TMI Blog2019 (10) TMI 565X X X X Extracts X X X X X X X X Extracts X X X X ..... icant has a direct contact with the customers in India forming a triumvirate, an essential feature of an intermediary services. Needless to emphasise that the applicant has himself accepted that they do not carry out the main supply, the supply of goods. Thus, the activities carried out in India by the applicant so far as those activities mentioned in the Pre-sale and Marketing Services Agreement would render the applicant to qualify as an intermediary as defined under Section 2(13) of the Integrated Goods and Services Tax Act, 2017 and consequently be subject to the levy of GST. - KAR ADRG 31/2019 - - - Dated:- 12-9-2019 - SRI. HARISH DHARNIA, AND DR. RAVI PRASAD M.P. MEMBER Represented by Sri Sivarajan. K, Authorised Representative ORDER UNDER SECTION 98(4) OF THE CENTRAL GOODS SERVICES TAX ACT, 2017 AND UNDER 98(4) OF THE KARNATAKA GOODS SERVICES TAX ACT, 2017 1. M/s. Infinera India Private Limited, (called as the Applicant hereinafter), Prestige Solitaire, Level 4-401, 6, Brunton Road, Bengaluru 560025, having GSTIN number 29AABC11411R1ZD, has filed an application for Advance Ruling under Section 97 of CGST Act,2017, KGST Act, 2017 IGST Act, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Following up with customer leads provided by Infinera USA; which in turn involves two major aspects one, making sales presentations; and two - educating potential customers about the benefits and salient features of the optical networking equipment offered by Infinera USA. f. The applicant has stated that with respect to its engagement with Infinera USA, the work carried out by the applicant is subject to the following limitations: i. The only activities carried out by the applicant under the marketing services agreement are pre-sales and marketing services for the optical networking equipment; ii. No activities pertaining to installation / post sales support or servicing etc. are carried out by the applicant; iii. The applicant does not enter into negotiation of contractual terms and price with respect to the Infinera USA products sold to customers iv. All decisions relating to pricing or commercial terms and conditions with customers are taken solely at the discretion of Infinera Corporation; and v. The applicant gets compensated for the aforementioned activities irrespective of whether such activities lead to a sales order or not. g. Regardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not have the authority to enter into contracts on behalf of Infinera, and maintain stock of goods or merchandise of Infinera . The applicant claims that the marketing support services provided by the applicant are auxiliary in nature for Infinera USA and the applicant at no point in time has any authority to negotiate prices or to enter into / conclude contracts for or on behalf of Infinera USA; and the performance and remuneration of the applicant is in no way linked to the purchase prices; as the applicant, as per the agreement, receives compensation on a cost plus basis - i.e. on the basis of cost of expenses incurred for providing marketing support services in addition to a definite mark-up. The applicant hence claims that it is evident that he cannot at any point of time be deduced to be an agent/ broker of Infinera USA. Therefore, the first requirement of any activity qualifying to be an intermediary service is not satisfied by the applicant in the instant case. i. The applicant submits that the expression arranges or facilitate supply as used in Section 2(13) of the IGST Act means to organize or support or assist in any manner the supply of goods or servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact, all decisions pertaining to pricing or commercial terms and conditions with customers are taken solely at the discretion of Infinera USA. Therefore, the applicant claims that the activities carries out by him cannot be held to ease out, make convenient, arrange or facilitate the supply of any goods and/or services between Infinera USA and its prospective customer and hence this requirement under the definition of intermediary is also not satisfied. k. The applicant states that he always provided pre-sale and marketing support services as well as software services on his own account and all activities are carried out by the applicant on a Principal-to-Principal basis with respect to Infinera USA. The agreement also treats specifically the applicant and the Infinera USA as Principals. In addition, the applicant receives consideration on cost plus basis and not related to the sales figures of the products. Hence it is reasonable evident that the activities performed by the applicant are in the nature of marketing services performed on its own account and not as an intermediary. Therefore the third requirement contained in the definition is also not satisfied by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch and provides information of business concern to Infinera USA. Thereafter, Infinera USA team gets in touch with the prospective customers and carries out host of activities, which inter-alia includes the following- i. Requirement analysis: The telecommunication equipments sold by Infinera USA are highly techn010U oriented and involve assessment of the exact requirements of the customer and suggesting products as per customer s needs ii. Request for Proposal (RFP): As a next step, customers request for proposals from various suppliers, Infinera USA takes part in the bidding process. iii. Supply of networking equipments: In a scenario the customers select Infinera USA s product to be supplied, Infinera USA would supply the goods to customers in India directly. iv. Installation: The goods supplied would require installation by technical experts v. Integration: The networking equipments would also require to be integrated to be fully operational and work as intended. As can be seen from the above, all the aforementioned activities require specialized knowledge, which is available with Infinera USA team. The applicant is involved merel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ediary. (i) He must be a broker or an agent or any other person by whatever name called , who arranges or facilitates the supply of goods or services or both or securities . (ii) The supply arranged or facilitated must be between two or more persons. (iii) He is not the person who supplies such goods or services or securities on his own account. (b) The applicant has strenuously attempted to draw reference to the characteristics of a broker and a commission agent to conclude that an intermediary has to meet the tests of a broker and a commission agent. The terms broker and agent are fundamentally different, a broker being a middleman whose job is to act as the meeting point between two or more people whereas an agent acts on behalf of the Principal, yet these terms have been used together in the definition of an intermediary. This shows that a person can be far away from being an agent or a broker and yet qualify to be considered as an intermediary. This view is amply supported by the definition itself which stipulates that an intermediary would not only be a person who is a broker or an agent but also any other person, by whatever name called . The us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid general understanding of the said terms to the instant case. The Statement of Work, Attachment A to the Pre-Sales and Marketing Agreement delineates the Project Scope as comprising of activities of (1) assisting Infinera through the coordination of sales promotion and advertising for its products in India, (2) conduct market research and keep Infinera advised and informed regarding all matters within India, which may be of reasonable business interest or concern to India and (3) provide informational, educational and service programs in India, as may be requested by Infinera from time to time. We also take note of the provisions of Para 4.3 of the Pre-Sales and Marketing Agreement. It provides that In the event any member of IIPL s staff is required to travel to Infinera s or a customer s work place whether it be to finalise specifications, for training, to hand-over files or otherwise, then in addition to the consideration specified above, Infinera shall be liable to pay IIPL for the following expenses . (e) In Para 15.2 and 15.3 of their application it is stated by the applicant that the pre-sales marketing agreement is with respect to optical networking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to time. Applicant would also advise GoDaddy US regarding upcoming events, festivals, holidays in India and accordingly the suitable timing for rolling our campaigns or advertisements in India (either in various social media or by way of dispatch of personal emails to GoDaddy US existing customers in India). The content of advertisement would be prepared by the marketing team of GoDaddy US itself. Also, such advertisement would be directly placed on social media by GoDaddy US. The necessary advice in this regard and said information 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 advertisement with Indian advertisement companies. Towards this, the applicant would provide information, advice and support to the marketing team of GoDad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 oversight of the quality of services rendered by the call centre and prepare a report, if desired by GoDaddy US, regarding the nature of complaints received by the call centre from customers in India so that GoDaddy could better appreciate the technical issues and provide long term solutions to customers. (c) Payment processing services : GoDaddy US will provide its services and products to customers in India through its website. To ensure maximum reach to the customer base in India and enable customers 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 direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iary. (b) In case of services related to Supervision of quality of third party customer care center services the call centres were directly appointed by GoDaddy US and the role of GoDaddy India was to carry out inspection to check the quality. GoDaddy India themselves carried out this activity and no third party was involved. Therefore they cannot be considered as an intermediary. (c) The payment processing services also clearly bring out that GoDaddy India did not qualify to be an intermediary. (d) Close examination of the nature of services rendered by GoDaddy India indicates that their role was purely of advisory in nature and the other entities in India were appointed and dealt with directly by GoDaddy US and GoDaddy India had no role in the matter. However the services rendered by the applicant are different in nature as compared to the GoDaddy India case in as much as the applicant acts as a facilitator to the entity located abroad, played the role of an interface between the customers in India and the principals located abroad. ln the case of GoDaddy India there was no third person with whom GoDaddy interacted in the taxable territory. In the instant case the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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