TaxTMI 
TaxTMI 
2024 (10) TMI 147
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....s" submitted by Grant Thornton, India, it appears that the services provided by Grant Thornton, India to develop the "Grant Thornton" brand name would not be 'export of services' under the Export of Service Rules, 2005 [Export of Service Rules] and the payment received by the respondent towards reimbursement of "Brand Development Expenses" would be covered under "business auxiliary service" [BAS] made taxable under section 65 (105)(zzb) of the Finance Act, 1994 [the Finance Act]. Further, with effect from 01.07.2012 "Brand development and other services" would be covered under section 66B of the Finance Act and would not be covered under the Negative List of services nor would any exemption be available under the Notification dated 20.06.2012. The show cause notice further alleges that Grant Thornton, India acted as an "intermediary". 3. The respondent filed a detailed reply to the show cause notice and denied the allegations made therein. 4. The Commissioner accepted the contention of the respondent and dropped the proceedings initiated by the show cause notice. Grant Thornton, India has been referred to as 'Assessee/Noticee and Grant Thornton, London has been referred to as 'GT....
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....ssioner examined the definition of BAS under section 65(19) of the Finance Act and observed: "For the period upto 30.06.2012 24.1 I find that as per clause 2 of the agreement which has been relied upon in the SCN, the Noticee is to take all necessary steps for development of "Grant Thorton" brand name in India, whether directly or indirectly by securing resources and funding initiatives. xxxxxxxxxx 24.2 I am not able to understand as to how the above activities are covered under sub-clauses (i) & (vi) ibid. As the production of any goods is not involved in the instant case, the question of coverage of the above activities under the said clause (i) is not tenable. Further, the Noticee has been entrusted with the activity of brand promotion. How such brand promotion would be covered under clause (vi) is also beyond comprehension. 25. Further, even if the proposal in the SCN regarding the classification were to be accepted, the impugned services would not be taxable as the same would be export of service in the light of the position as discussed below. 26. In this connection, this is to mention that BAS was a category (iii) service for which the conditions required for c....
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....ced. For example, for brand promotion advertisement in print or electronic media may be required and services of the respect ve service providers may be required for the same. Just because such services have been outsourced, the Noticee would not become an intermediary. 35. Further limiting of the reimbursement indicates the quantum of the consideration. The service recipient has clearly indicated that the consideration cannot exceed the ceiling and thus the expense for brand promotion shall be done within the limit prescribed in the agreement. 36. Thus, I find that the transactions in the instant case are not governed by Rule 9 of the Place of provision of Service Rules, 2012 (POPS) as alleged in the SCN. Rather, the default rule viz Rule 3 of the POPS would apply in the instant case according to which the place of provision of service shall be the location of the service recipient, which, in the instant case, is outside India. Further, there is nothing in the SCN to dispute that the payment for the services had also been received by the Assessee in convertible foreign currency. Accordingly, I find the all the conditions required under Rule 6A of the Service Tax Rules, 1994 ar....
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....India, GTAPL shall take all necessary steps, and accordingly, the parties agree and acknowledge that in order to develop the "Grant Thornton" brand name in India, GTAPL would incur certain expenses which it would otherwise have not incurred. (c) GTI has agreed to reimburse such expenses incurred by GTAPL, in accordance with the terms and conditions contained in this Agreement. 2. Reimbursement for Expenses Incurred 2.1 The parties agree that GTAPL shall take all necessary steps for development of the "Grant Thornton" brand name in India (whether directly or indirectly), by securing resources and funding initiatives including but not limited to:- 2.1.1 increasing markets & industries support capacities, including building a Privately Held Business focus and campaigns to build GT/GTI brand awareness; 2.1.2 increase capabilities of client service support functions-Professional Standards, Risk Management, HR/talent development & Training; 2.1.3 development/ improvement of physical infrastructure, financial control environment & technology infrastructure. 2.2 The Parties understand and specifically agreed that GTAPL would not have incurred these expenses otherwise than ....
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.... raised by the department, the two issues that will arise for consideration are: (i) Whether the services would be classifiable as 'intermediary' services; and (ii) Whether the services qualify as 'export of service' under the 2012 Rules. 14. 'Intermediary' has been defined in clause 2(f) of the 2012 Rules as follows: "2(f) "intermediary" means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the 'main' service) or a supply of goods, between two or more persons, but does not include a person who provides the main service or supplies the goods on his account." 15. The relevant clauses of the Cost Reimbursement Agreement do not indicate that Grant Thornton, India was to act as an 'intermediary'. The activities undertaken by Grant Thornton, India are for promoting the brand name of Grant Thornton in India. Grant Thornton in India had to provides services on its own account and merely because Grant Thornton, India outsourced certain services would not mean that it became an 'intermediary'. 16. The transaction would, therefore, not be covered by rule 9 of the 2012 Rules. Under rule 3 of the....
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....has been considered by the Punjab and Haryana High Court in Genpact India Pvt. Ltd. vs. Union of India [2023 (68) GSTL 3 (P&H)]. The issue that arose for consideration before the High Court was whether the services rendered by the petitioner under the agreement could be treated as 'intermediary services' under the provisions of the IGST Act. The observations of the High Court are as follows: "28. As per definition of "intermediary" under Section 2(13) of the IGST Act the following three conditions must be satisfied for a person to qualify as an "intermediary"; - 29. First, the relationship between the parties must be that of a principal-agency relationship. Second, the person must be involved in arrangement or facilitation of provisions of the service provided to the principal by a 3rd party. Third, the person must not actually perform the main service intended to be received by the service recipient itself. Scope of an "intermediary" is to mediate between two parties i.e. the principal service provider (the 3rd party) and the beneficiary (the agents principal) who receives the main service and expressly excludes any person who provides such main service "on his own account". ....
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....The observations of the High Court are as follows: "33. In terms of sub-section (8) of Section 13 of the IGST Act, the place of supply of certain services would be the location of the supplier of the services. In terms of clause (b) of sub-section (8) of Section 13 of the IGST Act, the place of supply of intermediary services is the location of the supplier of services. In the present case, the place of supply of services has been held to be in India on the basis that the petitioner is providing intermediary services. As discussed above, the Services rendered by the petitioner are not as an intermediary and therefore, the place of supply of the Services rendered by the petitioner to overseas entities is required to be determined on basis of the location of the recipient of the Services. Since the recipient of the Services is outside India, the professional services rendered by the petitioner would fall within the scope of definition of 'export of services' as defined under Section 2(6) of the IGST Act. 34. There is no dispute that the recipient of Services- that is EY Entities - are located outside India. Thus, indisputably, the Services provided by the petitioner would fall wi....
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....ment that the services rendered by the appellant has to be treated as "intermediary services" defined under Rule 2(f) of the Rules, 2012. From the definition of "intermediary services", we find that activity between two parties cannot be considered as an intermediate service as intermediary essentially arranges or facilitates the main supply between two or more persons, which is not the case here. Further, the definition of intermediary service excludes any person who has provided the service on their own account. Here from the facts, it is evident that the appellant has provided the service on his own account to the recipient of service, i.e. the foreign university placed beyond the taxable territory of India. Referring to Rule 6 of Rules, 2012, the learned Counsel submitted that they were providing services relating to specific event, i.e. recruitment of students for admission in educational institution/universities, i.e. recipients located outside India and therefore the place of provision of service shall be the place where the event is actually held. On the other hand, "intermediary services" are broader category and is not applicable to specific category. We find force in the....