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M/s Universal Services India Pvt. Ltd. Versus The Commissioner of Service Tax, Gurgaon

2016 (5) TMI 750 - AUTHORITY FOR ADVANCE RULINGS

Nature of activity of Payment Gateway services provided to client in USA - Whether the place of provision of payment processing service by the applicant, is outside India in terms of Rule 3 of Place of Provision of Services Rules, 2012 - Held that:- applicant is providing this service to WWD US on his own account for a fee equal to the operating costs incurred by the applicant plus mark-up of 13% on such costs. Therefore it cannot be inferred that the applicant would be providing payment process .....

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pplicant is providing main service i.e. “business support services” to WWD US and on his own account. Therefore, applicant is not an “intermediary” and the service provided by him is not intermediary service. Thus, the place of provision of service would be location of recipient of service i.e. WWD US under Rule 3 of POPS. Therefore, the place of provision of payment processing service by the applicant, is outside India in terms of Rule 3 of Place of Provision of Services Rules, 2012. - Whe .....

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provider of service i.e. the applicant, is located in India, which is the taxable territory; recipient i.e. WWD US is located in USA; the service to be provided by the applicant i.e. business support services, is not specified under Section 66D i.e. Negative List Services; applicant would receive payment for said services in convertible foreign exchange and applicant and WWD US are not merely establishments of a distinct person in accordance with item (b) of Explanation 3 of clause (44) of Secti .....

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Shri S.Thirumalai, Advocate For The Respondent : Shri Govind Krishna Dixit (AR) Ruling Universal Services India Private Limited (hereinafter also referred to as the applicant) proposes to enter into a Services Agreement with Wild West Domains, LLC, (hereinafter referred to as WWD US) located in Arizona, USA and incorporated in Delaware, USA. WWD US is domain name registrar and provides other web services to customers across the world. Vide the proposed services agreement, the applicant intends t .....

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S Dollars. Customers will also be able to pay for the services by using their Indian credit cards for bank payment facilities and make payments in Indian Rupees ( INR ). To enable customers using Indian credit card to pay for the services in INR, WWD US desires the applicant to provide payment processing facilities in India and collect money from the customers of WWD US in India and remit the same to WWD US. As far as provision for the payment collection services to WWD US is concerned, the appl .....

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applicant may allow the customers to directly deposit money in its bank account using their net banking facility. Thereafter, all such collections will be transmitted by the applicant to WWD US on actual basis i.e. without any mark-up. In consideration for the above-mentioned services, the applicant shall charge a fee equal to the operating costs incurred by the applicant plus a mark-up of 13% on such costs. It is proposed that the applicant would receive such fee from WWD US for services provid .....

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omers in India. Furthermore, the applicant will also not be engaged in any manner to arrange or facilitate the provision of any service by any third party service provider to WWD US. The only service to be performed by the applicant would be as stipulated in the draft service agreement. 2. WWD US, through its website http://who.wildwestdomains.com/ is engaged in the business of providing name registration, web hosting, designing and other services. The nature of services provided by WWD US is ou .....

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er enters into a contract for registration of the domain in its own name directly with WWD US and also pays for such services through the channels as provided by WWD US. b. Website hosting and e-mail: WWD US provides web hosting services which allow its users to develop their own websites / webpages by using the development tools and applications which are available online on WWD s website. WWD US hosts the website of its users on its servers/dedicated servers located outside India. Such website .....

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ts: WWD US also provides its domain users with email, calendar and other standard services with limited features. Additional features (like multiple email ids , additional space, synchronization etc.) are also available to the users for a service fee, which varies based on the service level requested by the users. WWD US also provides Secure Sockets Layer ( SSL ) certification services, which ensures that the message to be sent is properly encrypted and reaches the intended recipient. 3. In ligh .....

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vices would enable the customers of WWD US in India to have a payment solution in respect of the services which such customers procure from WWD US; that the service of payment processing proposed to be provided by the applicant to WWD US would be the main service of the applicant and would be provided by the applicant on its own account; that applicant would also arrange a third party payment gateway service provider in India; that such services of third party payment gateway service provider wo .....

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arly separate services provided on a principal to principal basis. Applicant submits that the taxability of the proposed services is governed by Rule 3 of the POPS, in terms of which the place of provision of services proposed to be provided by the applicant would be the location of the recipient of service. Since the intended recipient of the service (i.e. WWD US) is located outside India, the place of provision of the proposed service would be considered as outside India. 5. Revenue submits th .....

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lace of provision of service should be the location of recipient of service i.e. U.S.A. as per Rule 3 of POPS, whereas Revenue submits the place of provision of service as location of service provider i.e. India under Rule 9(c) of said Rules. Relevant Rules of POPS are extracted as under: Rule 3Place of provision generally The place of provision of a service shall be the location of the recipient of service: PROVIDED that in case the location of the service receiver is not available in the ordin .....

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ans of transport other than,_ (i) Aircrafts, and (ii) Vessels except yachts, Up-to a period of one month Rule 2 Definitions In these rules, unless the context otherwise requires,- (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 a .....

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e bank account opened by the applicant for this purpose or the amount would be collected from the customers in India by the third party entrusted with this work by the applicant and to be deposited in applicant s account opened for this purpose. In all these situations i.e. whether the payment is made by the Indian customers for the services provided by WWD US, directly or through the applicant, applicant would charge a fee equal to the operating cost incurred by the applicant plus mark up of 13 .....

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h costs. Therefore it cannot be inferred that the applicant would be providing payment processing service to the Indian Customer, for the service rendered by WWD US to them. If that was the case, applicant would not receive any fees from WWD US in respect of payments by the Indian Customer remitted directly through International Credit Card to their service provider i.e., WWD US. But that is not the case. Further, the definition of intermediary as envisaged under Rule 2 (f) of POPS does not incl .....

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of provision of payment processing service by the applicant, is outside India in terms of Rule 3 of Place of Provision of Services Rules, 2012. Question No.2: Whether in the facts and circumstances and in the light of the answers to question 1 above, the services to be provided by the Applicant to WWD US that fall to be classified under Rule 3 of the Place of Provision of Services Rules, 2012 qualify as export of taxable services in terms of Rule 6A of the Service Tax Rules, 1994 (inserted vide .....

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s export of service when,- (a) the provider of service is located in the taxable territory, (b) the recipient of service is located outside India, the service is not a service specified in the Section 66 D of the Act, (c) the place of provision of the service is outside India, (d) the payment for such service has been received by the provider of service in convertible foreign exchange, and (e) the provider of service and recipient of service are not merely establishments of a distinct person in .....

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applicant would receive payment for said services in convertible foreign exchange and applicant and WWD 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 ibid are satisfied, said service will qualify as export of taxable service. In view of above, we rule as under; In the facts and circumstances, the services to be provided by the applicant to WW .....

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ce to the customers of WWD US in India? 11. Applicant inter-alia submits that he would be hired by WWD US to provide payment processing services; that applicant would be engaged in the provision of business support services to its own customer i.e. WWD US and not to the customers of WWD US in India. Under no circumstance, the applicant will provide any support to the customer of WWD US in India; that applicant will not be remunerated for its services by any customer in India; that the remunerati .....

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