TMI Blog2019 (10) TMI 1135X X X X Extracts X X X X X X X X Extracts X X X X ..... ability of paying the consideration is also on the Company and hence the Company is the recipient of service. The supplier of service is the Third Party Service Provider and each of these services may be provided by different Service providers. Hence this cannot be a composite supply, less so in the hands of the applicant - The billing is done as per the Schedule and includes Direct Cost of such service plus Service Fees plus taxes applicable. Each service has a separate service fees and the services are separately classifiable and if such services are billed in a common invoice that does not amount to a naturally bundled supply and hence the same is not a composite supply. Mixed supply or not - HELD THAT:- The transaction of the applicant is verified and in case where the third parties supplies individual services to the company where invoicing is done to the company directly, the same does not come under services supplied by the applicant in relation to such supply. But where the services are actually supplied by the applicant as authorised services by himself to the company, and in case where such multiple services are for a single price, then since such supplies would not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tration/management of relocation of client s employees from one location to another. In this regard, the Applicant enters into relocation service agreements/ statement of work with its clients. Sample agreements denoting the rendition of relocation management service by the Applicant to its clients are provided below: i. Relocation Service Agreement entered between the Applicant and Client 1 executed on 14 November 2011 (hereinafter referred as RSA ) ii. Statement of work entered between the Applicant and Client 2, in reference to the Master Service Agreement executed on 28 December 2009 (hereinafter referred as SOW ) d. The primary objective of the Applicant of rendering Relocation Management Service can be substantiated by referring to the Objective and Scope clause of the SOW, that is reproduced below: Cartus, in its role as a fully outsourced relocation service provider, will manage, administer and facilitate the relocation of Client s employees from one location to another, as directed by Client, Cartus will provide all required support and coordination necessary to complete as employee relocation. e. Currently, for the purposes of GST, the service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iers to provide International Host Country Services as detailed below: A. Home Finding Programs 1) Accompanied Home Finding (By Cartus preferred Local Destination Service provider ( DSP )). Employee is accompanied by DSP providing direct personal support throughout all home search activities. DSP co-ordinates home search activities, negotiates leases, and manage all real estate brokers. B. Leasehold Assistance 1) Lease Coordination and Negotiation, (for Employees who have already found a property). Lease review (if legal review is required the cost will be charged as a Direct Expense), negotiation of lease terms, coordination of all signatures required, property walkthrough and completion of a property condition form. 2) Leasehold Improvements, Assistance with negotiated improvements prior to move-in to property. Coordination of improvements and repairs to the property as required by the employee and approved by the landlord. 3) Lease coordination and Renewal, (For Employees who are extending lease at current location). Lease review (if legal review is required cost will be charged as a Direct Expense), and coordination of all signatures required. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ient from the Applicant is determined basis the requirement of client s employees and various other factors viz. employee title, family makeup, to/from location etc. In this regard, drawing reference from the RSA, the Applicant offers packages under the relocation Management Service, in either of the following ways: a. Bundled program of a single consideration: Under this program, the Applicant offers a multitude of services in a package that are essential for the relocation of an employee and/ or his family to another location. This program is a constitution of different packages that involves various services brought under a bundled form. The said packages offer options to the clients befitting to their specific needs. Therefore, the client opts for the package that is most suitable, for relocating a specific employee (with or without family) to any other location. This program may be referred to as the standard program wherein certain sets of packages have been formed and could be opted with no customizations. It is imperative to note that such services are provided for a single consideration, wherein the separate line-item wise pricing is not identified. An illu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carte), services are performed with an intention of managing the relocation of client s employees. The client selects either of the two programs post evaluating the requirements and related costs for availing a particular program. 4.6 The gamut of services provided under the ambit of Relocation Management Service has been defined and explained in detail in Article 23 of the RSA and Exhibit B of the SOW. 4.7 Under both the agreements in the instant case, the client pays to the Applicant a service fee and also reimburse for any direct cost incurred for providing Relocating Management Service. The said arrangements are elaborated in Article 24 (Fee Schedule) of the RSA and Exhibit A of the SOW. Direct costs typically represents remittances made to third party vendors by the Applicant. 5. Regarding the issue for which advance ruling is sought, the applicant makes the following submissions: A. The entire gamut of services discussed in Annexure A involve provision of Relocation Management Service wherein an element of provision of one service is combined with an element of provision of another service A.1 The taxable event under the Goods and Services Tax laws (hereina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a particular transaction would qualify as composite, However, the concept of composite supply is not novel since it existed under the erstwhile Service tax regime as well. B. Reference to Service tax laws of the erstwhile regime B.1 Section 66F of the Finance Act, 1994 ( Finance Act ), dealt with the principles of interpretation of bundled services. Section 66F. Principles of interpretation of specified descriptions of services or bundled services.- (1) Unless otherwise specified, reference to a service (herein referred to as main service) shall not include reference to a service which is used for providing main service. (2) Where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description. (3) Subject to the provisions of sub-section (2), the taxability of a bundled Service shall be determined in the following manner, namely:- (a) if various elements of such Service are naturally bundled in the ordinary course of business, it shall be treated as provision of the single Service which given such bundle its essential character; (b) if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be treated as naturally bundled in the ordinary course of business. (ii) Majority of service providers in a particular area of business provide similar bundle of service. For example, bundle of catering on board and transport by air is a bundle offered by a majority of airlines. (iii) 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 is 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. For example, service of stay in a hotel is often combined with a service or laundering of 3-4 items of clothing free of cost per day. Such service is an ancillary service to the provision of hotel accommodation and the resultant package would be treated as services naturally bundled in the ordinary course of business. (iv) The other illustrative indicators, not determinative but indicative of bundling of services in ordinary course of business are: There is a single price or the customer pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrase has a very wide meaning, so as to cover any supplies made in connection with a business. B.10 Given the above, it is established that various elements of services that are naturally bundled in ordinary course of business would qualify as a composite supply. Similarly, in the instant case, different services provided by the Applicant to its clients are naturally bundled with each other since the same are inextricable for provisioning of the principal service of relocation management supplied in ordinary course of Applicant s business. B. 11 The term business has been defined under Section 2(17) of the CGST Act and includes: (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or clause of business; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment has to be judged not on the subjective standard of the assessing authorities but from the point of view of commercial expediency, and that in deciding whether remuneration paid to an employee by way of commission constitutes a reasonable expenditure, all the circumstances specifically referred to in the proviso to Section 10(2)(x), judged from the view of a normal prudent businessman, must be taken into account. B.15 In light of the above income tax judicial pronouncements, it is established that the manner of making commercial decisions have to be judged and decided by a businessman. Applying the above principles to the factual matrix of instant case, it is submitted that the components of different services provided by the Applicant are combined and connected with each other for rendering the Relocation Management Service. The construction of Applicant s business is such that the management of these services constitute a single supply of service that is offered and marketed to the clients. The manner adopted by the Applicant for providing the Relocation Management Service has a commercial expediency of the business and the same cannot be refuted by the departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the Relocation Management Service is a single supply for relocating the employees from one location to another. Whereas, the other services viz. visa facilitation, transportation service, home search service, temporary living Service etc. are the incidental and ancillary services supplied as part of the Relocation Management Service. European Union C.6 As per the European Union directive, a composite supply is a transaction where supplies with different VAT treatments are sold together as one. The supplies with a composite supply may consist of parts that, if assessed separately, have different tax rates. Some have standard rates, reduced rates or are exempt from VAT. C.7 In a judicial pronouncement of the European Court of Justice (hereinafter referred to as ECJ ) in Card Protection Plan Ltd v. Commissioners of Customs Excise, European Court Reports 1999 -00973, the ECJ pronounced that a service must be regarded as ancillary to a principal service if it does not constitute for customers an aim in itself, but a means of better enjoying the principal service supplied. C.8 Even in the instant case, the incidental and ancillary services are provided by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a service agreement, where it provided a bundle of services in relation to marketing, branding, offline marketing, oversight of quality of third party customer care center etc. The said services were provided by Godaddy India with a sole intention and principal objective of promoting the brand of Godaddy USA in India. The advance ruling application was submitted, interalia, on whether this gamut of services constituted as a bundled service in terms of Section 66F of the Finance Act. The ruling was pronounced in favour of Godaddy India, wherein the AAR opined that various support services proposed to be provided by Godaddy India to GoDaddy US are a bundle of services being naturally bundled in the ordinary course of business and accordingly is a single service, being business support Service, in terms of Section 66F of the Finance Act. E. Ambit of mixed supply E.1 The term mixed supply defined under Section 2(74) of the CGST Act, means:- two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply E.2 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions. The food product and non-food product were sold in a combined package for the price of the food product alone. The question that came for consideration before the Tribunal was whether GST was applicable on the sale of non-food product sold in the combined package. The Tribunal observed that promotional items packaged with food had intrinsic value, would not be consumed with the food and were mostly unconnected with the food item. The Tribunal found that the supply of the promotional items packaged with the food items was a mixed supply. Hence, in such case, it would not be denoted that the food component was the dominant part of the supply and the promotional item was ancillary or incidental to the supply of the food. E.7 Given the set of facts pertaining to Applicant s business, the above ruling cannot be applied to instant case, since the services provided by the Applicant under the RSA/SOW are inter-connected with each other and cannot be supplied independently. E.8 Therefore, in the given scenario, the gamut of services provided by the Applicant cannot be denoted as independent of each other since the whole set of services are provided with a view to meet a single ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sole responsibility of the applicant to ensure that the services provided under this agreement or any addendum have been performed appropriately, even if such services have been performed by a Service Partner. (f) In Article 3(b), it is made clear by the Company that in connection with any service provided or procured by the applicant pursuant to this agreement, the applicant may refer the Employee to various Service Partners and that the applicant may be entitled to receive a fee from such independent providers of services in connection with any such referral. The Company agrees that any referral fee paid by the person to whom the Employee is referred shall be the property of the applicant and neither the Company nor the Employee shall have any right, title or interest therein or thereto. (g) The applicant agrees to provide or procure relocation management services, but not financial services, from within the legal boundaries of India and to provide relocation management services by placing two of its employees on site at a mutually agreeable Company facility and the Company agrees to provide suitable workspace and facilities to the applicant at no cost to the applicant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ociated with, related to or arising out of the service tax or tax withholding, except to the extent caused by the gross negligence or willful misconduct of the applicant. (k) The Authorised services clause in Article 23 of the agreement reveals that the applicant or its service partners when requested and authorised, the applicant and/or service provider will provide the following services to the company / its employees and the applicant will be responsible for co-ordination and management of service partners and any suppliers selected to assist in providing global services . The applicant in all these cases is co-ordinating the providing of services. The Article 24 gives the Fee Schedules for the above services and involves Service Fees plus Direct Costs. It is further stated that in addition to the Service Fees and Direct Costs (which are exclusive of taxes), the Company will be liable for applicable service taxes, cesses and duties levied by the Government of India, or any other State or local authority within India, in connection with the services rendered under this agreement. The applicant will not charge service tax on reimbursement which are incurred in the capacity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axes applicable. Each service has a separate service fees and the services are separately classifiable and if such services are billed in a common invoice that does not amount to a naturally bundled supply and hence the same is not a composite supply. The mixed supply is defined under clause (74) of section 2 of the CGST Act as under: (74) mixed supply means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. The transaction of the applicant is verified and in case where the third parties supplies individual services to the company where invoicing is done to the company directly, the same does not come under services supplied by the applicant in relation to such supply. But where the services are actually supplied by the applicant as authorised services by himself to the company, and in case where such multiple services are for a single price, then since such supplies would not constitute a composite supply, the same may be categorized as a mixed supply . In all cases, the applicant is facilitating th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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