advance ruling is sought by the applicant, and relevant facts. 6.2 At the outset, we would like to state that the provisions of both the CGST Act and the KGST Act....
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....n agent. Here we would like to stress that the applicant's insistence on applying the rule of Noscitur a sociis to certain words/ phrases used in Section 2(13) of the IGST Act is not appropriate. It is an accepted fact that GST is destination based tax in the sense that it is levied on commercial activities and it is not a charge on the business but on the consumer. The words agent and broker (used in definition of the word 'intermediary' in the IGST act) are only in the broad construct of being an intermediary or a representative and are not substitutes for each other. In addition, the third part of the definition expands rather than limits the meaning of who an intermediary is to one who is only an agent or a broker. Therefore the applicant's assertion that they do not qualify to be treated as an intermediary on account of not meeting the characteristics of an agent or a broker is ill founded and we are not convinced to accept the argument. (c) Next we consider the import of the words 'arranges' and 'facilitates' as they appear in the cited definition of an intermediary. The terms 'arrange' and 'facilitate' have not been defined in the Act. In common parlance the Merriam....
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....tter. The first is the supplier based abroad, the second are the customers located in the taxable territory who purchase the goods and the third is the applicant. The scope of work, as narrated in the earlier para, requires that the applicant will engage himself in carrying out promotional activities in the taxable territory. In order to undertake these activities it is necessary for the applicant to first study the market conditions, identify the potential customers, meet them, convey the unique features and characteristics of the products of Infinera highlighting their advantages and usefulness etc. This creates a visibility about Infinera in the market. The prospective customers thereafter contact Infinera and finalise the purchase. The sale is then made directly between Infinera and the customers. However in the entire process the applicant, who identified the prospective customer, convinced them about the products and passed on the information to Infinera. It is an admitted fact that the applicant did not supply the goods to the customers. This was done by Infinera directly. The applicant therefore did not indulge in the main supply of goods. However it is an admitted fact tha....
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....oDaddy US regarding the locations/geographies in India where banners, billboards could be placed. The advertising agency appointed by GoDaddy US will be solely responsible to arrange required permissions or licenses from any local or State Government authority regarding display of the advertisement at any location or place. The advertisement agencies so employed by GoDaddy US in the entire set of activities aforesaid would be remunerated for all expenses and relevant service charges directly by GoDaddy US and the applicant will have no role to play with regard to appointment of the advertisement agency in India or payment of consideration to the advertisement agency by GoDaddy US. iii. Offline Marketing : Applicant shall undertake marketing and promotional activities in India for GoDaddy US. Towards this, the applicant shall take part in seminars, talk shows or any other events as speakers to spread awareness regarding the GoDaddy brand and services offered by GoDaddy US. Also, the applicant may conduct road shows, take up a stall in a fair or exhibition, hold webcasts for GoDaddy US channel partners or resellers in India to update them on new developments and services pro....
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....nk payment facilities and make payments in Indian Rupees ('INR'). To enable customers to pay for services in INR, GoDaddy US proposes the applicant to provide payment processing facilities in India, collect money from the customers of GoDaddy US in India and remit the same to GoDaddy US. Applicant shall outsource the payment collection activity to a for third party service provider in India which will provide the necessary payment collection gateway facility to the customers who may wish to effect payments in INR. Applicant proposes to open a separate bank account in India into which the payment collection gateway company will deposit the moneys collected from the customers of GoDaddy US. Further, the applicant may also allow customers to directly deposit money in its bank account using their net banking facility. All such collections from customers (in respect of services provided by GoDaddy US) will be transmitted by the applicant to GoDaddy US on actual basis i.e. without any mark-up. 6.6 We briefly examine as follows the nature of services provided by Godaddy India Web Services to understand the context in which the decision was made and its applicability to the instant case....