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2016 (3) TMI 355 - AUTHORITY FOR ADVANCE RULINGS

2016 (3) TMI 355 - AUTHORITY FOR ADVANCE RULINGS - [2016] 92 VST 1 (AAR) - Taxability of services - Classification - naturally bundled services or not - place of provision of services (POP Rules) - intermediary service or not - GoDaddy India Web Services Private Limited to provide support services in an integrated manner to assist GoDaddy US develop its brand in India, carry on its operations efficiently and serve customers in India - Held that:- the various support services proposed to be provi .....

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s of POPS but for Rule 3. Rule 3 of POPS inter-alia envisages that the place of provision of a service shall be the location of the recipient of service. - The place of provision of business support service provided by the applicant, is outside India in terms of Rule 3 of the Place of Provision of Service Rules, 2012. - the services to be provided by the applicant to GoDaddy US would fall to be classified under Rule 3 of the Place of Provision of Services Rules, 2012 qualify as export of tax .....

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he would have received "consideration" from Indian Customers. Fact is that no remuneration/consideration is received by the applicant from Indian Customers. Applicant is to only receive from GoDaddy US, a fee equal to the operating cost incurred by the applicant plus mark up of 13% on such costs. It is noticed that applicant is to receive said fees from GoDaddy US, even in respect of Indian Customers, who directly remit service charges to GoDaddy US through International Credit Card, wherein ap .....

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de India. - Activity is not liable to service tax - Decided in favor of applicant. - Ruling No. AAR/ST/08/2016, Application No. AAR/44/ST/15/2014 - Dated:- 4-3-2016 - V. S. Sirpurkar, Chairman, S. S. Rana, Member And R. S. Shukla, Member For the Applicant : Shri S. Thirumalai, Adv For the Department : Shri Govind Krishna Dixit, (AR) RULING GoDaddy India Web Services Private Limited (hereinafter also referred to as applicant) proposes to enter into a 'Services Agreement' with GoDaddy. .....

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eting and promotion services: Applicant proposes to engage in promotion and marketing of GoDaddy US services in India. This would essentially include increasing the awareness of services provided by GoDaddy US and establishment of the brand GoDaddy in India. Towards this, the applicant proposes to provide the following services: i. Direct Marketing: Applicant shall advise GoDaddy US regarding various aspects of the market situation prevailing in India from time to time. Applicant would also advi .....

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tion would be provided from the applicant to GoDaddy US. ii. Branding Activities: Applicant shall assist GoDaddy US in developing its brand in India by arranging for advertisement activities of GoDaddy US. An independent (third party owned) advertisement agency in India would be appointed by GoDaddy US directly. Such agency would negotiate the price for purchase of time slots or space for display of advertisement in the electronic or print media and coordinate regarding timing for display of the .....

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from any local or State Government authority regarding display of the advertisement at any location or place. The advertisement agencies so employed by GoDaddy US in the entire set of activities aforesaid would be remunerated for all expenses and relevant service charges directly by GoDaddy US and the applicant will have no role to play with regard to appointment of the advertisement agency in India or payment of consideration to the advertisement agency by GoDaddy US. iii. Offline Marketing: Ap .....

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the instructions of GoDaddy US. The applicant may also sponsor specific events or social gatherings in India to reach out to the public for creating awareness of GoDaddy US brand. For this purpose, the applicant shall hire an agency in India which will enable the applicant to undertake the said activities. The said agency will take the required permissions or licenses from the local or State Government authorities or any third party event organizers for conduct of such events. The applicant wou .....

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y call centre in India to provide such support and assistance to customers in India. Further, to ensure that the call centre provides the best customer support service and that the employees of the call centre understand the relevant technical aspects, GoDaddy US shall require the applicant to provide oversight of the quality of the services of the call centre. Applicant will have no role to play in selection or appointment of the call centre in India by GoDaddy US. Applicant shall provide overs .....

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s to procure the service without any difficulty in making payments, GoDaddy US desires to provide an online payment facility to its customers in India. Customers who possess an international credit card may make payment directly to GoDaddy US in US Dollars. Customers will also be able to obtain the services by using their Indian credit cards or bank payment facilities and make payments in Indian Rupees ('INR'). To enable customers to pay for services in INR, GoDaddy US proposes the appli .....

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moneys collected from the customers of GoDaddy US. Further, the applicant may also allow customers to directly deposit money in its bank account using their net banking facility. All such collections from customers (in respect of services provided by GoDaddy US) will be transmitted by the applicant to GoDaddy US on actual basis i.e. without any mark-up. 2. In consideration for the above-mentioned support services, the applicant shall charge a fee equal to the operating costs incurred by the appl .....

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rs in India. It will directly engage relevant third party service providers in India such as marketing agencies and call centers. Further, the applicant will not be engaged in arranging or facilitating provision of services by GoDaddy US to customers in India. Furthermore, the applicant will not secure orders from customers in India or arrange or facilitate the provision of any service by any third party service provider to GoDaddy US. The only service to be performed by the applicant is provide .....

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y code top level domains including, .us,.ca,.mx,.fr,.it,.de and.es. Any user desirous of obtaining any particular domain can access a website of GoDaddy US and place a request for the same. Upon availability, GoDaddy US registers the desired domain name for the customer in his name. The customer enters into a contract for registration of the domain in its own name directly with GoDaddy US and also pays for such services through the channels as provided by GoDaddy US. b. Website hosting and e-mai .....

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ices: GoDaddy US assists its users in creating various designs for website header, website content, website logo, business card, letter head etc., so that the users can build their own website. The relevant tools and applications required for the above services are available on a GoDaddy US website. d. Sale of on-demand products: GoDaddy US also provides its domain users with email, calendar and other standard services with limited features. Additional features (like multiple email ids', add .....

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ed from GoDaddy US. Such trouble shooting is facilitated by call centers appointed by GoDaddy US. 4. Applicant seeks rulings with regard to the following questions of law. Question No.1: Whether, in the facts and circumstances as explained in Annexure I, the various support services proposed to be provided by the Applicant to GoDaddy US are a "bundle of Services" being naturally bundled in the ordinary course of business and accordingly is a single service, being 'business support .....

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submits that the draft Service Agreement between applicant and GoDaddy US clearly shows that applicant would perform the service as a marketing and promotion support service provider in order to get GoDaddy US brand established in Indian market; that entire gamut of services proposed to be provided by the applicant are intended to be towards the common objective of supporting the business of GoDaddy US in India; that principal objective of the applicant will be to advance the business of GoDadd .....

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by its present as well as prospective customers in India; that this will go to strengthening the customer's trust in the brand 'GoDaddy'. Applicant further submits that the services proposed to be provided by the applicant would collectively work towards augmenting the business of GoDaddy US in India; that the sole objective of GoDaddy US to appoint the applicant in India is to obtain support in order to establish its brand and promote its services; that the various elements of servi .....

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on in India; that all the services to be provided by the applicant as would be evidenced from the Service Agreement would be naturally bundled and thus should be treated as provision of a single service of business support; that as regards the categorization of the business support services, these services in nature of support of business and commerce fall under the category of 'Business Support Services'. 6. Applicant further submits that paragraph 9.2.4 of the Service Tax: An Education .....

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a package then such a package could be treated as naturally bundled in the ordinary course of business. ii. Majority of service providers in a particular area of business provide similar bundle of services. For example, bundle of catering on board and transport by air is a bundle offered by a majority of airlines. iii. The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business. If the nature of ser .....

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the ordinary course of business. Other illustrative indicators, not determinative but indicative of bundling of services in ordinary course of business are- There is a single price or the customer pays the same amount, no matter how much of the package they actually receive or use. - The elements are normally advertised as a package. - The different elements are not available separately. - The different elements are integral to one overall supply - if one or more is removed, the nature of the s .....

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by the Education Guide and accordingly such services would be naturally bundled in the ordinary course of business. 8. Revenue inter-alia submits that various services i.e., marketing, event management services and collection of money from customer on behalf of GoDaddy US, proposed to be provided by the applicant to GoDaddy US are not a bundle of services; that there is involvement of the applicant with GoDaddy US as well as customers in India; that the services so provided appear to be covered .....

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ding main service. (2) 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. (3) Subject to the provisions of sub-section (2), the taxability of a bundled service shall be determined in the following manner, namely:- (a) If various elements of such service are naturally bundled in the ordinary course of business, it shall be treated as provision of the single source which gi .....

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her service or services.)" Rule 9 of Place of Provision of Services Rules, 2012; The place of provision of following services shall be the location of the service provider- (a) Services provided by a banking company, or a financial institution, or a non-banking financial company, to account holders (b) Online information and database access or retrieval services; (c) Intermediary services; (d) Service consisting of hiring of all means of transport other than,- (i) Aircrafts, and (ii) Vessel .....

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ods, between two or more persons, but does not include a person who provides the main service or supplies the goods on his account. Therefore, as per Section 66 F (2) of Finance Act, 1994, more specific descriptions shall be preferred over a more general description. According to Revenue, in view of sub section (3) ibid, service will not be taxed as bundled service, if the same is to be an "intermediary service". 10. The definition of "intermediary" as envisaged under Rule 2 .....

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ant portion is extracted as under; Similarly, persons such as call centers, who provide services to their clients by dealing with the customers of the client on the client's behalf, but actually provided these services on their own account', will not be categorized as intermediaries. Applicant relying on above paragraph submitted that call centers, by dealing with customers of their clients, on client's behalf, are providing service to their client on their own account. Similarly, ap .....

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third party customer care centre and payment processing, on principal to principal basis. These services are proposed to be provided with the sole intention of promoting the brand GoDaddy US in India and thus augmenting its business in India. Therefore, these services proposed to be provided by the applicant, would support the business interests of GoDaddy US in India. 12. It has been submitted by the applicant that services to be provided by the applicant are not peculiar only in applicant' .....

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plicant submits that in view of all these indicators, service provided by them to GoDaddy US is a bundle of services, which is bundled in normal course of business. This point has not been controverted by the Revenue. We agree with the submissions of the applicant that proposed services are a bundle of services, bundled in normal course of business and not intermediary service. 13. In view of above, we rule as under; In the facts and circumstances, the various support services proposed to be pro .....

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2012 (herein after referred to as "POPS"). If the services provided by the Applicant are not considered as naturally bundled then in the facts and circumstances enumerated in Annexure I, which of the individual service shall qualify for classification under Rule 3 of the POPS as service provided by a service provider located in India to a service recipient located outside India? 14. It has been ruled by us that in the present case, proposed service to be provided by the applicant to Go .....

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ssociation of Leasing & Financial Service Companies vs. U.O.I& Others - 2010-TIOL-87-SC-ST-LB as also the judgment of Hon'ble Delhi High Court in Microsoft Corporation (India) Pvt. Ltd vs. Commissioner of Service Tax 2009 (16) STR 545 (Del) wherein it has been inter-alia held that Service Tax is VAT which in turn is both a general tax as well as destination based consumption tax leviable on services provided within the country. According to the Revenue, service provided by the applic .....

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f quality of third party customer care center services and payment processing services, as per draft Service Agreement between the applicant and GoDaddy US. There is no contract between the applicant and the customers of GoDaddy US based in India. GoDaddy US have used said services provided by the applicant as per the draft Service Agreement. Further, applicant would charge a fee equal to the operating costs incurred by the applicant plus a mark-up of 13% on such costs, which would be received b .....

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ved that both sides have arguable case. In the case before us, Rule 3 ibid is applicable as the recipient of service is GoDaddy US i.e., outside India. 15. In view of above, we rule as under; In the facts and circumstances of the case, the place of provision of business support service provided by the applicant, is outside India in terms of Rule 3 of the Place of Provision of Service Rules, 2012. Question No. 3: Whether in the facts and circumstances and in the light of the answers to questions .....

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taxable services. Rule 6 A (1) of Service Tax Rule, 1994 reads as under: RULE 6A Export of services.- (1) The provision of any service provided or agreed to be provided shall be treated as export of service when,- a) the provider of service is located in the taxable territory, b) the recipient of service is located outside India, c) the service is not a service specified in the Section 66 D of the Act, d) the place of provision of the service is outside India, e) the payment for such service has .....

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y; recipient i.e. GoDaddy US is located in USA; the service to be provided by the applicant i.e. business support services is not specified under Section 66 D i.e. Negative List Services; applicant would receive payment for said services in convertible foreign exchange and applicant and GoDaddy US are not merely establishments of a distinct person in accordance with item (b) of Explanation 3 of clause (44) of Section 65B of the Finance Act, 1994. As all the ingredients enlisted under Rule 6 A ib .....

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f service tax under the Finance Act. Question No.4: Whether in the facts and circumstances of the case, by providing the support services being business support to GoDaddy US, the Applicant is providing any service to the customers of GoDaddy US in India? 18. Applicant inter-alia submits that he would be hired by GoDaddy US to provide business support services and other incidental or allied services to GoDaddy US only and not to the customers of GoDaddy US in India. Under no circumstance, the ap .....

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