TMI Blog2019 (10) TMI 787X X X X Extracts X X X X X X X X Extracts X X X X ..... icant is not covered under the exception clause as well. It is pertinent to note the use of words such and this relates to the supply of such goods or services which is facilitated by the applicant and not the services provided by him - It is clear from the above agreement the applicant is providing services to the foreign affiliates as an intermediary - thus, the business services of the intermediaries are covered under the SAC 998599. Whether the services supplied qualifies as export of services and hence zero-rated? - HELD THAT:- The issues involved are verified and found there is no doubt that the applicant, i.e., the supplier of services is located in India, the recipient of service is located outside India and the consideration is received in convertible foreign exchange and also that the applicant and overseas entity are two separate legal entities as per the agreement. The only issue to be decided is whether the place of supply is outside India or not and this is outside the jurisdiction of this authority. Unless this is decided, there is no question of determining whether the transaction is that of export of services or inter-State supply of services. Hence this autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etailed Explanation Identifying potential business and contacts for the sale of products by the company to prospective and existing customer in the territory (Clause (a)) This scope of work provided by the applicant entails activities in the nature of market research and forecasts It entails gathering of data on target market either based on past experience or through specifically targeted research This activity is a pure support activity undertaken to overcome the challenges any business is likely to face in a local market. This would also involve the applicant identifying potential customers who would buy the products of McAfee Singapore. In other words, identify potential business opportunities. Liaising with current and prospective customers of products in the territory by facilitating technical communication between Company and customers and other pre-sale and after-sale customer liaison activities (Clause (b)) This scope of work provided by the applicant entails it acting as a point of contact in India. The activity is limited to acting as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is. The relevant extract from Para 3.2 of the agreement is provided below: In consideration for services described in Exhibit A, Company agrees to pay Provider an amount equal to (a) any and all direct costs and allocable indirect operating overhead and out of pocket costs and expenses attributable to the Services performed by Provider based on US GAAP (Generally Accepted Accounting Principles), but excluding non-operative costs such as currency gains or losses, taxes on income and interest charge in U.S. Dollars and (b) an additional profit amount of ten percent (10%) of such costs and expenses. Payment shall be subject to all applicable governmental regulations including the withholding of any taxes required by law. Hence, the applicant claims that the compensation is independent of any sales volume or value by the service recipient, if any, during the specific period. 4. Regarding the issues on which the advance ruling is sought, the applicant makes the following submissions: 4.1 Part A - Legal submissions in relation to questions raised (a) The services provided by the applicant to McAfee Singapore are covered under HSN 9983 covering Management Services in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s goods or services or both or securities on his own account, which is specifically excluded from the definition. c. While the first two categories are covered under intermediary; the third category is excluded from the intermediary. (c) The applicant is not an agent, broker or any other person Regarding this the applicant states that as evident from the definition, the supplier i.e. intermediary should mean , a broker or an agent or any other person, by whatever name called. It is important to note the use of the word means . It is trite law that the word means in a definition governs the words following and has a restrictive meaning. In the present case an intermediary can mean only a broker, an agent or any other person, by whatever name called. (d) The first two words in the clause are broker or an agent. The words broker and agent have been defined in the Black s Law Dictionary as: Broker An agent employed to make bargains and contracts between other persons, in matters of trade, commerce, or navigation, for a compensation commonly called brokerage. One who represents and acts for another under the contract or relation of age ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... generis with the earlier expressions i.e. municipal corporation, notified area committee, town area committee, town committee. (j) The phrase by any other name and by whatever name called have a proximate purpose in a statute and hence the principle laid down by the P H High Court supra will apply on all squares. (k) Further, the Supreme Court in the case of Commissioner of Income Tax, Udaipur v. Mcdowell Co. Ltd. = 2009 (5) TMI 28 - SUPREME COURT held as follows: 10. It would be pertinent to note that the expression now used in Section 43B (i)(a) is Tax, Duty, Cess or fee or by whatever name called . It denotes that items enumerated constitute species of the same genus and the expression by whatever name called which follows preceding words Tax , Duty , Cess or Fee as a group of its specie belong vis. Compulsory exaction in the exercise of State s power of taxation where levy and collection is duly authorised by law as distinct from amount chargeable on principle as consideration payable under contract. (l) Thus, applying the principle laid down by the Hon ble Supreme Court, supra, and the interpretive rule of Ejusdem Generis, the phrase; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons. The applicant specifically submits that not all facilitating or arranging qualify as an intermediary . The applicant states that the reasons for stating that the second condition is not satisfied are as under: (i) The applicant states that the arrangement between the applicant and McAfee Singapore is on a principal to principal basis. In the present case, the applicant is providing the services on its own account. Therefore there is no arranging or facilitating of provision of service or supply of goods and hence the test of intermediary services is thus not satisfied in the present case. (ii) In addition to defining the nature of person, the nature of supply, the definition of the term intermediary contains an exclusion in as much as any person (including a broker, agent or any other person) who provides the main supply on his own account. In other words, the applicant submits that even if the supplier satisfies the nature of the supplier of service as an agent / broker, if such a person provides the supply on his own account, then such a supply is not covered under the definition of the term intermediary The importance of this condition has been explained in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and the services provided by the applicant does not fall within the ambit of intermediary service. 4.5 The applicant argues that since the definition of intermediary provided under the IGST Act is identical to the definition of intermediary provided under the erstwhile Service Tax law, the guiding principles provided under the erstwhile service tax law for determining whether the person is acting as an intermediary or not would become applicable. These guiding principles are: (a) 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 intermediate 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. (b) 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 for Adv based on an agreed percentage of sale or purchase price. Generally, the amount charged by an agent from his prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d wholly and properly attributed to the provision of services and paid independent of whether any sale is undertaken or not) 7. Consideration is generally an agreed percentage of the sale or purchase price which is called commission Yes Not applicable - there is no consideration paid to the applicant by McAfee Singapore which is dependent on the volume of the sale made by McAfee Singapore i.e. there is no commission Identity and title 8. Service provided on behalf of the principal is clearly identifiable Yes Not applicable - the applicant is not providing any services on behalf of principal, as the marketing services explained in the facts above, are provided by the applicant in its own capacity directly to McAfee Singapore on principal to principal basis and are independent of the sale of products by the McAfee Singapore. 5. The applicant has placed reliance on the following decisions in support of the claims a. The decision of the Advance Ruling Authority under Service Tax Law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the recipient of Services and the location of McAfee Singapore is Singapore, which is a place of supply of services provided by the applicant. 7. Based on the above, the applicant argues that the services provided by him to McAfee Singapore qualifies as Export of Services under the provisions of the IGST Act as it qualifies all the conditions laid down to treat a transaction as export of services under section 2(6) of the IGST Act. The claims are summarized as under: Sl.No. Export Condition Services by the Applicant 1 The supplier of service is located in India The supplier of service, i.e., the applicant is registered in India, hence located in India 2 The recipient of service is located outside India The recipient of service i.e., McAfee Singapore is incorporated outside India, i.e. in Singapore - hence located outside India 3 The place of supply of service is outside India McAfee Singapore has no establishment or branch in India and the service to be rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in has examined the place of supply in the case of accommodation services. The question before the Authority was whether the hotel accommodation and restaurant services provided within the premises of the hotel to the employees and guests of SEZ units should be treated as supply to SEZ Units. 8.2 The applicant states that the Hon ble High Court of Karnataka in its judgement in the case of CST v. Scott-wilson Kirkpatrick [2011 (23) STR 321 (Kar)] = 2011 (4) TMI 500 - KARNATAKA HIGH COURT had interpreted the phrase determination of rate of duty and relying on the decision of the Supreme Court in the case of Navin Chemicals [1993 (68) ELT 3 (SC)] = 1993 (9) TMI 107 - SUPREME COURT had held that the jurisdiction of the High Court does not extend to question relating to : (a) Dispute relating to the service tax payable in any service / taxable service (b) The value of the taxable service for the purposes of assessment (c) A dispute as to the classification of services (d) Whether those services are covered by an exemption notification or not (e) Whether the value of services for the purposes of assessment is required to be increased or decrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST Act would also mean a reference to the same provisions under the KGST Act. 10.1 The transaction of the applicant is verified and found that the applicant supplier of service and the recipient of service are group companies and the applicant has not provided any shareholding pattern of the recipient of service. 10.2 On careful perusal of the application and the adjunct documentary evidences and also the submissions of the applicant and his representative, the following issues emerge: (a) whether the applicant is acting as an intermediary of McAfee Singapore? (b) Whether the services supplied by the applicant to McAfee Singapore is marketing services or intermediary services (c) Whether the services supplied qualifies as export of services and hence zero-rated? 10.3 Regarding the first question, the definition of the intermediary as provided under section 2(13) of the Integrated Goods and Services Tax is examined and the clause reads 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s given for a class of persons, then the principle of ejusdem generis is applicable. But in the definition, it is clear that the word other is used as an adjective to the person and hence it is commonly understood to exclude the other persons who are preceding it and hence the argument of the applicant cannot be accepted. 10.7 The arguments of the applicant have been analysed and it is found that the support he has taken on the various decisions of the advance ruling authorities of the erstwhile service tax regime are all related to the service tax era and has no applicability during the GST regime. Hence the same needs to be verified in light of the GST Act. 10.8 The argument of the applicant that he is receiving the consideration on cost plus basis and not commission and hence he cannot be termed as intermediary is examined and it is seen clearly in the definition that there is no qualification that needs to be satisfied other than arranging or facilitating the supply of goods or services to be called intermediary. The consideration may be based on the turnover of supply made on behalf of the supplier or any other method and this does not have bearing on the nature of sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quipment may be required in order to provide such support activities. Such inventory will be maintained in a manner consistent with levels recommended by Company. Provider will receive samples from Company at no charge. Provider also agrees to acquire demonstration equipment from Company according in accordance with the then current Standard Sales Order Terms and Conditions; (e) Keeping Company advised and informed regarding the above matters in the territory that may be of interest or concern to Company in connection with the carrying on of Company s business; (f) Providing Company with such reports concerning the above matters as may from time to time be reasonably required by Company; and (g) Otherwise assist Company in serving existing and prospective customers. 11.4 The applicant has also provided another agreement called Master Services Agreement entered between the applicant (called Provider) and McAfee Singapore Pte Ltd (called Company) governing the nature of the contract and the same reads as under: 1. Provider s Obligations: 1.1 Provider agrees to provide to Company the Services as described in Exhibit A. In providing services, Provider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tifying potential business and contacts for the sale of the Products by Company to prospective and existing customers in the Territory; (b) Liaising with current and prospective customers of Products in the Territory by facilitating technical communication between the Company and customers and other pre-sale and after-sale customer liaison activities. Investigating customer inquiries received by Company and referred to Company; (c) Advising and assisting in complying with the laws, regulations, business and financial practices in effect in the Territory, including providing assistance in obtaining necessary local licenses, permits and authorizations; (d) Assisting Company in the demonstration of the Products. Provider agrees that a minimum level of samples and demonstration equipment may be required in order to provide such support activities. Such inventory will be maintained in a manner consistent with levels recommended by Company. Provider will receive samples from Company at no charge. Provider also agrees to acquire demonstration equipment from Company according in accordance with the then current Standard Sales Order Terms and Conditions; (e) Keeping Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for copyrights and their revenues (except from films); management services for rights to industrial property (patents, licences, trademarks, franchises, etc.); auctioning services other than in connection with legal procedures; reading of electric, gas and water meters; data preparation services; specialized stenotype services such as court reporting; public stenography services; other business support services not elsewhere classified This service code does not include: - maintenance of electricity, gas and water meters, cf. 996911, 996912, 996921 services related to advertising and sales promotion, cf. 99836 management services for motion picture rights, c/ 999614 art facilities operation services, cf. 999623 management services for artistic rights, cf. 999629 sports events organization services, cf. 999651 From the above, it is clear that the business services of the intermediaries are covered under the SAC 998599. 12. Regarding the question of whether the services provided by the applicant qualifies as export of services, the issues involved are verified and found there is no doubt that the applicant, i.e., the supplier of servic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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