TaxTMI 
TaxTMI 
2020 (1) TMI 1125
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....d, (herein after referred to as Appellant) against the advance Ruling NO. KAR/ADRG 31/2019 Dated: 12th Sept 2019 = 2019 (10) TMI 565 - AUTHORITY FOR ADVANCE RULING, KARNATAKA. Brief Facts of the case: 3. The Appellant is a 100% Export Oriented Unit under the STPI scheme and is a wholly owned subsidiary of Infinera Corporation, USA. The Appellant is predominantly engaged in software development services for the products developed by Infinera Corporation. In addition, the Appellant also provides pre-sale and marketing services for the optical networking equipment developed by Infinera Corporation. The Appellant and Infinera USA have entered into a "Pre-sale and Marketing Services Agreement" dated 1st April 2011 whereby the scope of work involves: a) Assist Infinera USA through the coordination of sales promotion and advertising for its products in India, b) Conduct market research and keep Infinera USA advised and informed regarding all matters within India, which may be of reasonable business interest or concern to India; c) Provide informational, educational and service programs in India, as may be requested by Infinera USA from time to time. 4. With regard to the pre-sal....
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....agent' or 'broker' of Infinera USA nor qualify as 'any Other person' within the meaning assigned in Section 2(13) of the IGST Act by applying the above principle of interpretation. 6.2, The expression 'arranges or facilitate supply' as used in Section 2(13) of the IGST Act means to organize or support or assist in any manner the supply of goods or services or both in such a manner that Such supply between two or more persons becomes easier or more convenient. A literal Interpretation of the definition of 'intermediary' appears to require actual arrangement or facilitation of supply of goods and / or services by an intermediary. Mere undertaking of marketing or sales promotion by an entity without any role in the actual arrangement or facilitation (Such as involvement in meetings between customers and suppliers, Stages of purchase order submissions, negotiation of Contractual terms, negotiation of price, logistics of the supply, post supply activities to fulfill the contract, etc) would not render such an entity to be an 'intermediary' in terms of the definition provided under Section 2(13) of the IGST Act. If the terms "arranges or facilitates" were to be given a wide unrestricted....
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....ighted that IIPL agrees that its relationship is one of an independent contractor and it will not act or represent that it is acting as an agent of Infinera or incur any obligation on behalf of Infinera; that Infinera India shall not have the authority to enter into contracts with third party customers on behalf of Infinera USA, conclude contracts on behalf of /Infinera and maintain stock of goods or merchandise of Infinera USA; that the Agreement specifically treats the Appellant as well as Infinera USA as Principals; that the Appellant receives consideration on cost plus basis and not related to the actual sales figures of the products: that the marketing services performed by the Appellant are on their Own account and hence they do not satisfy the requirement of definition of 'intermediary'. They relied on the Advance Ruling given by the Maharashtra Advance Ruling Authority in the case of Asahi Kasei India Pvt. Ltd. = 2019 (1) TMI 1091 - AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA wherein it was held under similar circumstances that the services performed do not qualify as an intermediary service but are to be classified as 'market research services". 6.5. The Appellant that the ....
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....ered their submission declaring specifically that the stated activity between the Appellant and Infinera USA has not resulted in sale of telecommunication equipment by Infinera USA till date in India. Therefore, they submitted that they cannot be held to be supplying 'intermediary services'. PERSONAL HEARING: 7. The Appellants were called for a personal hearing on 3rd Dec 2019 and were represented by Shri. T.R. Venkateshwaran, Authorized representative who reiterated the written submissions. They drew attention to the activities performed by the Appellant as mentioned in Page 6 of their written submissions as also the Agreement entered into between the appellant and Infinera USA. On a specific mention by the Members that the activities mentioned at Page 6 of their submissions do not form part of the Agreement or Statement of Work (SOW) and that nowhere in the Agreement or SOW does the workflow mentioned in Page 6 appear, the representative agreed to provide additional information regarding the scope of their work to substantiate the submissions. Further, on a query by the Members regarding the manner and nature of billing done to Infinera USA. the representative agreed to provide....
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....era USA to be performed by the Appellant is given in the Statement of Work (SOW) annexed to the Agreement and is as follow: a) Assist Infinera through the coordination of sales promotion and advertising for its products in India; b) Conduct market research and keep Infinera advised and informed regarding all matters within India, which may be of reasonable business interest or concern to India; c) provide informational, educational and services programs in India, as may be requested by Infinera from time to time 10. The responsibilities of the Appellant are outlined in Para 2 of the Agreement in terms of which it is the responsibility of the Appellant to deploy suitable personnel to render the services listed in the SOW; the employees of the Appellant shall not be deemed for any purpose to be employees of Infinera and shall not be entitled to any benefits normally accruing to employees of Infinera; the Appellant's relationship with Infinera is one of an independent contractor and that it will not act or represent that it is acting as an agent of Infinera or incur any obligation on behalf of Infinera; the Appellant shall not have the authority to make any commitments whatsoev....
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....ember at actuals; b) Reasonable accommodation at actuals c) Daily allowance per day to be paid directly to the Appellant's Staff member to cover food and miscellaneous expenses; d) All local travel expenses within Infinera's or customer's place of work 12. The terms of the Agreement also stipulate that the Appellant shall irrevocably assign and transfer and assign all rights, title and interest in, including any ownership of, any patent, copyright, trademark, trade secret, technology, ideas, know-how and other intellectual property rights in any material, information or software developed be the Appellant in the course of the performance of its obligations under the Agreement or SOW, to Infinera and the same shall be and remain the sole property of Infinera. 13. We have also gone through the extract from the Bilateral Advance Pricing Arrangement ('BAPA') comprising the details of activities carried out by the pre-sales and marketing services team of the Appellant company. The BAPA states that the products of Infinera India are conceptualized in the US and the marketing related materials for the potential customers are developed in the US and shared globally across the sales....
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....of the IGST Act, a person must satisfy the following conditions. (i) He must be a 'broker' or an 'agent' or 'any other person by whatever name called'. (ii) The supply of goods and services or both has to be 'arranged or facilitated' between two or more persons. (iii) He is not the person who supplies such goods or services or securities on his own account. The term 'broker' has not been defined under GST. However, the term 'agent' has been defined in Section 2(5) of the CGST Act to mean a person including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent by whatever name called' who carries on the business of supply or receipt of goods or services or both on behalf of another. Thus, while an agent includes a broker, it does not mean that every broker is an agent. The fundamental difference being that a broker is a middleman whose job is only to facilitate whereas an agent acts on behalf of the Principal. However, the definition of intermediary does not limit its Coverage to a 'broker' and 'agent' but brings within its ambit even 'any other person, by Whatever name called'. 16. The Appellant has argued that the....
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....nclude persons who are not necessarily similar to 'broker' or 'agent' 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 but are not substitutes for each other In additions 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. 17. Coming to the second limb of the definition, the phrase "who arranges or facilitates the supply of goods or services or both, or securities, between two or more person." in the clause defining 'intermediary' gives a clear indication of intendment in as much as it ascribes a quality to the person who is to be construed as an intermediary, What can be inferred from this is that, it is not the type of person which determines whether one is an 'intermediary' or not, Rather it is the action of arranging or facilitating the supply of goods or services or both, or securities, between two or more persons, which qualifies a person as an 'intermediary'. An intermediary, thus can be a broker or agent or any other person and is only a facilitator for the supply of go....
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....ncipal to the prospective customers, addressing the queries of the prospective customers with regard to the Principal's products, communicating with the Principal about the comments and queries of the prospective customers are all part and parcel of facilitating the supply of products by Infinera USA to the customers in India. It is noticed that the Appellant carries out the activities as per the Pre-sales and Marketing Agreement in a "liaison capacity", A person acting in a liaison capacity is the person who has to act as the go between. is the emissary, the interceder, the intercessor, the intermediary, the medium, the representative for all proper purposes, He may be prohibited by the contract from entering into binding contracts but at the same time is authorised by it to act as the go- between the Principal 's customers and prospects in India and the Principal itself. 20. The Appellant located in India, handles this function- broadly of sales promotion and advertising and market research for the foreign entity, Clearly, the engagement of the Appellant in the entire chain of sequence is with reference to the taxable territory and with reference only to such goods of the foreig....
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....erm "intermediary" under the GST regime and pre-GST regime. In the pre-GST regime, an intermediary referred to a person who facilitates the provision of a main service between two or more person but did not include a person who provided the main service on his account. Similarly, in the GST regime, an intermediary refers to a person who facilitates the supply of goods or services or both between two or more persons but excludes a person who supplies such goods or services or both on his own account. The phrase "such goods or services' used in the definition of 'intermediary' implies that the person should not be supplying on his risk and reward entirely, the very goods or services whose supply he is arranging or facilitating, In the instant case, the Appellant is facilitating the supply of the products of Infinera US between the Principal in USA and the Principal's customer in India. He is not supplying the products of Infinera on behalf of the Principal. He is only arranging the contact between the Principal and the Principal' s customer and the actual supply of the products is done by the Principal directly to the customer. The service of facilitating a supply of goods between th....
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....rty service provider to GoDaddy US, held that the applicant is providing support services in relation to marketing, branding, offline marketing, etc on principal-to-principal basis to GoDaddy US which are a bundle of services naturally bundled in the ordinary course of business and accordingly is a single service being Business Support Service; that the business support service is the main service provided to GoDaddy US on their own account and hence is not an intermediary service. We find that the facts of the case before the Service Tax Authority for Advance Ruling, which are also briefly brought out above, are patently different from the facts in the case before us. As such the ruling given in the case of GoDaddy India does not buttress the case of the Appellant before us. 25. The Appellant has also relied on the Advance Ruling given under GST law, by the Maharashtra Authority for Advance Ruling in the case of M/s. Asahi Kasei India Pvt Ltd. = 2019 (1) TMI 1091 - AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA in connection with the question whether the service supplied by the applicant under the service agreement would constitute "support service' or 'intermediary service'. The Auth....