TaxTMI 
TaxTMI 
2021 (7) TMI 263
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....icant provides engineering design and other technical advisory services which include marketing support, customer support services, flight maintenance training, flight operations supports, flight pilot training, etc. They also provide maintenance, repairs and overhaul services, agency services, renting of assets and trading of spares and parts of Helicopter. 3. The applicant submitted the following with regard to Overview of Airbus group operations & its global sourcing footprints. a) The Applicant is operating as a subsidiary of Airbus Invest SAS, France Molding Company'), and its ultimate holding company is Airbus SE, Netherland. Globally, Airbus Group is an international pioneer in the aerospace industry and is a leader in designing, assembling and delivering aerospace products, services and solutions to its customers on a global scale. b) Airbus Group has its presence worldwide and operates from over 130 nations of the World. Its manufacturing and final assembly line facilities are located in various countries such as France, Germany, Spain, United Kingdom, the United States and people's Republic of China. c) Airbus Group procures parts or components or services which ar....
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....global manufacturing operations and in market competition. In line with said objectives, Airbus SAS, France (Airbus SAS') has entered into an Intl-a-Group Services Level Agreement' with Airbus India. The copy of the said agreement is enclosed as Annexure 1 to this application. iv. Under the said agreement, Airbus India would primarily assist Airbus SAS by carrying out certain support functions / activities in relation to its global procurement strategy which includes carryout review of Indian supplier landscape, continuous update of supplier operations, conducting supplier onsite assessments, promote awareness of Airbus Group ethics and compliance guidelines, report any unethical practices of suppliers (if any), reporting on supplier compliances to local laws and regulations, providing market information, sharing information of product or services and its quality standards, information on supplier production facility, etc. v. The detailed activities or functions agreed between the parties under the said agreement are discussed in detail in the ensuing paragraphs: a. As per the agreement entered between the said parties, the support services rendered by Airbus India in connectio....
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....iance, procurement process and key projects management; * Strategy, Business Intelligence ('BI'), and Digital procurement; * Flying part procurement; * General procurement; B.1.1. As per the standard process and guidelines received from Airbus SAS, the Applicant conducts necessary audit and verify whether all the procurement activities are being carried out in adherence to the defined standards established by Airbus SAS; B.1.2. Airbus India has agreed with Airbus SAS to promote awareness of Airbus ethics and compliance guidelines amongst the suppliers approved and nominated by Airbus SAS; B.1.3. Airbus India to identify and report any unethical or non-compliant behavior / activity in the supply chain, but the decision of continuing the relationship and procurement from such supplier is vested with Airbus SAS; B.1.4. Airbus India to provide necessary guidance to key projects within procurement and report any non-compliance; B.1.5. Airbus India to assist Airbus SAS in building development strategy framework, goals & roadmap for procurements related activities from Indian region; B.1.6. Airbus India to provide guidance in developing strategic initiatives, identify op....
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....he said services rendered, Airbus India would be remunerated with a service fees computed on cost plus markup (at such percentage as agreed between the parties) basis. b) Further, it is made clear in the aforesaid agreement that the relationship between Service Provider and Beneficiary shall be on a principal to principal basis. c) The agreement specifically restricts Airbus India to decide or select any supplier and agree upon the terms and conditions of the supply. Further, the said decisions are vested and prerogative of Airbus SAS. d) Additionally, it is even agreed between the parties that Airbus India will not be responsible for issuance of purchase order or payment for the supply made by the vendor. 6. The applicant submitted the following with regard to Summary of the above contractual terms agreed between Airbus India and Airbus SAS for easy reference and understanding: i. Given the backdrop of above discussion, the predominant support activities / functions undertaken by Airbus India are provided below for ease of reference: Support services rendered by Airbus India to Airbus SAS under the agreement: * Conduct onsite assessments, technical advisory / guidance....
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....t regular intervals; * promote awareness of Airbus Group ethics and compliance guidelines, and to report any unethical practices of suppliers (if any); * reporting on supplier compliances to local laws and regulations, * providing market information, sharing information of product or services and its quality standards, information on supplier production facility etc.; * continuous update of supplier operations; * carrying out certain support functions / activities in relation to its global procurement strategy which includes carryout review of Indian supplier landscape; 7.2 Under the Goods and Service Tax Law, the said activities rendered by the Applicant are squarely covered under the following service code / scheme of classification of service: Chapter, Section, Heading or Group Description of Service in the Tariff Entry 9983 Other professional, technical and business services 7.3 In the current context, the above classification holds merits owing to reason that the activities rendered by the Applicant is essentially comprises of providing technical expertise, advisory support and operational assistance mainly concerning important areas of procurement such as prod....
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.... IGST Act, 2017 with effect from July 1, 2017. The relevant extract of the definition is reproduced below, for easy reference: "2. (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;" 7.8 On perusal of the above definition of "Intermediary", it can be noted that the definition consists of the following three major limbs: a. Person should be a broker, an agent or any other person, by whatever name called; b. Person should arrange or facilitate the supply of either goods or services or both, or securities - between two or more persons; and c. It does not include the person who supplies the goods or services or both or securities on his own account. 7.9 The applicant with regard to Concept of 'agent' and 'broker' - first limb of 'intermediary' definition, submitted as under: In order to understand whether the person qualifies to be an 'agent' or a 'broker', it is imperious to understand the meaning of expression 'agen....
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....a joint reading of the definitions in section 182 of the Contract Act and section 2(5) of the CGST Act, two key elements to qualify as an 'agent' are apparent: * 'Agent' is a person appointed to do any act for another, or to represent another, in dealings with a third person; and * The supply or receipt of goods or services has to be undertaken by the agent on behalf of the principal. 7.13 The circular also states that the key ingredient for determining an agency relationship is that an 'agent' should have a representative character which enables him to carry out activities on behalf of the principal. 7.14 The term "broker" as used in the relevant definition, needs to be examined, as the GST provisions do not define this term. 7.15 On referring to Legal dictionary - Law Lexicon, the dictionary meaning of the term "broker" can be understood to mean a middleman or agent who, for a commission on the value of transaction, negotiates for others the purchase or sale of stocks, bonds, commodities, or property of any kind. Additionally, as per the Black's Law dictionary, "broker" has been defined to mean an agent who acts as an intermediary or negotiator, especially between prospect....
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.... 'any other person' and anyone who satisfies such characteristics are included in the said expression. 7.19 The applicant submits that the following conclusions may be drawn on applying the various aspects of law discussed above. a) As per the facts mentioned in Exhibit - 1, it may be noted that the activities performed are in the nature of technical advisory and business support services and not of intermediary services. Further, the support services rendered by Airbus India could be characterized as business support services or functions which are performed or rendered on their own account and not as an intermediary. b) Additionally, since the services rendered by the Applicant are in the nature of technical advisory and business support service, it is not involved in any of the commercial decisions mentioned below and all such responsibilities / decisions are completely vested with Airbus SAS: * accepting a supplier; * agreeing the price; * deciding on the terms and conditions of the contract; * issue of purchases order/placing order; * accepting the invoice of supplier and making the payment etc.; Accordingly, it is conclusive to note that the services rendere....
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....g 'support service'. With respect to services, we may take reference of the erstwhile Service Tax Law (The Finance Act, 1994'). The expression 'commission agent' (prior to July 01, 2012) was grouped under the taxable service category of 'business auxiliary services' which referred to a person 'engaged in causing provision of receipt of services and in not merely marketing of services belonging to a principal". Consequently, an 'intermediary', for all practical purposes 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. 7.24 In view of the above, it can be interpreted that 'an intermediary should mediate the actual supply of goods or provision of service a service vis-a-vis a prospective customer'. 7.5 The applicant submits that based on the facts mentioned in Exhibit - 1, it is evident that at no point of time the Applicant would be carrying out any such activity which may be deemed to be a direct or indirect act of 'facilitating or arranging' a sale of goods or supply of services between Airbus SAS and identified suppliers. In other words, Airbus India providing support services which ....
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.... Agreement specifically expresses that the activities performed by the Applicant are performed on a principal to principal basis and thereby makes it reasonably evident that the activities performed by the Applicant are in the nature of "business support services" performed on its own account and not as 'intermediary'. Thus, the requirement of third limb contained under the definition of 'intermediary' is also not satisfied. 7.30 The applicant, on the Basis of the above discussions states that, it is evident that the Applicant does not qualify as an 'intermediary' and consequently, its activities cannot be classified as 'intermediary services' for the purposes of levy of GST. 8 The applicant with regard to Advancement of Revenue understanding on 'Intermediary' in the legacy Indirect tax regime - Educational Guide issued by the CBEC, submitted as under: 8.1 It is imperious to highlight that the definition of 'intermediary' provided under clause 13 of section 2 of IGST Act, 2017 is pari-materia to the definition provided under the Finance Act 1994. The Education Guide, 2012 issued by the CBEC inter alia provides the various factors that needs to be considered in determining whethe....
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....on Guide are travel agents, tour operator, commission agent and recovery agent. And basis the above, it is clear that an intermediary plays a key role in the fructification of the contract for the provision of the primary service by the principal or in the ongoing performance of the service by the principal. 8.4 An added trait of an intermediary is that an intermediary (such as travel agents, tour operator, commission agent and recovery agent) is remunerated based on the successful closure of a deal for provision (or arranging/ facilitating) of the main service/ goods. 8.5 In addition to above, the Applicant would wish to submit before your kind authority the following summary table which depicts the support activity that are undertaken by the applicant: Sl.No. Scope of work /activities performed by the Applicant i) Market research & analysis √ ii) Identifying and preparing list of potential suppliers x iii) Initial rescreening of potential supplier to check the ability to deliver the goods x iv) Organizing 8s participating in seminars, events, fairs x vi) Bidding process / Invitation to tender process x vii) Negotiation of Pricing & Commercial decision....
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....ei India Private Limited ("The Applicant") is a company incorporated in India in August 2012. The Applicant is a subsidiary of Ashai Kasei Corporation, Japan. The Applicant provides sales promotion and marketing support to Asahi Kasei group. For this, the Applicant has entered into a Services Agreement with Asahi Kasei Corporation, Japan and Marketing Services Agreement with various group companies of Asahi Kasei group. The scope of work under the Agreement is broadly stated below: a) Collecting and analyzing information i.e. market analysis and supporting Asahi Kasei group in getting new business; b) Providing marketing & administration support and back-office support (including accounting Support); c) Networking i.e. co-ordinate with the government authorities and relevant universities to join relevant trade associations; d) Supporting sales activity of Asahi Kasei group. Issue for consideration: 9.2 Whether the service supplied by the Applicant under the Service Agreement dated 1 March 2013 constitute a supply of "Support services" falling under HSN code 9985 "Intermediary service" classifiable under HSN code 9961 /9962? Authority Ruling: 9.3 On scrutiny of Marketin....
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....Assignment work, Payroll assistance, Storing and scanning of data to the data storage disk and any other work would be required by you as per your requirements. 9.9 Nature of Relationship as per agreement: In performing services pursuant to this Agreement, the Party providing such service will be an independent contractor of the Party for whom such services are performed, and this Agreement will not be deemed to create a partnership, joint venture or other arrangement between the Parties. Issue for consideration: 9.10 Whether the transaction in question is a Zero-Rated Supply or a Normal Supply under the GST Act? If the said supply is a Zero-Rated Supply, then can the same be considered as an export of service under the GST Act? Authority Ruling: 9.11 From the scrutiny of the MSA it was observed that the relationship between the parties is that of independent contractors i.e., the agreement does not intend to create relationship of principal and agent. Thus, we find that applicant is not a person who arranges or facilitate supply of services between two or more persons and therefore the proposed service would not qualify as 'intermediary service'. 9.12 Further, as the applica....
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....including marketing and promotion) should be classified as 'business support services' and not as 'intermediary services'. Authority Ruling: 9.18 After due consideration, the Hon'ble AAR held that the entire bundle of services provided by GoDaddy India to GoDaddy.com LLC (including marketing and promotion) should be classified as 'business support services' and not as 'intermediary services'. 9.19 The prime reasons on which the Hon'ble AAR based its Ruling were as follows: a) Services were being provided by GoDaddy India with the sole intention of promoting the brand GoDaddy US in India, and increasing its business in India; b) GoDaddy India would provide a bundle of support services in an integrated manner on a principal-to-principal basis and thus it cannot be considered an 'intermediary service' (based on a reading of Paragraph 5.9.6 of the Education Guide, 2012); c) The said services could not be considered to have been availed by customers of GoDaddy US in India - as the benefits of the said services accrued to the recipient i.e. GoDaddy US (which is situated outside India); d) Further, GoDaddy India would not be responsible for servicing Indian customers and theref....
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....o not render any service to any Indian customers, the services rendered by the Respondent could not be held as 'intermediary services', rather it amounts to export of services. AMD India Private Limited versus CST, Bangalore Judicial decision: 9.23 In the above said case, the Hon'ble bench of CESTAT has held that the appellant is a subsidiary of its holding company and is providing services under the Master Services Agreement and the same Master Services Agreement does not provide that the appellant will facilitate or will arrange the purchase and sale on behalf of the AMD entities outside India. Thus, the services rendered by the appellant do not fall under the definition of intermediary and it satisfies all the conditions prescribed under rule 6A of the Service Tax Rules, 1994. Analog Devices India Private Limited versus Commissioner of Central Tax, Bengaluru East; Judicial decision: 9.24 The judicial decision mentioned supra (point 3.22) has been upheld even the in current case. M/s Chevron Phillips Chemicals India Private Limited versus Commissioner of CGST and Central Excise, Navi Mumbai Judicial decision: 9.25 Here in the above case, the Hon'ble bench of CESTAT....
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....ion 2 of the IGST Act, 2017. The relevant extract is set out hereunder: "(6) "export of services" means the supply of any service when, (i) the supplier of service is located in India; (ii) the recipient of service is located outside India; (iii) the place of supply of service is outside India; (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange, and (v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;" 10.2 From the above definition, it can be noted that in order to qualify whether any supply of service as "Export of Services" the below mentioned cumulative conditions are required to be satisfied: i) the supplier of service is located in India; ii) the recipient of service is located outside India; iii) the place of supply of service is outside India; iv) the payment for such service has been received by the supplier of service in convertible foreign exchange, and v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explana....
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.... provides that where a person has an establishment in India and any other establishment outside India, then such establishments shall be treated as establishments of different legal persons. The term person has been defined to include a Company. In the instant case, the service recipients i.e. Airbus SAS is not an establishment formed by the Applicant and consequently, it cannot be treated as an establishment of a distinct person. 10.4 The applicant based on the above discussion and analysis stated that "it could be construed that the Applicant fulfils all the required conditions for construing the supply of services as an 'export of services' in terms of clause 6 of Section 2 of the IGST Act, 2017". PERSONAL HEARING: / PROCEEDINGS HELD ON 15-04-2021 11. Sri Venkateshwaran T.R, Duly Authorised Representative of the applicant appeared for personal hearing proceedings held on 15-04-2021 and reiterated the facts narrated in their application. FINDINGS & DISCUSSION 12. We have considered the submissions made by the applicant in their application for advance ruling. We also considered the issues involved on which advance ruling is sought by the applicant and relevant facts. At th....
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....the vendors and does not enter into any agreement with the vendors on any terms and conditions in respect of the supply. 15. With this background, we proceed to address the first question, which is appended below: Whether the activities proposed to be carried out in India by the Applicant would constitute as a supply of "Other professional, technical and business services" falling under HSN code 9983 or as "Intermediary service" classifiable under HSN code 9961/9962 or any other classification of services as specified under the Tariff entries of rate notification issued under Goods and Services Tax law? We observe that the applicant is of the opinion that the activities undertaken by them are classifiable under Heading 9983 with description of 'Other professional, technical and business services'. As per the explanatory notes to the scheme of classification of services, heading 998399 offers the same description. This heading includes specialty design services including interior design, design originals, scientific and technical consulting services, original compilation of facts/ information services, translation services, trademark services and drafting services. It is clearly....
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....ood by them as technical advisory, guidance and business support assistance concerning quality control standards, performance and safety standards of the suppliers. By doing all this, they are merely facilitating the supplies to their holding company as all these activities are directed at the vendors. We also note that it is not necessary that a commission payment is always involved in an intermediary scenario. Cost plus mark up can also be one of the ways for payment. The criterion of the nature of the payment is not part of the definition of Intermediary. Therefore, we conclude that the activities performed by the applicant are fulfilling the parameters mentioned in the definition of 'Intermediary' as per Section 2 (13) of IGST Act, 2017. 17. Now, we proceed to discuss the following case laws cited by the applicant. a. Asahi Kasei India Pvt Ltd [Advance Ruling Order No.GST-ARA- 35/2018-19/B-108 Mumbai dated 07.09.2018], Godaddy India web Series Pvt Ltd [Advance Ruling Order AAR/ST/08/2016], Chevron Phillips Chemicals India Pvt Ltd [2018 (4) TMI 301-CESTAT]: We would first clarify that this authority is not bound by the advance Rulings of other state. In all these cases, the i....
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....ces n.e.c. This service code includes business brokerage and appraisal services other than for real estate; business services of intermediaries and brokers; specialist advice other than for real estate, insurance and engineering (specialist services in art, specialist services for courts of law, etc.); services by agencies and agents on behalf of individuals seeking engagements in motion pictures, theatrical productions, modelling or other entertainment or sports attractions; placement of books, plays, artwork, photographs, etc., with publishers, producers, etc.; issue of reduced price coupons and gift stamps; management services for copyrights and their revenues (except from films); management services for rights to industrial property (patents, Page 83 of 129 licences, trademarks, franchises, etc.); auctioning services other than in connection with legal procedures; reading of electric, gas and water meters; data preparation services; specialized stenotype services such as court reporting; public stenography services; other business support services not elsewhere classified This service code does not include: - maintenance of electricity, gas and water meters, of 996911, 996912....