TMI Blog2018 (12) TMI 1006X X X X Extracts X X X X X X X X Extracts X X X X ..... Software the reservation system of choice for subscribers and to strengthen the subscribers trust in the brand ‘Sabre’ so as to augment Sabre APACs business in India. Whether or not the applicant is providing Intermediary Services? - Held that:- If the services provided are Intermediary Services then as per the GST Laws the applicant will be liable to tax. An intermediary can be a broker, an agent or any other person and either facilitates the supply of goods and/or services between two or more persons and who cannot change the nature of supply as provided by the principal - the applicant is covered by the said definition of an intermediary because they are definitely acting as a broker/ agent, etc and facilitating the process for sale of CRS Software belonging to their foreign parent company, to the Indian subscribers because they identify such subscribers on their own in India. It is the sales team of the Applicant which approaches potential subscribers in India to whom they explain the features of the CRS Software and the flexibility of said software to integrate with the potential subscriber’s system for smooth functioning. Once the applicant gets a positive response from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods Services Tax Act 2017 (hereinafter referred to as Said Tax Acts ) or would remain excluded under the said Acts as the said activities qualify as export of service in accordance to Section 2(6) of the Integrated Goods and Service Tax Act 2017 read With the said Tax Acts? At the outset, we would like to make it clear that the provisions of both the CGST Act and the GST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the GST Act . 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submission (Brief facts of the case), as reproduced verbatim, could be seen thus - STATEMENT RELEVANT HAVING A BEARING ON QUESTIONS ON WHICH ADVANCE RULING IS REQUIRED BACKGROUND: A. Sabre Travel Network (India) Pvt. Ltd. (hereinafter referred to as Applicant/Sabre India ), situated at 14th Floor, Urmi Estate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of the above, the Applicant undertakes the following activities in relation to the marketing and promotion services provided by them under the Marketing Agreement dated 31 October 2016: According, while marketing access to the CRS Software, the sales team of the Applicant approaches potential subscribers in India to whom they explain the features of the CRS Software and the flexibility of same to integrate with the potential subscriber s system for smooth functioning; Thereafter, in the event of a positive response, the Applicant scans the credentials and the business potential of the subscriber to whom it proposes to market the CRS Software; Based or an organizational and workflow analysis of the subscriber and following a background check of their prior activities, the applicant logs on a request into the system through the website maintained by Sabre APAC called Subscriber Communication Management System. This is an automated process wherein a request is placed by the Applicant to create a Pseudo City Code; Simultaneously, provided the subscriber agrees to use the CRS Software, order forms are collected from them to begin the process for activation of the CRS Software ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strengthen the subscribers trust in the brand Sabre so as to augment Sabre APAC s business in India. H. The entire gamut of services are provided in an integrated manner to Sabre APAC, and for consideration the Applicant raises a consolidated monthly invoice for the fees to be received from Sabre APAC for all the services rendered to them. The said fees, which is received in the form of convertible foreign exchange, is calculated on a cost plus a mark-up basis as per the terms of the said Marketing Agreement. Further, the amount so received is in accordance to the domestic arm s length requirements under the local transfer pricing laws. Hereto annexed and marked as Exhibit B are sample copies of invoices issued to Sabre APAC. I. Basis the above facts, the various roles and responsibilities of the Applicant and Sabre APAC Under the Marketing Agreement dated 31 October 2016 are distinguished below: Sr. No Functions Duties of Sabre APAC Duties of Applicant 1. Strategic Management functions Planning, formulating and implementation of business goals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, Sabre APAC makes a decision on whether or not to allot the Pseudo City Code The Applicant is required to provide consultancy and provision of information services in relation to potential customers. 6. Acceptance or rejections Subscriber Application Subscriber applications are accepted or rejected directly by Sabre APAC at its sole discretion No participation of the of Applicant except as a communication channel where required by Sabre APAC 7. Execution of contracts with customers Access to the CRS Software, by the allotment of Pseudo CRS Software City Code, is permitted by Sabre APAC The Applicant provides marketing support services in relation to which may include grievance redressal service, repairs and maintenance services, etc. 8. Promotional Activity Involved, as may be required on case to case basis Use of any and all advertising and promotion techniques, service and support, promotion materials, participation in trade shows, sponsorship services, etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the questions on which advance ruling is sought The Applicant makes the following factual and legal submissions in relation to the aforesaid questions: The Applicant is a registered Goods and Service Tax (hereinafter referred to as GST ) assesse holding registration certificate bearing no. 27 AAACA4836H2ZR and is engaged in the business of providing marketing, promotion and distribution services to Sabre APAC. As per the definition of Advance Ruling under Section 95(a) of the Central Goods and Service Tax Act, 2017 (hereinafter referred to as CGST Act ), an Applicant already engaged in business activities can seek an advance ruling in respect of matters or questions specified in Section 97 (2) of the CGST Act, in relation to the supply of goods either proposed to be undertaken or is already being undertaken by the Applicant. Thus, an advance ruling can also be sought on the activity of supply of marketing and promotion services being undertaken by the Applicant. Further, the Applicant submits that the question for which an advance ruling is sought in the present case, is not pending before any Goods and Service tax Officer, the Appellate Tribunal or any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice Tax Act, 2017 (hereinafter referred to as IGST Act ) read with the said Acts. In order to substantiate the said proposition it is necessary to explain the provisions prescribed under the GST law which are analyzed as follows: 1.2 It is submitted that under the GST Act, the eligibility to tax of any activity is dependent on two aspects, viz. whether it is taxable under the provisions Of the GST Acts and secondly whether the same is eligible for any exclusion for purpose of taxation under the GST Acts. Accordingly, it is necessary to first identify the taxability of the services under GST Acts and further the parameters for any exclusion from tax as are applicable in the facts and circumstances of the present case. 1.3 Determination of taxability: 1.3.1 It is submitted that as opposed to the erstwhile indirect tax regime where the taxable event was identified on specific events such as manufacture, sale or provision of service; under the provisions of the GST Acts, all such events have been Subsumed under the single umbrella of supply as prescribed under Section 7 of the CGST Act. 1.3.2 It is submitted that for a service to qualify as supply under Section 7 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of services shall be the location of the recipient of services. 1.5 Applicability of the exclusion from tax in the present case: 1.5.1 In view of the above, a taxable service provided by a person in India would be subject to tax only when in accordance with the aforesaid rules mentioned in para 1.4 above has been consumed in India and not when it has been consumed outside the territorial boundaries of India. Consequently, where the services are provided from India and consumed outside India, they said activities would be excluded from taxation if they satisfy the test as export of services as per Section 2(6) of the IGST Act. The said provision defines export of services as under: (6) export of services means the supply of any service when, (i) the supplier of service is 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 Expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re APAC is at its registered office in Abacus Plaza, 3 Tampines Central 1, Abacus Plaza, #08-01, Singapore 529540 and is evidenced by the same copy of which is attached as Exhibit-c. iii) The place of supply of services is outside India: the services are provided by the Applicant to Sabre APAC. As per Section 13(2) of the IGST Act, the place of supply of services shall be the location of the recipient of services. Sabre APAC is located in Singapore. Consequently, as the recipient is located in Singapore, the services shall be considered to be supplied in Singapore. Thus, the place of supply of services is outside India. A copy of the GST registration certificate issued to the Applicants is attached as Exhibit-D and this would be the place of location of the supplier of service in accordance with Sec 2(71) of the CGST Act. iv) The payment for such services is received in convertible foreign exchange : the consideration for the services rendered to Sabre APAC is received in convertible foreign exchange. Sabre India Charges a fee on a cost plus markup basis in US Dollars which the Applicant is entitled to irrespective of the number of booking made on the said CRS Software b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pal to principal basis with the only intention of promoting and marketing of CRS Software in India. 2.2 In this regard it is also necessary to examine the scope of the expression intermediary as defined under Section 2(13) of the IGST Act. 2.3 It is submitted that the Marketing Agreement between the Applicant and Sabre APAC do not intend to operate so as to create a partnership or a joint-venture between the Applicant and Sabre India. It is a contractual relationship is between to two distinct entities for the supply of services from India and the receipt of the same in Singapore. Furthermore, neither does any clause of the Marketing Agreement requires any facilitation or any similar arrangement with respect to the Subscribers in India viz travel agents by the Applicant, nor does the said Agreement tea obligation on the Applicant s part to facilitate or arrange the supply of goods or services by Sabre APAC to the subscribers. Herein a reference can be made to Article 11 of the Marketing Agreement enclosed as Exhibit A. 2.4 The said Article 11 reads as follows: Nothing in this Agreement is intended to or shall operate to create a partnership or joint venture of any ki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agency, q. v. Classification. Agents are either general or special. A general agent is one employed in his capacity as a professional man or master of an art or trade, or one to whom the principal confides his whole business or all transactions or functions of a designated class; or he is a person who is authorized by his principal to execute all deeds, sign all contracts, or purchase all goods, required in a particular trade, business, or employment. 2.10 The dictionary meanings extracted above, clearly indicate that, an element of representation of acting on behalf of the other person should be mainly present for a person to be considered as broker or agent . In other words, Agent or a Broker represent and act on behalf of another person i.e. the principal, and do not work at their own behest but as a representative of on behalf of their principal. Therefore, it can fairly be concluded that a principal - agency relationship between persons forms the core requirement of an agent or a broker. 2.11 Besides, the last phrase in the means clause of the definition of intermediary contains the clause or any other person, by whatever name called . The most appropriate r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some of it rights to local distributors so as to promote and market the CRS Software. The said Agreement does not create an obligation on the part of the Applicant to facilitate or arrange the supply of goods or services by Sabre APAC to the Subscribers. It only creates an obligation on the part of the Applicant to provide marketing services to Sabre APAC with respect to the CRS Software belonging to Sabre GLBL Inc. within the territory of India. 2.18 Herein, it is pertinent to note that, an agent typically facilitates supply of goods or services between two or more persons; therefore, acts under a tripartite arrangement i.e. such arrangement ought to have at least three parties seller, buyer and the agent. Whereas, no clause of the Marketing Agreement between the Applicant and Sabre APAC, mentions the rendering of facilitation or arrangement of services by the Applicant between Sabre APAC and the Subscriber. The Agreement does not facilitate nor does it enable the facilitation of any supply of services between Sabre APAC and the Subscriber. There is no privity of contract between the Applicant and the Subscriber namely travel agent in India where by the Applicant is under any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is facilitating service between travel agents and Sabre APAC this structure cannot render them s intermediary. The question of altering the nature of value of service can apply only when the applicant qualifies as an agent, etc., and not otherwise. Separation of Value: The consideration received by the Applicant is a service fee which is calculated on cost plus mark up method. It is submitted that the mere fact that the remuneration is by way of commission cannot alter the status of the Applicant to that of an agent when the basic agreement with Sabre APAC clearly states that there is no right of representation under Article 11. Further whether there are any registrations from the Subscriber viz travel agents in India or not even in that case the minimum establishment cost of the Applicant with the mark up as provided in para 5.1 of the Marketing Agreement will have to be paid by SABRE APAC to Sabre India. It is settled law that the person who is entitled to the receipt of service and who has the obligation to pay for the said service alone is the service receiver and no other person even if such other person were to indirectly benefit from the provision of the main service. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bre APAC as an agent or otherwise or to bind Sabre APAC in any respect. The Applicant does not have any authority to allow the creation of the Pseudo City Code in favour of the subscriber to grant access to the CRS Software. The applicant s role is limited to undertaking marketing and promotional activities, undertake market research and informing of Sabre APAC of interest of potential customers immediately by raising a request for grant of a Pseudo City Code. It does not have any authority whatsoever to bind Sabre APAC with respect to issuance of the same. Sabre APAC may directly accept or reject such requests on its own discretion. The information / any services provided by the Applicant are not the sole basis upon which Sabre APAC would accept or reject the orders received from customers. They would depend upon various other business factors taken into consideration by Sabre APAC. The decision to allow or reject access solely rest With the Sabre APAC. The Applicant plays no role in enabling Sabre APAC and the subscriber to enter into contract for access of CRS Software except feeding the information via the system to enable Sabre APAC register the admitted and only s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds 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 3.4 Thus, for a supply to be treated as a composite supply, it has to meet the following conditions: the supply should consist of two or more taxable supplies; they should be naturally bundled together; they should be sold in conjunction with each other; and One of the supplies should be the principal supply, i.e, the predominant portion of the supply to which the other supply is ancillary 3.5 It is submitted that in the present case, the services like consultancy, promotion, sponsorships and other related support services are of a supplementary nature which facilitate the provision of the marketing and promotion services rendered by the Applicant to Sabre APAC. Therefore, said service of marketing access to the CRS Software is of principal nature with the other services being supplementary to it, as the other marketing support services cannot be rendered in the absence of the marketing services provided by the Applicant under the Marketing Agreement. 3.6 Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the Said Acts being in the nature of exports and qualify as zero-rated supplies under Section 16 of the IGST Act. Finally, as all the services rendered under the said Marketing Agreement are naturally bundled and provided in conjunction with each other for which a single invoice is raised by the Applicant the service may be classifiable as a composite supply as defined under Section (30) of the CGST Act and thus all such supplementary activities would also be excluded from the Said Acts. Without prejudice to above submission, the Applicant respectfully requests Your Honor to grant an opportunity of personal hearing in this matter in order to explain the matter more lucidly. The Applicant reserves their right to modify, rescind or alter any part of submissions and to place additional evidence in support of their contention at the time of personal hearing. WRITTEN SUBMISSION AT THE PERSONAL HEARING ON 10 JULY 2018 Brief Background: A. Applicant is private limited company engaged in the provision of marketing, promotion distribution of the Computer Reservation System Software ( CRS Software ) within the territory of India. The CRS Software has been dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside India. Submission : In order to avoid repetition and in the interest of brevity, the Applicant would like to reiterate the facts and submissions made in the Application and without prejudice to the same, make the following submission which it requests be considered as part of the Application itself: 1. Submission with respect to the qualification of services rendered by the Applicant under Section 2(6) of the IGST Act 1.1. It is submitted that the Marketing Agreement dated 31 October 2016 creates an obligation on the Applicant to provide marketing, promotion and distribution services to Sabre APAC in relation to the CRS Software, within the territory of India. The Applicant identifies potential customers and once the said customer is accepted by Sabre APAC, it provides after-sales services as may be required. Further, all promotion and marketing support services provided by the Applicant is towards the objective of building the customer base of the CRS Software in India or in relation to the same. Hereto annexed and marked as Annexure 1 is a scope of the services rendered by the Applicant under the said Marketing Agreement dated 31 October, 2016. 1.2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a in terms of Rule 9 of the Place of Provision of Service Rules, 2012. Therefore, the demands against the appellants are not sustainable. Consequently, refund claim filed by the appellants are admissible. (emphasis supplied) 1.5. Further, in the ruling of the Hon ble Advance Ruling Authority (under the Finance Act,1994) in the matter of GoDaddy India Web Services Pvt. Ltd. reported in 2016 (46) STR 806 (AAR) = 2016 (3) TMI 355 - AUTHORITY FOR ADVANCE RULINGS , GoDaddy India was to provide a bundle of services such as direct marketing and promotion services, supervision of quality of third party customer care centre services and payment processing services under the category of Business Support Services to GoDaddy.com LLC ( GoDaddy US ) in lieu of a proposed Service Agreement. In the said ruling, it was held by the Hon ble Authority for Advance Ruling that the GoDaddy India was providing services on their own account to GoDaddy US and not to the Indian customers of GoDaddy US. Hence, the place of provision of service would be outside India in terms of Rule 3 of the place of Provision of Services Rules, 2012 and these services would qualify as export under Rule 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid 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 GoDaddy US would 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 Notification No. 36/2012-S.T. dated 20.6.2012) and therefore remain non-taxable for purpose of payment of service tax under the Finance Act 1.6. Similar view has been taken by the Hon ble Advance Ruling Authority at New Delhi in the case of M/s Universal Services India Pvt. Ltd. v. CST, Delhi- IV reported in 2016 (42) STR 585 (AAR) = 2016 (5) TMI 750 - AUTHORITY FOR ADVANCE RULINGS . 1.7. With respect to the above, it is submitted that the criterion for the determination of export of services under the erstwhile service tax provision was similar to the provisions under the IGST Act. In this context, is may be relevant to refer to the CESTAT order in the case of Principal Commissioner of Central Excise -I v. Advinus Therapeutics Ltd reported in 2016-TIOL-3138-CESTAT-MUM = 2016 (12) TMI 34 - CE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . A service is not necessarily a single, discrete, identifiable activity; on the contrary, it is a series of invisibles that cater to the needs of a recipient; it is upon the consumption of the service by the recipient that service is deemed to have become taxable. This has been so held by the Hon'ble Supreme Court in All India Federation of Tax Practitioners v. Union of India others [ below: '7. In the light of what is stated above, it is clear that Service Tax is a VAT which in turn is destination based consumption tax in the sense that it is on commercial activities and is not a charge on the business but on the consumer and it would, logically, be leviable on services provided within the country. It would appear from the exposition in the judgment that the tax was intended as a levy on activities that would otherwise be performed by the recipient for itself. The new industry of hiving out or outsourcing of what was, conceivably, being done within the enterprise was intended to be subject to the new levy. In the matter of service rendered by respondent, this activity could, but for commercial viability, well be executed by the recipient within its own organi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Poly Fabriks v. CCE, Punjab reported in 2008 (10) STR 545 S.C = 2008 (4) TMI 31 - SUPREME COURT wherein the Supreme Court held as follows: 8. There cannot be any doubt whatsoever that a document has be read as a whole. The purport and object with which the parties thereto entered into a contract ought to be ascertained only from the terms and conditions thereof. 1.12. Also, the Applicant also refers to para 5.9.6 of the Education Guide issued by the Central Board of Excise and Customs (hereinafter referred to as CBEC ) in the year 2012 which states that it is expected the intermediary or agent would have documentary evidence authorizing him to act on behalf of the provider of the main service. 1.13. In the present case, the Marketing Agreement does not entrust such authority on the Applicant, nor is there any other authorising document establishing agency between the Applicant and Sabre APAC. Thus, the services rendered by the Applicant are on a principal to principal basis and qualify as export as export of services and the same cannot be considered to be intermediary services as per Section 2(13) of the IGST Act. 2. Submission with interpretation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not work at their own behest or instruction but as a representative or on behalf of their principal. Further, the last phrase in the means clause of the definition of intermediary contains the clause or any other person, by whatever name called . Accordingly, the question that has to be asked is whether the any other person will have a nature/ Character distinct from that of a broker or an agent or will it continue to have the same nature and character as that of a broker or an agent. 2.3.4. The Golden Rule of Interpretation enunciated and espoused by various judicial pronouncements States that the words of a statute must be given their plain grammatical meaning. The intention of the legislature has to be gathered and deciphered in its proper spirit having due regard to the language uses therein. But, when the words are unclear or ambiguous, aid of other rules of interpretations must be used. 2.3.5. The most appropriate rule of interpretation which is to be used while interpreting the phrase by whatever name called is the principle of ejusdem generis . The application of this Rule is necessitated because of the use of a general phrase preceded by specific words. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eable on principle as consideration payable under contract. 2.3.9. The Applicant also relies on the CBEC Circular bearing No. 83/1/2006-ST dated 4 July 2006 issued by the CBEC, wherein the applicability of the principle of ejusdem generis with respect to the term any other person was interpreted to be mean as follows: 3. Banking and other financial services are defined under section 65(12). Such Services provided to a customer by a banking company or a financial institution including a non-banking financial company or any other body corporate or any other person to a customer are liable to service tax under section 65(105)(zm). The expression any other person appearing in section 65(105)(zm) is to be read ejusdem generis with the preceding words. The expression other financial services appearing under section 65(12)(a)(ix) is a residuary entry and includes; those services which are normally rendered by banks or financial institutions (emphasis supplied) 2.3.10. Thus, applying the principle laid down by the Hon ble Supreme Court, supra, and the interpretative rule of ejusdem generis , the phrase by whatever name called will include a person in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any activity in the nature of arrangement or facilitation as explained above. 2.46. The Applicant would also like to refer to qualifying conditions for intermediary services described in para 5.96 of the CBEC Education Guide. The said conditions are reproduced below for ease of reference: Nature and value: An intermediary cannot alter the nature or value of the service, the supply of which he facilitates on behalf of his principal, although the principal may authorize the intermediary to negotiate a different price. Also, the principal must know the exact value at which the service is supplied (or obtained) on his behalf, and any discounts that the intermediary obtains must be passed back to the principal. Separation of value: The value of an intermediary s service is invariably identifiable from the main supply of service that he is arranging. It can be based on an agreed percentage of the sale or purchase price. Generally, the amount charged by an agent from his principal is referred to as commission! Identity and title: The service provided by the intermediary on behalf of the principal is clearly identifiable. 2.4.7. The Appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the contract. 90. In our judgment the services of the employees of Bookit in obtaining card information and transmitting the same to Girobank do not involve any act of mediation on behalf of the customer. The only matters mentioned in paragraph 39 of CDC which could be relevant are making contact with another party here Girobank. However, it does not seem to us that the mere transmission of card information suffices for negotiation or it follows does such transmission come within intermediary services in item 5. (emphasis supplied) 2.4.10. Similarly in Leadx v. Revenue Customs reported in (2008) UKVAT V20904 (19 December 2008) it has been held that introducing customers to the seller is not sufficient for a service provider to qualify to be an intermediary. In this case the assessee was inter alia engaged in the activity of facilitating telecommunication and data services for trading of loan and insurance leads. In other words, the assessee was engaged in providing an open market for purchase/ sale of loans and insurance products from brokers via its internet based bidding system. The relevant para of the judgement is extracted hereunder for the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not provide the services of an insurance intermediary. 2.4.11. From the above judgments under UK VAT law, the following legal position emerges: Mere introduction of buyer with the seller is not sufficient for a service provider to qualify to be an intermediary. Activity of gathering information / sorting the same does not necessarily mean that it is an act of facilitating provision of the main service. The intermediary plays a proactive part in putting in place the arrangements under which the supply of the main service is made. The intermediary typically undertakes the arrangement or facilitation of a main service by way of active introduction, support in order processing, support in negotiation of contractual terms, support in collection of price etc. Negotiation is a pre-requisite for qualifying to be an intermediary. Negotiation means carrying out all the necessary activities end to end which would entail two parties to enter into a contract, without the negotiator having any interest of his own in the terms of the contract. 2.4.12. The above-mentioned principles can be applied into the present factual matrix to determine whether the Applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CBEC Education Guide 2012, wherein the situation where services are rendered on the persons own account is specifically highlighted. The relevant extract reads as follows: When the freight forwarder acts on his own account (say, for an export shipment) A freight forwarder provides domestic transportation within taxable territory (say, from the exporter s factory located in Pune to Mumbai port) as well as international freight service (say, from Mumbai port to the international destination), under a single contract, on his own account (i.e. he buys-in and sells fright transport as a principal), and charges a consolidated amount to the exporter. This is a service of transportation of goods for which the place of supply is the destination of goods. Since the destination of goods is outside taxable territory, this service will not attract service tax. Here, it is presumed that ancillary freight services (i.e. services ancillary to transportation- loading, unloading, handling etc) are bundled with the principal service owing to a single contract or a single price (consideration).*** 2.5.3. Thus, even persons who provide services to their clients by dealing with the customer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rincipal basis. 2.5.7. In the above case, while there is an arrangement involving the Applicant, Sabre APAC as well as the customers of Sabre APAC, the Applicant s engagement with Sabre APAC s customers is in pursuance of the promotion and distribution activities carried out by the Applicant. The Applicant approaches the potential customer and subsequently may even undertake analysis of their business activities in order to determine the viability for use of the CRS Software, but the actual provision of the services of access to CRS Software is provided by Sabre APAC. Besides, even the interaction with the potential or confirmed customer of Sabre APAC is done by the Applicant on its own account and not as an agent of Sabre APAC. 2.5.8. Herein, the Applicant places reliance on the following judgments of the CESTAT which hold that the person could at the same time act as an agent and also on principal to principal basis with respect to the same line of activity. (i) Greenwich Meridian Logistics (I) Pvt. Ltd. v. CST, Mumbai [2016 (43) STR 216 (Tri. - Bom.)] = 2016 (4) TMI 547 - CESTAT MUMBAI (ii) Phoenix International Freight Services Pvt. Ltd. v. CST, Mumbai - I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 31 October 2016: - While marketing access to the CRS Software, the sales team of the Applicant approaches potential subscribers in India to whom they explain the features of the CRS Software and the flexibility of same to integrate with the potential subscriber s system for smooth functioning; -Thereafter, in the event of a positive response, the Applicant scans the credentials and the business potential of the subscriber to whom it proposes to market the CRS Software; - Based on an organizational and workflow analysis of the subscriber and following a background check of their prior activities, the Applicant logs on a request into the system through the website maintained by Sabre APAC called subscriber Communication Management System. This is an automated process wherein a request is placed by the Applicant to create a Pseudo City Code; - Simultaneously, provided the subscriber agrees to use the CRS Software, order forms are collected from them to begin the process for activation of the CRS Software following the creation of the Pseudo City Code; It the subscriber meets all the criterion set forth by Sabre APAC for subscription, it is registered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AS PER THE CONCERNEP OFFICER The submission, as reproduced verbatim, could be seen thus- M/s. Sabre Network (India) Pvt. Ltd. have filed an application with Advance Ruling Authority (ARA), GST Bhavan, Mazgaon, Mumbai - 400 010 on 13.04.2018. In the application, they asked the question as to :- Whether the marketing, promotion and distribution services provided by M/s. Sabre India to Sabre APAC would be subject to tax under IGST Act 2017 and Maharashtra GST Act 2017 or would remain excluded under the said acts, as the said activities qualify as export of service in accordance to Section 2(6) of the IGST Act 2017 read with the said Tax Acts.?. In support of their above question, during the course of personal hearing held on 17.07.2018, in the office of Authority of Advance Ruling, GST Bhavan, Mazgaon, Mumbai - 400 010, they submitted the following facts to the notice of the authority. M/s. Sabre Network (India) Pvt. Ltd. (hereinafter referred as the Applicant) is private limited company engaged in the provision of marketing, promotion and distribution of the Computer Reservation System Software ( CRS Software ) within the territory of India. The CRS Soft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C situated outside India. FINDINGS :- In this context, it is to submit that:- M/s. Sabre GLBL Inc, is the foreign company who developed the CR software. Secondly, M/s. Sabre APAC, Singapore based company has been sub-licensed the right to market and promote the said CRS Software for Asia specific jurisdictions. At lastly, Sabre APAC has appointed M/S. Sabre Network (India) Pvt. Ltd the National Marketing Company vide a Marketing Agreement dated granting a non-exclusive right to market and distribute the CRS Software to various travel agents in India. Section 2(13) of the IGST Act, defines an intermediary to mean 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 on his own account. In their submission dated 17.07.2018, before Adjudicating authority, the applicant submitted their Marketing Agreement dated 31.10.2016, wherein it clearly stated that: 1.1. It is submitted that the Marketing Agreement dated 31 October 2016 creates an obligation on the Applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agents in India. Sabre GLBL Inc., an affiliate of Sabre APAC and the applicant, had developed a global distribution system which uses a Computer Reservation System Software ( CRS Software ) which it owned and operated and for sales outside the USA, granted to Sabre Marketing Nederland B.V., a non-exclusive right to market and promote the said CRS software, which was further sub licensed to Sabre APAC for the Asia Pacific region. In view of the Marketing Agreement dated 31 October 2016 between Sabre APAC and the applicant, to market the CRS software, the sales team of the Applicant approaches potential subscribers in India to whom features of the CRS Software and the flexibility of the same to integrate with the potential subscriber s system for smooth functioning are explained. In the event of a positive response from the subscriber, the Applicant scans the credentials and the business potential of the subscriber to whom it proposes to market the CRS Software and based on an organizational and workflow analysis of the subscriber and following a background check of their prior activities, the Applicant logs on a request into the system through the website maintained by Sabre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t qualify as Services under the GST Laws. In view of the submissions made by the applicant we find that the issue before us is whether or not the applicant is providing Intermediary Services. If the services provided are Intermediary Services then as per the GST Laws the applicant will be liable to tax. It is seen that the applicant has given detailed submissions, which are reproduced above, contending that the service provided by them are not in the nature of Intermediary Services and therefore it is their contention that the subject services provided by them to Sabre APAC are actually export of services as per the GST Laws. In view of the above details we need to examine whether the services provided by the applicant are Intermediary Services or not: In simple terms intermediary can be taken to be as a firm or a person, etc. who acts as a link between parties for the conduction of business, etc. We find from the question posed that the applicant is having doubts as to whether their services are taxable under CGST Act and MGST Act or whether their services are exempt under the IGST Act, being export of services. To arrive at a decision we first take up the definit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and educates the subscriber about the software. Hence it is clear that the subscriber becomes aware of the software only after the applicant approaches them. It is also mentioned that the software does not belong to the applicant. Thus we find that the applicant actually acts as an Intermediary between the potential subscriber and Sabre APAC. The applicant is not providing services on their own. The software belongs to the parent company. The applicant educates the subscriber about the software which they would not have known if the applicant was not present as an intermediary between them and the owner of the CRS software. It is very clear from the facts of transaction that the applicant is not providing services on their own account but on account of Sabre APAC, and thus it is very apparent that the applicant is providing Intermediary Services in the instant case. Since the applicant, being the supplier of service is located in India and the recipient of Service i.e. supplier of goods is located outside India, Section 13 of the IGST Act, 2017 would be applicable to determine the place of service. As per Section 13 (8) (b) of the said Act, the place of supply of Intermed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... territory, not being an intra-State supply and not covered elsewhere in this section, shall be treated to be a supply of goods or services or both in the course of inter-State trade or commerce. As per intra-state provisions contained in Section 8(2), the said provisions are subject to the provisions of section 12 of the IGST Act. As per section 12, the provisions of section 12 would be applicable only for determining the place of supply of service where the location of supplier of services and the location of recipient of the services is in India. When recipient is located outside India the said provisions of section 12 cannot be made applicable and since provisions of section 8(2) are inter-linked with provisions of section 12, the same cannot be made applicable in case the recipient of service is located outside India. Thus we find that in case the intermediary services are provided to the recipient located outside India, the inter-state provisions as contained under section 7(5) (c) shall be applicable and hence IGST is payable under such transaction. With respect to the case laws cited by the applicant it is seen that none of the case laws are applicable in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
