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2023 (5) TMI 1123 - HC - GSTRefund of tax paid on inputs - services rendered to McDonald’s USA, its holding company, under the Service Agreement without payment of Integrated Goods and Services Tax - intermediary services or not - place of supply of services. Whether the petitioner is an intermediary within the meaning of Section 2(13) of the IGST Act in respect of services rendered under the Service Agreement? HELD THAT:- The petitioner is liable to pay an initial franchisee fee for each restaurant operated or franchised by it. In addition, it is also liable to pay royalty equal to 5% of the gross sales from the operation of all restaurants on a monthly basis. There is no controversy regarding the payments made by the petitioner to McDonald’s USA under the MLA - It is material to note that the scope of services as mentioned in the Service Agreement, read in isolation, do not entail procurement or facilitating services from third-party suppliers. The Adjudicating Authority held that the petitioner was performing services on behalf of McDonald’s USA in the backdrop of McDonald’s USA’s obligations - the Adjudicating Authority rejected the petitioner’s claim for refund of ITC. Rendering service on behalf of another person does not render the service provider an intermediary - However, if it is found that McDonald’s USA is obliged to perform certain services to third parties and the petitioner is facilitating or arranging such services from third-party suppliers; the services performed by the petitioner may fall within the scope of intermediary services. However, it is essential that the principal service, the supplier of such services, and the service purchaser are identified to ascertain whether the services performed by the petitioner are those of a facilitator or one that arranges such services. The Order-in-Original has not analysed the services rendered by the petitioner on the aforesaid anvil. There are no basis for the Appellate Authority to have concluded that the petitioner acts as a mediator between joint ventures/ franchisees and McDonald’s USA. The Appellate Authority has not considered that the MLA, which entitles the petitioner to enter into sub-licenses with franchisees, is a separate agreement. Further, certain observations made in the impugned order also indicates that the Appellate Authority has proceeded on the basis that providing services on behalf of another party amounts to acting as an intermediary. In order to examine whether Section 13(3)(b) of the IGST Act is applicable, it is necessary to identify the service provider and the service recipient. In the present case, under the Service Agreement, the service recipient is McDonald’s USA and the petitioner is the service provider. The supply of services by the petitioner to McDonald’s USA does not require the physical presence of McDonald’s USA. We are unable to follow as to why the physical presence of the service recipient, that is, McDonald’s USA, in India is necessary for receiving the services rendered by the petitioner or any third-party supplier. Section 13(3)(b) of the IGST Act contemplates the location of service, whereby the presence of a service recipient is necessarily to be in India. Section 13(5) of the IGST Act contemplates the supply of services by way of admission to, or organisation of a cultural, artistic, sporting, scientific, educational or entertainment event. It also contemplates admission to, or organisation of a celebration, conference, fair, exhibition or similar events. Conducting interviews, making reference checks or performing any screening services in connection with potential joint venture partners, franchisees or employees has no connection with the services as contemplated under Section 13(5) of the IGST Act. The impugned order as well as the order passed by the Adjudicating Authority set aside - matter remanded to the Adjudicating Authority to consider the petitioner’s case afresh - petition disposed off.
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