TaxTMI 
TaxTMI 
2024 (11) TMI 922
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....siness Support Service(BSS). On the basis of the audit of their records, it is alleged that they have entered into a Research & Development Agreement dated 02.05.2003 with their foreign company for the purpose of providing research and development of software. The said agreement was amended from time to time and w.e.f. 01.01.2004, the respondent added Marketing and Support Service (M&S Service). The said M&S Service include marketing and sales & customer support service in addition to R&D service (software development). Also w.e.f. 01.04.2017, they had made three separate agreements viz. (1) Software Development Services Agreement, (2) Marketing and Sales Services Agreement and (3) Customer Support Services Agreement with their parent company who are in non-taxable category. The services rendered by the respondent in relation to products are: (a) identification of customers, (b) providing information and educating potential customers, (c) procuring information from the clients in terms of their requirements / expectation regarding the pricing of their product, (d) passing on the information to their foreign company, (e) providing demonstrations and presentations to the customer on ....
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....s situated in non-taxable category. The respondent has been raising a common invoice on monthly basis for the services rendered. Further, it is submitted that in terms of service agreements, the respondent is required to provide R&D Software Service, Marketing & Sales Support Service and Customer Support Service. On analysis of the nature of the activities undertaken in terms of R&D Software Service, Marketing & Sales Support Service and Customer Support Service, it is clear that the same are in the nature of ITSS covered under Section 66E(d) of the Finance Act, 1994 as 'declared service'. As narrated in the agreements, it is clear that while rendering the services, the nature of service has been mentioned in the respective agreements, and the respondent acted as an 'intermediary' between the parent company and the prospective customers to identify the purchase of software products. Marketing and Sales Services & Customer Support Services are undertaken by the assessee for and on behalf of their parent company in furtherance to the agreement dated 02.05.2003 as mended from time to time and also the three separate agreements w.e.f. 01.04.2017. 3.3. Referring to the definition of ....
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....he respondent to their parent company situated in USA is an 'intermediary service' or otherwise. 7. Undisputedly, under agreements dated 02.05.2003 effective from 01.01.2004 which have been amended from time to time and three separate agreements dated 01.04.2017, the respondent are required to provide R&D Software Development services, Sales & Marketing Services and Customer Support services. The nature of services broadly rendered by the respondent, briefly, are as follows:- ➢ performance of certain software development assignments, programs and projects identified by Informatica; ➢ marketing, sales, maintenance and support services for the Products from time to time; ➢ Providing sales and marketing assistance to Informatica's third party distributors, systems integrators, resellers and influencers; ➢ Providing technical support and maintenance services by telephone to customers, distributors, systems integrators, resellers and influencers of Informatica's Products in the Asia-Pacific market from time to time; ➢ Providing such other marketing, sales, maintenance and support services for the ....
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....clauses a conclusion has been arrived at that the impugned marketing and customer support services provided in the Asia-Pacific market would amount to "intermediary services" provided in India. As such I find the contention in the said para, is more in the nature of a bland assertion without any logical or legal basis. The said findings of the learned Commissioner have been challenged in the present appeal to be incorrect and the argument of the department that the service provided by Respondent is in the mature of an intermediary service. 10. We find that recently Board has issued a circular bearing No.159/15/2021-GST dated 20.09.2021 clarifying who should be considered as an 'intermediary' in the context of GST, which is borrowed from the definition of Rule 2(f) of the POPS Rules, 2012. The said circular has been noted in various judgments of this Tribunal and which are referred in the case of Commissioner of CG&ST &CE, Delhi South Vs. Grant Thornton Advisory Pvt. Ltd. [2024(10) TMI 147 - CESTAT NEW DELHI]. The relevant portion of the order reads as follows:- 15. The relevant clauses of the Cost Reimbursement Agreement do not indicate that Grant Thornton, India was....
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....s the appellant did not arrange or facilitate main service i.e. education or loan rendered by colleges/banks. In that circumstances, the appellant cannot be called as intermediary." (emphasis supplied) 18. The definition of 'intermediary services' in section 2(13) of the Integrated Goods and Service Tax Act, 2017 is pari-materia with the definition of 'intermediary services' in rule 2 (f) of the 2012 Rules. The meaning of 'intermediary services' 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 arrangeme....
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....t there is broadly no change in the scope of "intermediary" services in the GST regime vis-a-vis the service tax regime except addition of supply of securities in the definition of "intermediary" in the GST law." (emphasis supplied) 19. The Delhi High Court in Ernst and Young vs. Additional Commissioner, CGST, Delhi [2023 (73) GSTL 161] also considered whether the services claimed were actually exported and convertible foreign exchange was received by the party in lieu of the said export of services. 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 rende....
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....o are located outside India and the benefit of service rendered by the appellant also accrued outside India, coupled with the fact that the appellant received the payment against the services in convertible foreign exchange and the appellant and the recipient of service are independent legal identities and are not merely establishment of distinct person. It is thus evident that the appellant met the criteria under Rule 6A(1) of the ST Rules and therefore being "export of service" was not amenable to service tax. 17. We may now consider the stand of the department 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 r....