TaxTMI 
TaxTMI 
2019 (10) TMI 1135
X X X X Extracts X X X X
X X X X Extracts X X X X
....Applicant, would constitute as a composite supply or a mixed supply for the purpose of taxability under GST?" 3. The applicant furnishes some facts relevant to the stated activity: a. Cartus India Private Limited (hereinafter referred to as 'CIPL'/'the Applicant'), is a private limited company incorporated in India on 6th December 2010. The Applicant is a subsidiary of Cartus Corporation USA (hereinafter referred to as 'Cartus US') and Cartus Global Holdings Limited, Hong Kong. b. The Applicant is registered under the Goods and Services Tax (hereinafter referred to as 'GST') in the state of Karnataka under its registered office at 201, prestige Sigma, 3 Vittal Mallya Road, Bengaluru, 56001, Karnataka, India. c. The Applicant is engaged in supply of 'Relocation Management Service' to its clients located in India, which primarily involves facilitation/administration/management of relocation of client's employees from one location to another. In this regard, the Applicant enters into relocation service agreements/ statement of work with its clients. Sample agreements denoting the rendition of relocation management service by the Applicant to its clients a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... other third party invoices as agreed by Cartus. B. Temporary Living: Coordination of temporary living with a Cartus preferred supplier on behalf of the Employee. C. Move Management: 1) Moving Services: Cartus will coordinate the shipment and storage of the Employee's household goods using Cartus' network of household goods carriers and/or freight forwarders. Cartus collects commissions as a licensed broker (MC39S301 B) and arranger of transportation services. 2) Permanent Storage Management: Selection, hiring and management of household goods in permanent storage (long term storage) and payment of permanent storage invoices. Goods are placed in long term storage at the origin or destination location and remain in storage for the duration of the assignment or subsequent assignments. International Host Country Services Client will use Cartus and/or Cartus selected suppliers to provide International Host Country Services as detailed below: A. Home Finding Programs 1) Accompanied Home Finding (By Cartus preferred Local Destination Service provider ("DSP")). Employee is accompanied by DSP providing direct personal ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l schools. 4.2 Similar to the above services, the Applicant provides various services to its client described in detail under Article 23 of the RSA. These services include destination-based services, global departure services, policy counselling, immigration process, counselling/administration, temporary living management, household goods shipment arrangements, expense administration, home country property management facilitation, departure programme, language training coordination etc., which encompass to form the Relocation Management Service. 4.3 The arrangement between the Applicant and its client is based on the fundamental principle that such Relocation Management Service is primarily for facilitation of smooth transition of client's employees and/ or his family to another location. To ensure the smooth transition of employees, the client chosses the services that are offered by the Applicant. 4.4 Further, the number of services to be procured by the client from the Applicant is determined basis the requirement of client's employees and various other factors viz. employee title, family makeup, to/from location etc. In this regard, drawing reference from the RSA, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... program * School search program * Settling-in services/host country formalities * web based destination services * Car rental coordination * Airport Pick-up and Delivery * Web tools, Reporting & Supplier Management. Global Departure Services * Instruction on lease termination- disconnect/transfer utilities, return of security deposit, mail forwarding, etc Candidate Assessment System * Detailed Analysis * Self-Assessment Tool 4.5 In either of the above-mentioned programs (viz. bundled or a la carte), services are performed with an intention of managing the relocation of client's employees. The client selects either of the two programs post evaluating the requirements and related costs for availing a particular program. 4.6 The gamut of services provided under the ambit of Relocation Management Service has been defined and explained in detail in Article 23 of the RSA and Exhibit B of the SOW. 4.7 Under both the agreements in the instant case, the client pays to the Applicant a service fee and also reimburse for any direct cost incurred for providing Relocating Management Service. The said arrangements are elaborated in Article 24 (Fee Schedu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....satisfied collectively: a. Two or more taxable supplies of goods or services or both; b. The supplies are naturally bundled; c. The supplies are supplied in conjunction with each other; d. The supplies are supplied in the ordinary' course of business; and e. There is one principal supply. A.7 Having outlined the above parameters, it is known that the GST law is nascent and constantly evolving. Presently, there docs not exist sufficient guidelines under the GST laws for determining whether or not a particular transaction would qualify as composite, However, the concept of composite supply is not novel since it existed under the erstwhile Service tax regime as well. B. Reference to Service tax laws of the erstwhile regime B.1 Section 66F of the Finance Act, 1994 ('Finance Act'), dealt with the principles of interpretation of bundled services. "Section 66F. Principles of interpretation of specified descriptions of services or bundled services.- (1) Unless otherwise specified, reference to a service (herein referred to as main service) shall not include reference to a service which is used for providing main servic....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... linked that they essentially form one composite transaction, then the nature of such transaction would be determined by the application of dominant nature test. B.5 The Education Guide at para 9.2.4 has prescribed the following indicators regarding the normal and frequent practices which ascertains a service to be considered as a bundle of services: (i) The perception of the consumer or the service receiver. If large number of service receivers of such bundle of services reasonably expects such services to be provided as a package, then such a package could be treated as naturally bundled in the ordinary course of business. (ii) Majority of service providers in a particular area of business provide similar bundle of service. For example, bundle of catering on board and transport by air is a bundle offered by a majority of airlines. (iii) The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business. If the nature of services is such that one of the services is the main service and the other services combined with such service are in the nature of incidental ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....loyee. Applicant advertises and provides these services in form of a package and no individual services are rendered. The client also expects that these services should be provided in a package. Hence, it appears appropriate that these services be classified as a composite supply. B.9 In addition to above, another important criterion necessary for satisfying the conditions of composite supply is that different services are supplied in the ordinary course of business. The phrase 'in the ordinary course of businesses has not been defined or dealt with anywhere under the GST laws. However, in essence, the said phrase has a very wide meaning, so as to cover any supplies made in connection with a business. B.10 Given the above, it is established that various elements of services that are naturally bundled in ordinary course of business would qualify as a composite supply. Similarly, in the instant case, different services provided by the Applicant to its clients are naturally bundled with each other since the same are inextricable for provisioning of the principal service of relocation management supplied in ordinary course of Applicant's business. B. 11 The term 'business' has....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e purpose of determining whether, in fact, the amount was spent. Once it is established that there was a nexus between the expenditure and the purpose of the business, the Revenue cannot justifiably claim to put itself in the armchair of a businessman or in the position of the board of directors and assume the said role to decide how much is a reasonable expenditure having regard to the circumstances of the case." B.14 Further, in the case of Mysore Fertilizer Co v. Commissioner of Income Tax [1956] 30 ITR 734 (Madras) = 1956 (8) TMI 68 - MADRAS HIGH COURT, the Madras High Court observed that it is a settled law that the reasonableness of the payment has to be judged not on the subjective standard of the assessing authorities but from the point of view of commercial expediency, and that in deciding whether remuneration paid to an employee by way of commission constitutes a reasonable expenditure, all the circumstances specifically referred to in the proviso to Section 10(2)(x), judged from the view of a normal prudent businessman, must be taken into account. B.15 In light of the above income tax judicial pronouncements, it is established that the manner of making commercial d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly does not get altered. C.5 In another judicial pronouncement in the case of Saga Holidays Limited, v. FC of T, 2006 ATC 4841, the Federal Court of Australia, focusing on the economic and social reality of the supply, opined that there is a single supply of accommodation and the adjuncts to that supply (including the use of furniture and facilities within each room, cleaning and linen services, access to common areas and facilities such as pools and gymnasiums and various other hotel services such as porterage and concierge) were incidental and ancillary to the accommodation part of the supply. Similarly, in the present case, the Relocation Management Service is a single supply for relocating the employees from one location to another. Whereas, the other services viz. visa facilitation, transportation service, home search service, temporary living Service etc. are the incidental and ancillary services supplied as part of the Relocation Management Service. European Union C.6 As per the European Union directive, a composite supply is a transaction where supplies with different VAT treatments are sold together as one. The supplies with a composite supply may consist of parts....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ipal supply and other gamut of services qualify as ancillary supplies provided in ordinary course of business. This is in terms of the definition of composite supply provided under the CGST Act. D.4 Reliance in this regard is also placed on a ruling pronounced by the Advance Ruling Authority, Service tax (hereinafter referred to as 'AAR') (established under the erstwhile service tax regime) in Re: Godaddy India Web Services Pvt. Ltd. 2016 (46) S.T.R. 806 (A.A.R.) = 2016 (3) TMI 355 - AUTHORITY FOR ADVANCE RULINGS, wherein, Godaddy India was involved in provisioning of various services to Godaddy USA under a service agreement, where it provided a bundle of services in relation to marketing, branding, offline marketing, oversight of quality of third party customer care center etc. The said services were provided by Godaddy India with a sole intention and principal objective of promoting the brand of Godaddy USA in India. The advance ruling application was submitted, interalia, on whether this gamut of services constituted as a bundled service in terms of Section 66F of the Finance Act. The ruling was pronounced in favour of Godaddy India, wherein the AAR opined that various suppor....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... are provided on a stand-alone basis. Therefore, supply of Relocation Management Service should not qualify as a mixed supply since the same is composite in nature. E.6 Thus, under a mixed supply, none of the individual supplies would act as a dominant supply. Reliance in this regard is placed on a ruling of the Administrative Appeals Tribunal, Australia (hereinafter referred to as 'tribunal') In Re Food supplier and Commissioner of Taxation (2007) AATA 1550. In this ease, the food supplier sold its food products with a non-food product i.e. mug, clock etc. for the purpose of marketing promotions. The food product and non-food product were sold in a combined package for the price of the food product alone. The question that came for consideration before the Tribunal was whether GST was applicable on the sale of non-food product sold in the combined package. The Tribunal observed that promotional items packaged with food had intrinsic value, would not be consumed with the food and were mostly unconnected with the food item. The Tribunal found that the supply of the promotional items packaged with the food items was a mixed supply. Hence, in such case, it would not be denoted that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y as being entitled to the benefits of the agreement and may include existing employees, job candidates, independent contractors, their respective family members and others. (d) The term "Initiation" is defined as the time at which the applicant contacts the Employee at Company's request, explains the nature of applicant's services, and through a needs analysis, assists the Employee in selecting the appropriate services and the Employee agrees to accept the applicant's services as envisaged by the agreement. (e) In Article 3(a) - the applicant understands and acknowledges that it shall be the sole responsibility of the applicant to ensure that the services provided under this agreement or any addendum have been performed appropriately, even if such services have been performed by a Service Partner. (f) In Article 3(b), it is made clear by the Company that in connection with any service provided or procured by the applicant pursuant to this agreement, the applicant may refer the Employee to various Service Partners and that the applicant may be entitled to receive a fee from such independent providers of services in connection with any such referral. The C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cant less applicable TDS withholding which Company shall promptly remit to the proper authority and the Company will issue a TDS Certificate to the applicant as appropriate. Upon receipt of the funds, the applicant shall make disbursements to third party suppliers less applicable TDS with-holdings which the applicant shall promptly remit to the proper authority and the applicant shall issue TDS certificates to third party suppliers as appropriate. The Company shall indemnify and hold the applicant harmless from all claims, liabilities, losses, damages, or expenses, including but not limited to late fees, penalties or interest, associated with, related to or arising out of the service tax or tax withholding, except to the extent caused by the gross negligence or willful misconduct of the applicant. (k) The Authorised services clause in Article 23 of the agreement reveals that the applicant or its service partners "when requested and authorised, the applicant and/or service provider will provide the following services to the company / its employees" and the applicant will be responsible for co-ordination and management of service partners and any suppliers selected to assist....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rovided by the applicant is the not relocation management service but the management support service of relocation related services, which have independent nature. Further, it is seen that even in case where the applicant himself is providing relocation related services called in the agreement as "Authorised Services" then the services are not bundled services as each set of services is provided separately and each service has a separate value and out of the total services, some may be provided by the applicant and some may be outsourced. The billing is done as per the Schedule and includes Direct Cost of such service plus Service Fees plus taxes applicable. Each service has a separate service fees and the services are separately classifiable and if such services are billed in a common invoice that does not amount to a naturally bundled supply and hence the same is not a composite supply. The mixed supply is defined under clause (74) of section 2 of the CGST Act as under: "(74) "mixed supply" means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply....