9911796707
TMI Blog2018 (10) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... has sought advance ruling in respect of the following questions: a) Whether pure and mere promotion and marketing services will be "intermediary services" for the purposes of section 12 of the Integrated Goods and Services Tax Act, 2017 for determining the place of supply of such services? b) If after sale support services are also provided under a composite contract, would it then be composite supply? What will be the principal supply for such contracts? c) Whether the above contracts would qualify as exports if the client is overseas entity, in terms of clause (6) of section 2 of the Integrated Goods and Services Tax Act, 2017 and will be a zero-rated supplt as provided in section 16 of IGST Act, 2017? 3. The applicant furnishes some facts relevant to the stated activity: 3. The applicant states that he is a supplier of services to overseas clients and is engaged in the business of promotion and marketing and after sale support services as a composite supply. He has entered into an agreement with their customers (Service Recipients), who are located outside India (which is a non-taxable territory in terms of clause (79) of section 2 of the CGST Act, 2017) for providing marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me on its activities to promote and solicit orders for the products in India, to the overseas entity. These business reports would normally include: i. Short and medium term forecasts detailing prospective customer's name, order value, anticipated placement and expected delivery dates and long term project and prospect lists; ii. Results of regular observation of marketing conditions, information in the public domain relating to the activities of competitors; and iii. Results of participation in trade fairs. 5. The assessee has submitted that intermediary means a person who arranges or facilitates the supply of goods or services or both, between two or more persons, but does not include a person who supplies such goods or services or both on his own account. In this regard, the following are to be considered: a. Services provided by the applicant to overseas entity (service recipients) is on principal-to-principal basis; b. Applicant is providing services to service recipients and not on behalf of the service recipients to any other person, say, the prospective customers in India; c. Service recipients would be dealing with Indian customers directly and the applicant is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice to their client on their own account. Similarly, applicant is providing business support service such as marketing and other allied services like oversight of quality of third party customer care centre operated in India and payment processing services, on behalf of GoDaddy US. Therefore, these services provided by the applicant to GoDaddy US cannot be categorized as intermediary or services, as intermediary services." The applicant submits that the facts and surrounding circumstances of the said case and the applicant's business are same and wholly comparable and thus, the ratio of the said Ruling should be squarely applicable to the applicant's case. 7. The applicant submitted that clause (30) of section 2 of the CGST Act, 2017, provides the meaning of composite supply which reads as under: "Composite supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply." In this case where after-sale support services are also provided al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... predominant component while installation and warranty services are ancillary to such promotion and marketing services. 9. The applicant submits that the clause (6) of section 2 of the IGST Act defines the meaning of "export of services" which reads as under: "Export of services" means the supply of any service when, - (i) The supplier of service in located in India; (ii) The recipient of service is located outside India; (iii) The place of supply of service is outside India; (iv) The payment for such service has been received by the supplier of service in convertible foreign exchange; and (v) The supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 of section 8 of IGST Act." The applicant submits that recipient has been defined in clause (93) of section 2 of the CGST Act, 2017, which reads as under: "Recipient" of supply of goods or services or both means - (a) Where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration; (b) Where no consideration is payable for the supply of goods, the person to whom the goods are del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e additional submissions and the same are as under 12.1 The activities of the applicant are limited to functioning as an agent of the overseas principals and the applicant does not and is not engaged in the business of buying and selling of the products. In this regard, the following are important to note: (a) Majority of the customers are research institutes or R&D centres. Under the Customs Law, they are eligible for exemptions / concessions with respect to custom duties on import of goods. Accordingly, they would always directly import the said goods and would not procure (such imported goods) from any supplier in India (who has imported the same earlier). Such a proposition would disentitle them from availing the customs duty exemptions or concessions. (b) The activities of the applicant is always limited to functioning as an agent promoting the goods od the overseas principals. This is evident from: a. The fact that the order for such goods are placed by the companies or institutes etc. in India directly on the overseas suppliers; b. The bill of entry at the time of import is filed by such companies or institutes and the payment is also made directly by such importers t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bundled in the ordinary course of business * Majority of service providers in a particular area of business provide similar bundle of services * 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 services in such that one of the services is the main service and the other services combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main service * Other illustrative indicators, not determinative but indicative of bundling of services in ordinary course of business are - o There is a single price or the customer pays the same amount, no matter how much of the package they actually receive or use; o The elements are normally advertised as a package; o The different elements are not available separately; o The different elements are integral to one overall supply - if one or more is removed, the nature of the supply would be affected." The applicant submits that above analogy further substantiates the submissions earlier made and squarely applies to the present case and claims that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commission, it is clearly stated as under: "On all contracts for the sale of goods which the Principal enters into with customers residing in the Agent's territory, the Agent shall receive a commission of 12% on the value of goods as far as sales contracts are concerned that have been negotiated by the Agent and a commission of 6% for all other sale contracts." In Clause VI of the contract, it is seen that the commission is calculated on the basis of the amount invoiced 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 conn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt nature of the transaction is of "intermediary" nature. 16.4 Further, on the question of whether the contract is a composite supply or not is to be seen from the nature of the contract. When the applicant solicits the prospective purchaser, he is not aware of whether the transaction would ultimately result in a supply of goods. The terms of the contract also makes it very clear that the amount of consideration towards after-sale services and warranty services would not cross 25% of the value and hence there is an element of classification of the value of marketing "intermediary" services and the "after-sale and warranty services". The incidence of after-sale and warranty services is contingent upon the successful supply of materials and is not contingent upon the marketing "intermediary" services provided by the applicant to the principal and hence cannot be called as a naturally bundled services. Hence this does not amount to a composite supply and the same are treated as two supplies independent of each other and the valuation of each has to be computed as per Section 15 of the Central Goods and Services Tax Act. Both these independent supplies are only linked to the supply of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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