TaxTMI 
TaxTMI 
2021 (7) TMI 263
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....hile the Companies Act, 1956. The applicant 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) A....
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....sourcing strategy aids Airbus Group in ensuring better economies of scale, ease of 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 agreemen....
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.... group at agreed time intervals; B. Procurement Transformation & Central services (PY) function: Under the above function, the applicant renders the support services in relation to the areas such as: • Procurement Ethics & Compliance, 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 guid....
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.... any potential financial risk or loss of the supplier identified; • in any litigation risk associated with the supplier identified; 5. The applicant submitted the following with regard to Other key contractual terms agreed between Airbus India and Airbus SAS. a) As per the provisions of aforesaid agreement entered between the parties, the support services as enunciated above are rendered on principal to principal basis between Airbus India and Airbus SAS. For the 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 fo....
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....he Applicant would constitute a supply of "Other support services" falling under HSN code 9985 or as "Intermediary service" classifiable under HSN code 9961/9962 or any other classification of services as specified under various Tariff entries of rate notification issued under Goods and Services Tax law?", as under: 7.1 From the facts mentioned above (Exhibit 1) and the agreement entered between the parties, it is clearly evident that the Applicant is involved in rendering various services which are in the nature of professional, technical and business support services to its Customer. The services primarily rendered by the Applicant includes: * conducting supplier onsite assessments at 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 fun....
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....1 & 9962, since the said classification is applicable only if the activities are in the nature of 'Intermediary service'. However, in the given context, considering the facts mentioned in Exhibit 1 and agreement entered between the parties, it is clearly evident that the activities carried out by the Applicant do not qualify to be termed as 'intermediary service'. The detailed explanation in this connection has been elucidated in the subsequent paragraphs: 7.7 In order to understand whether the activities carried out by the Applicant (as described in the Exhibit -1) would fall under the ambit of the term 'intermediary services' as contemplated under GST Law; it is essential to analyze the definition of 'intermediary' as provided under clause 13 of Section 2 of the 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 s....
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....goods belonging to the principal. 7.11 Further, the scope of principal-agent relationship under GST was discussed in circular 57/31/2018-GST dated September 4, 2018 where certain principles were laid down to determine who can be covered within the ambit of 'agent'. The Government has identified that the crucial component for covering a person within the ambit of the term "agent" under the CGST Act is corresponding to the representative character identified in definition of "agent" under the Indian Contract Act, 1872 ("Contract Act"). Therefore, it is pertinent to analyse the concept of agent under the Contract Act as follows: "an 'agent' is a person employed to do any act for another, or to represent another in dealings with the third person. The person for whom such act is done, or who is represented, is called the principal'." 7.12 On 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 s....
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....ing on behalf of another and causing the sale or purchase of goods, or provision or receipt of services, for a consideration (for a commission agent). 7.18 The applicant with regard to the expression 'any other person', submitted as under : In this context, it is also important to understand the residuary category - any other person (by whatever name called) who facilitates or arranges supply of goods or services or both or securities between two or more person. The said expression may be understood with the aid of interpretational rules, specifically by application of rule of ejusdem generis, with which the expression "any other person" provided in the definition of intermediary may be interpreted to mean and include only the person having the same class as broker or agent. Accordingly, the above characteristics explained for a 'broker' or a 'commission agent' would be equally applicable even to expression '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 mentio....
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....SAS. Accordingly, the first limb of the definition of 'intermediary' is not satisfied by the Applicant. 7.21 The applicant with regard to "arrangement or facilitation of supply" submits that the expression 'arranges or facilitate supply' as used in clause 13 of Section 2 of the IGST Act, 2017 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. 7.22 On literal interpretation of the definition of "intermediary", it appears that there is a requirement of arrangement or facilitation of 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 an 'intermediary service' by the intermediary to the said person. 7.23 The concept of a 'commission agent' for goods and /or services has been specified to be a 'buying or selling agent' and not merely a person providing 'support service'. With respect to services, we may take reference of the erstwhile Service Tax Law (The Finance Act, 1994'). The expression 'commission agent' ....
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....ilitating of any supply of goods or services between the Group companies and its prospective customers. 7.27 The applicant submits that consequent to above discussion, it can be connoted that the Applicant is neither involved in arranging nor facilitating the supply of any goods and/ or services between the Group Companies and its prospective customers, and thus, the requirement of second limb referred under the definition of the term 'intermediary' as per clause 13 of Section 2 of the IGST Act, 2017 is also not satisfied by the Applicant. Thus, the requirement of second limb referred under the definition of the term 'intermediary' as per clause 13 of Section 2 of the IGST Act, 2017 is also not satisfied by the Applicant. 7.28 The applicant with regard to third limb of intermediary i.e. 'acts on its own account" submitted that, the agreement entered between the Applicant and Airbus SAS clearly manifest that the Support services are rendered solely on its own account on a principal-to-principal basis. 7.29 The applicant further states that, the Article 2.4 of the Agreement specifically expresses that the activities performed by the Applicant are performed on a principal to ....
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.... Even in other cases, wherever a provider of any service acts as an intermediary for another person, as identified by the guiding principles outlined above, this rule will apply. Normally, it is expected that the intermediary or agent would have documentary evidence authorizing him to act on behalf of the provider of the "main service" 8.2 On the basis of the aforesaid clarifications provided in the Education Guide, the following principles emerge: • An intermediary should be involved in two services at any one time - (a) services between the principal and the third party; and (b) services by an intermediary to the principal. • An intermediary cannot alter the nature and value of service, the supply of which is facilitated on behalf of principal; • The value of services provided by an. intermediary is clearly identifiable from the main services provided by principal to the service recipient; and • Intermediary should be separately compensated for its services and the fees is generally based on an agreed percentage of sale or purchase price 8.3 The examples of the categories of intermediaries referred....
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.... no contract between Airbus SAS and the suppliers for provision of any service. Thus, the question of the Applicant facilitating the supply between the principal and third party does not arise; (b) The Applicant is remunerated with service fees computed on a cost-plus markup basis which demonstrates that the Applicant is not an intermediary as intermediaries are remunerated on the basis of successful closure of deal and with commission. (c) The Applicant is providing services on a principal-to-principal basis as an 'independent contractor'. Thus, the services provided by the Applicant shall not qualify as 'intermediary service'. 9. The applicant with regard to Legal precedents supporting the Applicant's claim that activity rendered by them do not qualify as an 'Intermediary Service' submitted as under: Attention of the Hon'ble authority is invited towards the below mentioned advance rulings which although rendered in the context of marketing service activities, the principle of said rulings has greater relevance under the current scenario or the technical advisory and business support services rendered by the applicants. Further, the reference to th....
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.... 9.5 In the current case, the Applicant is acting as independent contractor. The Applicant is not involved in conclusion of contracts, acceptance of orders, etc. In the above case, the Applicant is merely providing/ collecting the information, analyzing the information and providing such information to Airbus SAS. Thus, the principal laid down in the above advance ruling is applicable to the current case, and on this basis the services provided by the Applicant should not qualify as 'intermediary service'. Advance Ruling in the case of NES Global Specialist Engineering Services Private Limited Facts of the case: 9.6 NES Global Specialist Engineering Services Private Limited (NES India) has its registered office is situated at office no 24 & 28, Red Bricks - Level 1, HDIL Kaledonia, Sahar Road, Andheri East, Mumbai - 400069, Maharashtra, India. 9.7 NES India & NES Global Talent Recruitment Services (NES Abu Dhabi) have proposed to enter into a service agreement through which NES India will provide support service in respect of the foreign business carried on by NES Abu Dhabi. 9.8 Further, every service provided by NES India will form part of the Master Services A....
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....ermediary services. Thus, applying the aforesaid rationale to the Applicants' fact of the case, it is amply clear that the Support services provided by the Applicants do not qualify as 'Intermediary Services'. Advance Ruling in case of GoDaddy India Web Services Pvt Ltd, India Facts of the case: 9.15 The facts leading up to the Ruling are as follows: a) GoDaddy US carried out the business of providing services with respect to internet domain name registration, webhosting, e-mail designing etc. to customers in India. b) An Agreement was entered into in this regard between GoDaddy India and GoDaddy US for primarily rendering marketing and promotional services, including but not limited to direct marketing, branding activities, offline marketing, participating in various events for increasing brand outreach, conducting brand promotion shows, setting up stalls at various exhibitions, fairs etc. Issue for consideration: 9.16 The question under consideration before the Hon'ble AAR pertained to whether services provided to GoDaddy.com LLC (i.e. GoDaddy US), which had been rendered in the form of a complete package on a principal-to-principal basis, should be classifie....
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....rect tax regime (Finance Act- Service Tax): Verizon India Pvt. Ltd. v. Commissioner of Service Tax STS-594-CESTAT-2019-ST] Judicial Decision 9.21 It may also be relevant to note that in case of Verizon India Pvt. Ltd. v. Commissioner of Service Tax [TS-594-CESTAT-2019-ST] it was held by the New Delhi Tribunal, that assessees providing services such as activity of market research, sales proposals, developing pricing and contracts, billing, negotiation of service contracts, identification of customers network requirements, procurement identification, sales and service support, within the guidelines provided by the overseas group entity, on Principal to Principal (P2P) basis at cost plus mark-up, does not qualify as 'intermediary service'. The entire premise of the Tribunal's decision in this case was based on the fact that the Appellant was working on P2P basis and was being compensated on cost-plus markup basis. Commissioner of Central Excise and Service Tax versus Analog Devices India Private Limited; Judicial decision: 9.22 Here in the above case, the Hon'ble bench of CESTAT - Bengaluru has held that the Respondent, Indian Company are as per the agreement involve....
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....s merely providing/ collecting the information, analyzing the information and providing such information to Airbus SAS. Thus, the principal laid down in the ruling i.e. on principal to principal basis is applicable to the current case, and on this basis the services provided by the Applicant should not qualify as 'intermediary service'. 9.28 Accordingly, in the present case, the Applicant is working on the Principal to Principal basis. In the current case, the Applicant is acting as independent contractor. The Applicant is not involved in conclusion of contracts, acceptance of orders, etc. Like in the above case, the Applicant is merely providing/ collecting the information, analyzing the information and providing such information to Airbus SAS. Thus, the principal laid down in the above judgement is applicable to the current case, and on this basis the services provided by the Applicant should not qualify as 'intermediary service'. 10. The applicant with regard to their question "Whether the services rendered by the Applicant would not be liable to GST, owing to the reason that such services may qualifies as 'export of services' in terms of clause 6 of Section 2 of the Integ....
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....ned GST registration. Consequently, the location of the supplier of service shall be Karnataka (i.e. in India.) 2) Recipient of service is located outside India In the instant case, since Airbus SAS is located outside India (i.e. France). Consequently, the said criteria met by the applicant. 3) Place of supply of service is outside India In order to determine the place of supply, we refer to provisions contained in Section 13 of the IGST Act which enunciate the place of supply of services in case where either the service recipient or the service provider is situated outside India. As the services provided by the Applicant is in the nature of "Other professional, technical and business services" which is classifiable under HSN code 9983. The place of supply in the instant case would therefore be determined as per the general rule i.e. as per sub-section 2 of section 13 of the IGST Act, 2017, wherein the said sub-section provides that the "location of the recipient of services" shall be the place of supply of services. Thus, applying the above rationale to the instant case, it can be concluded that the place of supply of services shall be the location of Airbu....
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....ces to manufactures its products and hence it has established regional offices across countries. The applicant is one such regional entity. As per the agreement entered between the Airbus Invest SAS, France and the applicant, the activities performed by the applicant broadly fall under two categories, as mentioned in the applicant's submissions above. They are Procurement Operations (PO) Function and Procurement Transformation & Central Services (PY) function. 14. As per the agreement, the activities performed by the applicant involve identifying the local capabilities in India to supply the raw materials, on.site assessment of the suppliers by the applicant to monitor their performance. The applicant assesses the quality of the production, risk evaluation in respect of the supplier and provides guidance to the vendors regarding the product expectation of Airbus Invest SAS, France. They obtain initial quotations and terms of the contract from the suppliers and share the same with the Holding company; review performance and production quality in terms of adhering to the production schedule of the suppliers se....
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....eing an agent or a broker. We notice that there can be difference between agent, broker and an intermediary. Whereas in the case of an agent or broker, activity is undertaken on another's behalf which is not necessary in the case of an intermediary. Therefore, the reliance on principal to principal relationship or calling oneself as an independent contractor is not relevant for the purpose of determining an intermediary as per the definition. An intermediary will merely facilitate or arrange the supply of goods or services between two or more people but will not be providing such supplies on his own account. Here, the word, 'such' is of paramount importance. 'Such' goods in the present case are the raw materials supplied by the vendors to Airbus Invest SAS, France. Applicant has also emphasized upon the principle of ejusdem generis. We understand that meaning of the phrase, ...any other person, by whatever name called 'only denotes representation, which is also a characteristic of a broker or an agent. We observed that the applicant plays an important part in identifying the vendors, making them understand the product requirement, advising and guiding them not merely on technica....
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.... into the subject and observed that the service fee charged by the appellant to its overseas group entities for provision of service has no direct nexus with the supply of goods by the overseas entities to its customers in India. Chevron Phillips would continue to receive remuneration even if there is no order received by the overseas entities. We observe that in that case, there was no discussion with regard to the contract or the nature of supply undertaken by the appellant. In its absence, one can not rely on the case to state that the applicant is not involved in facilitating or arranging the supply. b. NES Global Specialist Engineering Services Pvt Ltd [GST-ARA- 52/2018-19/B-160 Mumbai dated 19.12.2018]: The facts of the case are different from the present case. In that case, the tax payer was involved in providing services like accounting, sales and purchase invoicing, bank payment entries, pay roll assistance etc to the overseas company. These are the main services which were provided by the tax payer on its own account. Whereas, in the present case, supply of goods is not occurring on applicant's account. c. Verizon India Pvt Ltd [2017 (12) TMI 830-CESTAT]....
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....However, it may be noted that where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description. Here, we find that the SAC 998599 is a specific heading for the activities of the applicant. Further, we have already noted in para 8 above that SAC 9983 is not relevant to the activities of the applicant. The rate of GST applicable to the activities of the applicant is 18% in terms of clause (ii) of entry no. 23 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. 19. We now address the second question of the applicant, which is appended below: Whether the services rendered by the Applicant would not be liable to GST, owing to the reason that such services may qualifies as 'export of services' in terms of clause 6 of Section 2 of the Integrated Goods and Services Tax Act 2017 (hereinafter IGST Act, 2017') and consequently, be construed as 'Zero rated supply' in terms of Section 16 of the said act? We find that Export of service is defined, under Section 2(6) of the IGST Act, 2017, as under: 2(6) -export of services means the supply of any ser....