TaxTMI 
TaxTMI 
2019 (10) TMI 787
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....he GST provisions and if yes, what is the SAC and the applicable rate of tax? b) Whether the services provided by the applicant to McAfee Singapore qualifies as export of services under the provisions of the IGST Act considering the fact that: a. The applicant is located in India b. The overseas entity is located in Singapore c. The place of supply is outside India d. The consideration for providing the services is received by the applicant in foreign currency; and e. The applicant and overseas entity are two separate legal entities established under the laws of India and Singapore respectively. c) That the services are not "intermediary" services. 3. The applicant furnishes some facts relevant to the stated activity: a. The applicant states that he is a subsidiary of McAfee (Singapore) Pte. Ltd, which is inter alia engaged in the sale of security software products and services. In relation to the business of McAfee (Singapore) Pte Ltd ('McAfee Singapore") the applicant has entered into Marketing Services Agreement to provide marketing support services. b. The applicant has provided the details as enumerated in the marketing services agreement and the same are ex....
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....ion equipment from Company according with the then current Standard Sales Order Terms and Conditions of Company (Clause (d)) * The inventory for carrying out these demonstration are kept with the applicant as a custodian Keeping Company advised and informed regarding the above matters in the territory that may of interest or concern to Company in connection with the carrying on of Company's business (Clause (e)) * The applicant informs the overseas entity about the developments in the markets. * Keep McAfee Singapore informed about the market trends, local factors, etc. Providing Company with such reports concerning the above matters as may from time to time be reasonably required by Company (Clause (f)) Otherwise assist Company in serving existing and prospective customers Regarding the manner of compensation, the applicant states that for the marketing support services provided, the applicant is compensated on a cost plus basis. The relevant extract from Para 3.2 of the agreement is provided below: "In consideration for services described in Exhibit A, Company agrees to pay Provider an amount equal to (a) any and all direct costs and allocable indirect o....
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....pal to principal basis as explained below: (b) Services provided by the applicant do not qualify as "intermediary services" as defined under Section 2(13) of the IGST Act, 2017 a. In this regard, the applicant states that Section 2(13) of the IGST Act defines the term "intermediary". Definition provided under the Act is extracted below: "intermediary" means a broker, an agent or any other person, by whatsoever 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" b. The above definition of intermediary talks about three categories: i. Broker or an agent ii. Any person who arranges or facilitates supplies of goods or services or both or securities between two or more persons; or iii. Person who supplies goods or services or both or securities on his own account, which is specifically excluded from the definition. c. While the first two categories are covered under intermediary; the third category is excluded from the intermediary. (c) The applicant is not an "agent, broker or any other ....
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..... If the intention of the legislature has to be gathered and deciphered in its proper spirit having due regard to the language uses therein. When the words are unclear or ambiguous, aid of other rules on interpretations must be used. a. The statute enumerates the specific words; b. The subjects of enumeration constitute a class or category c. That class or category is not exhausted by the enumeration; d. The general terms following the enumeration; and e. There is no indication of a different legislative intent. (i) The applicant has cited the judgement of the Punjab and Haryana High Court in the case of CIT v. Rani Tara Devi = 2013 (3) TMI 53 - PUNJAB & HARYANA HIGH COURT held as below: "The expression 'by any other name' appearing in Item (a) of clause (iii) of Section 2(14) of the Income Tax Act has to be read ejusdem generis with the earlier expressions i.e. municipal corporation, notified area committee, town area committee, town committee." (j) The phrase 'by any other name" and "by whatever name called" have a proximate purpose in a statute and hence the principle laid down by the P&H High Court supra will apply on all squares. (k) Further, the Supreme Cour....
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....ry' should have a role in the main supply of goods or services being rendered by the service recipient to its customer in India. c. The applicant states that as per the definition of 'intermediary service', the words that have been used in the definition are (a) arranges and (b) facilitates. It would be pertinent to understand the meaning of these words: Facilitate (verb) : Oxford English Dictionary - 'to make an action or process easy or easier". Arrange (verb) - Oxford English Dictionary - 'organise or make plans for (a future event)' From the above definitions, the applicant claims that it is clear that the "intermediary" must be a broker or an agent or any person acting on behalf of the principal, who arranges or facilitates the supply of services or supply of goods between two or more persons. The applicant specifically submits that not all facilitating or arranging qualify as an 'intermediary'. The applicant states that the reasons for stating that the second condition is not satisfied are as under: (i) The applicant states that the arrangement between the applicant and McAfee Singapore is on a principal to principal basis. In the present case, the applicant is provid....
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....nd does not receive any commission amount as in the case of "intermediary" as brokerage and further they do not negotiate on behalf of the service recipients. He states that they do not have any express or implied authority to negotiate any agreement on behalf of the service recipients. The applicant states that the payment received is independent of the quantum of sales made by McAfee Singapore and the yardstick for payment is based on the costs incurred on periodic basis. 4.4 The applicant further states that he does not conclude the sale but merely facilitate technical communication with the prospective customers of McAfee Singapore. He submits that the from the definition discussed supra, an agent is a person who has the right to conclude contracts on behalf of the principal and the services provided by the applicant does not fall within the ambit of intermediary service. 4.5 The applicant argues that since the definition of intermediary provided under the IGST Act is identical to the definition of intermediary provided under the erstwhile Service Tax law, the guiding principles provided under the erstwhile service tax law for determining whether the person is acting as an in....
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.... Yes No - Value is not linked with the sale by McAfee Singapore to the customers (service cost charged by the applicant is calculated on the basis of costs and expenses incurred wholly and properly attributed to the provision of services and paid independent of whether any sale is undertaken or not) 7. Consideration is generally an agreed percentage of the sale or purchase price which is called commission Yes Not applicable - there is no consideration paid to the applicant by McAfee Singapore which is dependent on the volume of the sale made by McAfee Singapore i.e. there is no commission Identity and title 8. Service provided on behalf of the principal is clearly identifiable Yes Not applicable - the applicant is not providing any services on behalf of principal, as the marketing services explained in the facts above, are provided by the applicant in its own capacity directly to McAfee Singapore on principal to principal basis and are independent of the sale of products by the McAfee Singapore. 5. The applicant has placed reliance on the following decisions in support of the claims a. The decision of the Advance Ruling Authority under Service Tax Law in the cas....
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....n of McAfee Singapore is Singapore, which is a place of supply of services provided by the applicant. 7. Based on the above, the applicant argues that the services provided by him to McAfee Singapore qualifies as Export of Services under the provisions of the IGST Act as it qualifies all the conditions laid down to treat a transaction as export of services under section 2(6) of the IGST Act. The claims are summarized as under: Sl.No. Export Condition Services by the Applicant 1 The supplier of service is located in India The supplier of service, i.e., the applicant is registered in India, hence located in India 2 The recipient of service is located outside India The recipient of service i.e., McAfee Singapore is incorporated outside India, i.e. in Singapore - hence located outside India 3 The place of supply of service is outside India McAfee Singapore has no establishment or branch in India and the service to be received by it from the applicant is meant for and will be used in its business conducted abroad, therefore, the place of supply of 'services' provided by the applicant is the location of McAfee Singapore which is Singapore (outside India) 4 The payment for ....
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.... the case of CST v. Scott-wilson Kirkpatrick [2011 (23) STR 321 (Kar)] = 2011 (4) TMI 500 - KARNATAKA HIGH COURT had interpreted the phrase 'determination of rate of duty' and relying on the decision of the Supreme Court in the case of Navin Chemicals [1993 (68) ELT 3 (SC)] = 1993 (9) TMI 107 - SUPREME COURT had held that the jurisdiction of the High Court does not extend to question relating to : (a) Dispute relating to the service tax payable in any service / taxable service (b) The value of the taxable service for the purposes of assessment (c) A dispute as to the classification of services (d) Whether those services are covered by an exemption notification or not (e) Whether the value of services for the purposes of assessment is required to be increased or decreased. (f) The question of whether any services are taxable services or not (g) Whether an activity is a service rendering activity or not, so as to attract levy of service tax (h) Whether a particular service falls within which heading, sub-heading of section 65(105) of the Service Tax 1994 which defines 'taxable service' 8.3 The applicant states that the Delhi High Court in the case of CST, New Delhi v....
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....epresentative, the following issues emerge: (a) whether the applicant is acting as an intermediary of McAfee Singapore? (b) Whether the services supplied by the applicant to McAfee Singapore is marketing services or intermediary services (c) Whether the services supplied qualifies as export of services and hence zero-rated? 10.3 Regarding the first question, the definition of the "intermediary" as provided under section 2(13) of the Integrated Goods and Services Tax is examined and the clause reads as under: "(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;" The intermediary means, as per the above clause, the following persons (a) A broker by whatever name called, or (b) An agent by whatever name called, or (c) Any other person by whatever name called Hence the terms broker and agent are elucidatory, but involves any person and the second part of the definition qualifies the first part. 10.4 The second pa....
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....of the erstwhile service tax regime are all related to the service tax era and has no applicability during the GST regime. Hence the same needs to be verified in light of the GST Act. 10.8 The argument of the applicant that he is receiving the consideration on cost plus basis and not commission and hence he cannot be termed as intermediary is examined and it is seen clearly in the definition that there is no qualification that needs to be satisfied other than arranging or facilitating the supply of goods or services to be called intermediary. The consideration may be based on the turnover of supply made on behalf of the supplier or any other method and this does not have bearing on the nature of supply. There is nothing in the definition to states that if the person supplying the service receives the consideration other than as commission, that would make exclude his from being an intermediary and hence the argument of the applicant cannot be considered favourably. 11. Coming to the nature of the transaction, the agreement for supply of services by the applicant to McAfee Singapore is verified and found that work entrusted to the applicant are as under: 11.1 The agreement entere....
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....ion with the carrying on of Company's business; (f) Providing Company with such reports concerning the above matters as may from time to time be reasonably required by Company; and (g) Otherwise assist Company in serving existing and prospective customers." 11.4 The applicant has also provided another agreement called "Master Services Agreement" entered between the applicant (called Provider) and McAfee Singapore Pte Ltd (called Company) governing the nature of the contract and the same reads as under: "1. Provider's Obligations: 1.1 Provider agrees to provide to Company the Services as described in Exhibit A. In providing services, Provider agrees to use commercially reasonable efforts to maintain the high quality and integrity standards as established by Company from time to time otherwise used by Company with respect to Products. 1.2 Company may from time to time request Provider to perform certain additional ancillary services (as may be further specified in an addendum to Exhibit A or otherwise in writing). The exact nature of services requested will be agreed by both Parties at the time of Company requesting for such additional services, which shall be deemed to be....
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.... providing assistance in obtaining necessary local licenses, permits and authorizations; (d) Assisting Company in the demonstration of the Products. Provider agrees that a minimum level of samples and demonstration equipment may be required in order to provide such support activities. Such inventory will be maintained in a manner consistent with levels recommended by Company. Provider will receive samples from Company at no charge. Provider also agrees to acquire demonstration equipment from Company according in accordance with the then current Standard Sales Order Terms and Conditions; (e) Keeping Company advised and informed regarding the above matters in the territory that may be of interest or concern to Company in connection with the carrying on of Company's business; (f) Providing Company with such reports concerning the above matters as may from time to time be reasonably required by Company; and (g) Otherwise assist Company in serving existing and prospective customers." "Territory" shall mean the country in which Provider is domiciled." 11.6 The above agreements clearly state that the applicant is performing services to support and facilitate the selling, market....