TMI Blog2018 (10) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for the business transaction, free of VAT and rebates are deductible. Additional costs such as freight, cartage, packing insurance, custom duties, and all other charges and dues, costs for installation, expenses resulting from putting into operation and similar services which are essentially work and labour shall be deducted, even if they are not invoiced separately, shall also be deducted. It is also stated in the contract, where the agent orders goods from the principal at his own expense, the commission due can be deducted directly from the value of goods. Further, it is also stated that any expenses and spendings of the Agent resulting from his activities (regardless of whether they arise generally or in connection with a particular business transaction) shall be regarded as covered by commission that the Agent is entitled to, and such expenses excludes travelling expenses. It is also stated that for spare parts, the commission would be paid for values equal or superior to 250 and repairs are not subject to commission. In sub-clause 6 of Clause IV, it is seen that the consideration is payable for the services which include pre-sales, marketing, sales, installation and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid paragraphs for the purposes of determination of place of supply of such services. The after-sale services provided are not in the nature of a composite contract and they are independent from the services provided in paragraph 1 above and hence there is no question of determination of what will the principal supply. The third question cannot be answered as it is not in the purview of jurisdiction of this Authority as it amounts to determination of the place of supply. - AAR No. KAR ADRG 23/2018 - - - Dated:- 19-9-2018 - SRI. HARISH DHARNIA, AND DR. RAVI PRASAD M.P. MEMBER Represented by: Sri Badarinath, Chartered Accountant ORDER UNDER SUB-SECTION (4) OF SECTION 98 OF CENTRAL GOODS AND SERVICE TAX ACT, 2017 AND UNDER SUB-SECTION (4) OF SECTION 98 OF KARNATAKA GOODS AND SERVICES TAX ACT, 2017 1. M/s Toshniwal Brothers (SR) Private Limited, (called as the Applicant hereinafter), No.11, AECS Layout, 4th Main, 3rd Cross, Sanjay Nagar 1st Stage, Geddalahalli, Bengaluru - 560094, having GSTIN number 29AAACT2881R1ZJ, has filed an application for Advance Ruling under Section 97 of CGST Act,2017, KGST Act, 2017 IGST Act, 2017 read with Rule 104 of CGS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded the following activities: i. Applicant would advertise the details of the goods to the prospective customers; ii. Demonstration of the products to the various prospective customers located in India; iii. Communicate and correspond about all the relevant information to the prospective customers in connection with the goods; iv. Communication to the overseas clients about comments and queries of the prospective customers; and v. Review the credit rating of the prospective customers of the overseas entity on regular basis; b. After sale support services On the basis of the order issued by the prospective customer to the overseas entity, the overseas entity supplies the products to their customer in India. The applicant shall provide the following support services: i. Advice and assist the customers of the overseas entity in installation, initial start-up of products and demonstration of its satisfactory operation to such customers; ii. For few product lines, provide complete installation services to the customers of the overseas entity along with necessary advisory and assistance to the customers of the overseas entity in initial sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g services is not intermediary services. The applicant refers to the Advance Ruling pronounced by the Authority on Advance Rulings under the Service Tax provisions in the case of GoDaddy India Web Services (P.) Ltd (Ruling No. AAR/ST/08/2016, Application No. AAR/44/ST/15/2014) = 2016 (3) TMI 355 - AUTHORITY FOR ADVANCE RULINGS wherein the Authority had clearly demarcated the meaning of intermediary services and ruled that pure marketing and promotion services would not be intermediary services. 6. The applicant submits that in the aforesaid Advance Ruling, it is stated as under: The definition of intermediary as envisaged under Rule 2 (f) of POPS does not include a person who provides the main service on his own account. In the present case, applicant 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. Further, during arguments, applicant drew our attention to one of the illustration given under paragraph 5.9.6 of the Education Guide, 2012 issued by CBEC. Relevant portion is extracted as under: Similarly, persons su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place order to the service recipients on the basis of promotion and marketing services provided by the applicant; c. Post purchase, customer would be able to use the products only when after-sale support services are provided; d. Since all these activities are inter-linked with each other, it is naturally bundled in the ordinary course of business. 8. The applicant submits where after-sale support services are also provided along with promotion and marketing services and being a composite supply, one should be the principal supply. The applicant submits that the principal supply would be the promotion and marketing services because of the following reasons: a. Marketing activities is the first step in the complete process; b. After-sale support services can be given only once the product is sold; c. Customer will place order to the service recipients on the basis of promotion and marketing services provided by the applicant it is only after the products are sold that after-sale services arises; d. The supply of the product by the overseas entity to the customer in India embeds within itself, the provision of after-sale support; e. Marketing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he services will be the overseas entity, which is located outside India. 10. The applicant submits that the place of supply shall be determined as provided in section 13 of the IGST Act, 2017 because the location of the supplier is in India and the location of the recipient is outside India. The applicant submits that as explained in the earlier paragraphs, services provided by him is not intermediary services and hence the place of supply shall not be determined by section 13(8) of IGST Act, 2017 but in terms of section 13(2) of IGST Act, 2017, which is general clause. As per section 13(2) of IGST Act, 2017, the place of supply of services shall be the location of the recipient of services and since the location of the recipient of services is a place outside India, the place of supply for promotion and marketing services would be the place outside India. 11. The applicant submits that the services as a whole, would be the export of services provided in clause (6) of section 2 of the IGST Act because: (a) The supplier of services, i.e. the applicant, is located in India; (b) The recipient of services, i.e. the overseas entity, is located outside India; (c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses, only marketing services are undertaken and the post-sale support services are not provided, the applicant submitted that the equipment that are manufactured by the applicant s principals and marketed by him in India are specialized equipment. Most of the equipment would need installation support. The applicant confirms in all such cases, he is the one providing the same and nevertheless, there could be certain equipment: Which donot need any installation: they are typically in the nature of plug and play; Which are installed more appropriately termed as configured remotely through computer or online networks or which requires specialized knowledge, in which cases, the same are undertaken by the manufacturers themselves; In such cases, the applicant states that the question of providing any installation support does not arise; 14. The applicant also refers to the e-Flyers published by the CBIT on 15.03.2018 on Composite supplies wherein they have given a list of certain indicators for determining when a bundle of supplies should be treated as naturally bundled in the ordinary course of business and consequently as composite supplies . The extract relevant ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch contract is only between the applicant and the owners of such equipment. 15.1 The maintenance of such machinery / equipment could involve replacement of spares, if need be. In this regard, the same being specialized equipment, the spares also would have to be procured from the suppliers of equipment itself. It is in this context, that the agreement with the principals contains clauses with respect to discount that would be offered for purchase of spares from them. The applicant reiterates that the import of spares is not in connection with the marketing activities. 16. FINDINGS DISCUSSION: 16.1 The applicant has provided a copy of the agency contract and the following are noted from the contract: (a) In clause II relating to the Duties of the Agent, in paragraph 1, the applicant is referred to as Agent shall be act as intermediary on behalf of principal in negotiating business transactions with prospective customers in his territory, but the applicant shall not be entitled to conclude contracts on behalf of the principal. It is also seen that the applicant acting as an Agent shall take care of the interests of the principal and regularly visit the custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principal as declaring to the agent as under From our experience for business in your territory it would be commensurate to allocate 25% of total commission earned in each fill system case to address installation and warranty period services which are provided by your company on our behalf to the end customers . All the above show that the applicant has been offered commission on the amount of goods sold and this is the method adopted for calculating the consideration. 16.3 Further, on the question as to whether the services provided by the applicant is an intermediary service or not, Sub-section (13) of section 2 of the IGST Act, 2017 defines an intermediary as under: (13) intermediary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account. The agreement copy provided by the applicant shows clearly that the price is negotiated by the applicant for the machinery or equipments and intimated to the overseas supplier. It is al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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