TMI Blog2020 (8) TMI 523X X X X Extracts X X X X X X X X Extracts X X X X ..... ird-party supplier invoices to the client who shall provide the appellant the funds for disbursement to the third-party suppliers. Therefore, in the case of the RSA, the Appellant acts as an agent for the purpose of making payments to the third-party suppliers on behalf of the client. It is evident that in the case of the RSA, the appellant is acting only as a payment agent of the client for the supplies rendered by the third-party suppliers. The supplies are made by the third-party service providers directly to the client. The recipient of the service in this case is the client but the payment for the same is made by the appellant to the third-party service provider on behalf of the client. The question of the appellant providing any service in this case does not arise. In the case of the SOW, the appellant is receiving the services from the third-party service provider and in turn billing the client for the service which he has facilitated. The pre-requisite of a composite supply or a mixed supply is that there should be two or more taxable supplies provided together. When there is no supply or only one taxable supply being provided, the question of determining whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee requirement shows that there is no natural bundling of services in this case. The bundling of services is a construct of the appellant s business model to which there is a commercial expediency. The same does not fall within the ambit of a composite supply . The package of bundled services supplied by the appellant for a single price in terms of the RSA and SOW, is a mixed supply in terms of Section 2(74) of the CGST Act, 2017 and the taxability of the mixed supply will be determined in terms of Section 8 (b) of the said Act - The a la carte services provided by the appellant, relating to employee relocation is neither a composite supply nor a mixed supply - the observations made by the Lower Authority in the impugned order to the effect that the service provided by the appellant is covered under the definition of intermediary is expunged as being beyond the mandate of the Authority in the instant case. AAR ruling modified. - KAR/AAAR-14-C/2019-20 - - - Dated:- 9-2-2020 - SHRI. D.P. NAGENDRA KUMAR, AND SHRI. M.S. SRIKAR, MEMBER Represented by : Shri. Harish Bindumadhavan, Advocate Commissioner of Central Tax, Bangalore North Commissionerate. PROCEEDINGS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnished. 5. The following diagrammatic representation of the RSA agreement indicates the overall chain of transactions between the parties involved. 6. The Statement of Work (SOW)dated 28th December, 2009 entered between the Appellant and a client 2, in reference to the Master Service Agreement was also furnished. 7. A brief description of the typical services/ activities supplied by the Appellant to its clients under the SOW is listed below: S.No. Activities Role of the Appellant 1 Policy Counselling and Expense Administration Documentation, coordination and administration of client processes, policies and procedures, explanation to Employee of relocation benefits according to client s relocation policy, discussion and resolution of exception requests. Hiring, management and authorization of Third-Party Vendors for services including in this Agreement. Expense administration will include the audit, tracking and/or payment of Employee expenses incurred through the Employee s arrival in the destination location (excluding tax payments). Cartus wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se Novation. Negotiation of change of name (landlord or tenant) and coordination of all signatures required. C. Settling-In Services 1) Settling-In Complete. Provides welcome kit review, neighborhood familiarization, commuting advice and planning, shopping, dining, exercise facilities, entertainment options, medical facilities, domestic help assistance in hiring, currency exchange information, groups and activities discussion, assistance with utility hookup, bank account set up, local registration, six month information line available during business hours, and assistance with the completion of driver s license forms and scheduling of driving lessons and exams.* *Available as part of setting-in services in some countries 2) Settling-In Assisted. Provides welcome kit review, commuting advice, and information on: shopping, dining, exercise, entertainment, medical facilities, currency exchange, group activities, local registration, bank and utility set up. D. School Finding Assistance 1) Education Complete. Provides information and schooling options, scheduling of visits to potential schools, assistance with enrollment p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service provided by the applicant would constitute as a composite supply or a mixed supply for the purpose of taxability under GST? 11. The AAR vide its order dated 27 September 2019 gave the following ruling: 1. The services supplied by the applicant do not constitute a composite supply and would be a mixed supply, when the services are billed for a single price in case where the relocation related services are actually provided by them. 2. The services provided to the company as an agent are management support services of relocation related services which is a single service covered under SAC 9985 and is covered under entry 23(ii) of Notification No 11/2017-Central Tax (Rate) dated 28.06.2017. 12. Aggrieved by the said ruling, the appellant has filed this appeal on the following grounds. 12.1 The entire gamut of services discussed in the RSA involves provision of Relocation Management Service wherein an element of provision of one service is combined with an element of provision of another service. In this regard, the Appellant submitted that for a service to qualify as a composite supply in terms of the definition under Section 2 (30) of the CGST Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion, whether an activity or service is rendered in the ordinary course of business or not is for the tax payer to answer and the department cannot assume the role of a businessman for determining the reasonableness of a business operation. They relied on the following judicial decisions in support of this defense: a. Commissioner of Income Tax v. Walchand Co. Private Limited [1976] 65 ITR 381 (SC) = 1967 (3) TMI 2 - SUPREME COURT b. Commissioner of Income Tax v. Dalmia Cements [2002] 254 ITR 377 = 2001 (9) TMI 48 - DELHI HIGH COURT c. Mysore Fertiliser Co v. Commissioner of Income Tax [1956] 30 ITR 734 (Madras) = 1956 (8) TMI 68 - MADRAS HIGH COURT They submitted that the components of different services provided by the Appellant are combined and connected with each other for rendering the Relocation Management Service. The construction of Appellant s business is such that the management of these services constitute a single supply of service that is offered and marketed to the clients. 12.5. The Appellant placed reliance on the Taxation of Services, an Education Guide 2012, dated 20 June 2012 (hereinafter referred to as Education Guide ) issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder a single classification, which provides the most specific description to all the different elements of said service. 12.8. The Appellant submitted that they offer the Relocation Management Service under different combination of service packages offers. The services provided under a particular package that fits the needs of the employee/s most, is availed by the Appellant s client; that in case of a typical relocation program, a client would opt for policy counselling, global departure service, immigration service, accommodation service, transport service, settling in services etc. In addition, a client may also opt for other services viz. spousal employment assistance, school search service, language translation service, furniture rental service etc. Thus, these services in toto form the Relocation Management Service. Therefore, the intent of the service is Relocation Management Service and not availment of individual services. 12.9. In view of the above understanding, they submitted that the constitution of Relocation Management Service qualifies as the principal supply and the other gamut of services qualify as ancillary supplies provided in ordinary course of busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) Testeels Ltd. v. N.M. Desai and Anr. AIR 1970 Guj. 1 = 1966 (4) TMI 74 - GUJARAT HIGH COURT c) Excel India Pvt. Ltd v. Commissioner of Service Tax, Bangalore 2007 (7) S.T.R.542 (Tri.-Bang) = 2007 (2) TMI 100 - CESTAT, BANGALORE 12.11. The Appellant further submitted that under a mixed supply arrangement, each of the supplies can be supplied separately as the same are not dependent on each other. Further, the identification of the principal supply, which gives the essential character to such bundle, is not possible. The mixed supply is a single supply formed with an aggregation of separately identifiable parts, where these parts are not integral or incidental to a dominant supply. However, they submitted that, in the given case, the Appellant is not engaged in rendering of individual and independent supplies of services to its clients. Rather, the services discernable as independent in the RSA/SOW are available as a part and parcel of the programs offered under the Relocation Management Service. Further, the Appellant s nature of business is of assisting clients in relocation of employees. To fulfil the same, a host of ancillary services are provided, i.e. ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y by the Appellant for someone else, the test of intermediary is not satisfied in the present case. PERSONAL HEARING 13. The appellant was called for a personal hearing on 10th Jan 2020 but the same was postponed to 31st Jan 2020 on their request. The appellant was represented by Shri. Harish Bindumadhavan, Advocate who reiterated the submissions made in the grounds of appeal. He emphasised that the Appellant provides two types of relocation services to their clients viz. (a) a la carte services- where the client chooses the services required, and (b) bundled services - where a few services are provided as a single package for a single price in the course of business; that these bundled services are a composite supply appropriately classifiable as support services under HSN 9985. As regards the reference in the RSA to the Appellant being an agent of the client, he submitted that the agency scope in the agreement is only with respect to the payments made and not to be construed in the literal meaning of the term agent : that the lower Authority has ventured into giving a finding on an aspect of their transaction which was not part of the ruling which they ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rams Pre-decision orientation Global Transportation Coordination Post settling-in support Destination Services Inbound/Outbound which include: - Pre-assignment visit/Orientation tour - Arrival assistance - Temporary Housing assistance - Home finding program - School search program - Settling-in services/Host country formalities - Web based destination services Post property support Stored value card Lease cancellations Global Home Marketing Assistance Spousal Employment Assistance Other Auxiliary services which include: - Notary services - Language translation - Document translation - Banking for overseas employees - Furniture rental - Security services Travel coordination Pre-decision/candidate services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ol Finding Assistance, Leasehold Assistance, Settling in Services) 16. Under both the above agreements, the appellant is responsible for providing or procuring services which are necessary to complete an employees relocation. The services to be performed by the Appellant may be performed by telephone as well as in person or may be provided by third party service providers. 17. The role of the appellant in so far as third-party service providers are concerned is different in terms of the RSA and the SOW. As per the RSA, the client shall enter into service agreements directly with third-party suppliers providing services within the scope of the agreement. However, the third-party suppliers will address/issue their invoices to the client in the name of the client, but mail the invoices to the appellant for payment processing. The appellant shall forward the third-party supplier invoices to the client who shall provide the appellant the funds for disbursement to the third-party suppliers. Therefore, in the case of the RSA, the Appellant acts as an agent for the purpose of making payments to the third-party suppliers on behalf of the client. However, as per the SOW ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engages a third -party service provider to provide the service to the client, either of the following methods are adopted: The third-party service provider enters into an agreement with the client and bills the client directly for the service but receives the payment from the appellant who acts as a payment agent of the client. In this case, the appellant is not providing any service to the client but only acting as a payment agent for the services supplied by the third-party service provider directly to the client; or The appellant enters into service agreements directly with the third-party service providers. The third-party service providers will bill the appellant for the service provided. The appellant in turn will bill the client a service fee (fixed rate as per the agreement) for the relocation service which has been facilitated by them through the third-party service provider as well as Direct Expenses which includes third-party payments/third-party supplier costs. In this case, the appellant is providing only a single service to the client which is facilitating the relocation service by the third-party service provider. 19. In view of the above, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or more goods or services or both is a composite supply or not should be guided by the provisions of the GST law. The relevant provisions on the CGST Act are reproduced below: Section 8. The tax liability on a composite or a mixed supply shall be determined in the following manner, namely: - (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply,. and (b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax. Section 2(30) of the CGST Act, 2017 defines composite supply as follows: composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply; Illustration . - Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relocation. 23. As regards the packages which the appellant offers, it is seen that the package is a bundle of services put together by the appellant as per his business model. What is bundled and put together by the appellant as part of his business model cannot be termed as naturally bundled . However, unlike the a la carte services, in the case of a package, there is a single rate which is charged for all the services which form a part of the package. As per Section 2(74) of the CGST Act, a mixed supply is a combination of a taxable services which is supplied for a single price. In the instant case, the package advertised by the appellate has a combination of certain basic services like Policy Counseling, home search, settling in, temporary living and travel coordination, together with immigration, car, school added to the package. The entire combination of services is charged to a single price. Therefore, such packages of bundled services is a mixed supply in terms of GST law and is to be taxed accordingly. 24. The appellant has argued that the dominant intention is to provide relocation service for which purpose various services are rendered and that all the services s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was beyond the scope of the issue before them. We therefore set aside this part of the advance ruling and hold that the same has been given beyond the scope of the question which was placed before the Authority for consideration. 27. In view of the above discussion, we pass the following order ORDER We modify the Advance Ruling Order No KAR/ADRG 92/2019 dated 27th Sept 2019 = 2019 (10) TMI 1135 - AUTHORITY FOR ADVANCE RULING, KARNATAKA as follows: The package of bundled services supplied by the appellant for a single price in terms of the RSA and SOW, is a mixed supply in terms of Section 2(74) of the CGST Act, 2017 and the taxability of the mixed supply will be determined in terms of Section 8 (b) of the said Act. The a la carte services provided by the appellant, relating to employee relocation is neither a composite supply nor a mixed supply in view of our discussions above. The observations made by the Lower Authority in the impugned order to the effect that the service provided by the appellant is covered under the definition of intermediary is expunged as being beyond the mandate of the Authority in the instant case. We make it clea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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