2018 (11) TMI 959 - AAR - GST

Supply of Services - supply of Business Support Service' comprising of 'Back Office Support' and Accounting' which is its Principle Supply - intermediary services - Composite supply - zero rated supply - section 16 of IGST Act - export of services - supplier of service located in India - establishment of Distinct person - POPOS Rules. Held that - Admittedly appellant is to provide back office support services, payroll processing, to maintain records of employee to overseas companies i.e. clients and after finalization of purchase / sale between the client and its customer. As per the legal understanding of the applicant aforesaid services proposed to be rendered qualify as 'Zero rated supply' in term of section 16 of the IGST Act. In order to have seal of approval on the issue, the present application is made and applicant has requested this authority to decide the issue. Applicant as a person who arranges or facilitate supply of goods or services or both between the overseas client and customers of the overseas client, and therefore applicant is clearly covered and falls in the definition of an intermediary as defined under the IGST Act. As the applicant is held as Intermediary the provisions pertaining to place of supply in case of intermediary services as provided in 8 of section 13 are relevant - the place of supply in case of services provided by the applicant being intermediary would be the location of the supplier of services i.e. the location of the applicant which is located in the state of Maharashtra, India. 'To qualify transaction of supply of services as export of services that transaction has to satisfy all five ingredients of the definition of export of services simultaneously. In the present case, the condition at (iii) of the above definition is not satisfied and hence without examining and getting into the contention of the jurisdictional officer with regards to condition at (v) of the said definition as to distinct person which would require more specific and detailed examination and verification on their part to get correct factual position in this regard, the services proposed to be rendered by the applicant do not qualify as 'export of services' as defined u/s.2(6) and thus not a 'zero rated supply' as per sec.16(I) of the IGST Act, 2017. The facts of the present case are different and not similar to facts of M/S GODADDY INDIA WEB SERVICES PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX, DELHI-IV 2016 (3) TMI 355 - AUTHORITY FOR ADVANCE RULINGS - In case of GoDaddy the provision of support services was admittedly on principal to principal basis and were provided with sole intention of promoting the brand GoDaddy US in India for augmenting its business - In the present case, the activities undertaken by the applicant are for and on behalf of clients to facilitate supply of goods and services between the clients their customers. Ruling - The aforesaid services as proposed to be rendered do not qualify as Zero Rated Supply in terms Of Section 16 of the intergated Goods Service Tax Act, 2017.

Summary

Issues Involved:
1. Whether the services proposed to be rendered by the applicant qualify as 'Zero Rated Supply' under Section 16 of the Integrated Goods and Services Tax Act, 2017.
2. Whether the applicant is considered an 'intermediary' under the IGST Act.
3. Determination of the place of supply of services.

Detailed Analysis:

1. Whether the services proposed to be rendered by the applicant qualify as 'Zero Rated Supply' under Section 16 of the Integrated Goods and Services Tax Act, 2017:
The applicant, Vservglobal Private Limited, sought an advance ruling to determine if their back-office support services qualify as 'Zero Rated Supply' under Section 16 of the IGST Act, 2017. The applicant contended that their services satisfy all conditions for 'Export of Services' as defined in Section 2(6) of the IGST Act, which includes:
- The supplier of service is located in India.
- The recipient of service is located outside India.
- The place of supply of service is outside India.
- Payment for such service is received in convertible foreign exchange.
- The supplier and recipient are not merely establishments of a distinct person.

2. Whether the applicant is considered an 'intermediary' under the IGST Act:
The applicant argued that they are not intermediaries but provide services on a principal-to-principal basis. They referenced the definition of 'intermediary' under Section 2(13) of the IGST Act, which excludes persons supplying goods or services on their own account. The applicant cited the case of GoDaddy India Web Services Pvt Ltd, where similar services were ruled not to be intermediary services.

3. Determination of the place of supply of services:
The jurisdictional officer argued that the application is not maintainable as it pertains to 'place of supply,' which is not covered under the questions that can be sought for advance ruling as per Section 97(2) of the CGST Act. The officer further contended that the services provided by the applicant are not 'export of services' as the place of supply is within India, given that the recipient's fixed establishment is in India.

Observations and Ruling:
The Authority for Advance Ruling (AAR) examined the service agreement and concluded that the applicant facilitates the supply of goods or services between the client and its customers, thus falling under the definition of 'intermediary' as per Section 2(13) of the IGST Act. Consequently, the place of supply for intermediary services is the location of the supplier, which is in India, as per Section 13(8) of the IGST Act.

Since the place of supply is in India, the services do not qualify as 'export of services' under Section 2(6) of the IGST Act. Therefore, the services cannot be considered 'Zero Rated Supply' under Section 16 of the IGST Act.

Order:
The AAR ruled that the services proposed to be rendered by the applicant do not qualify as 'Zero Rated Supply' in terms of Section 16 of the IGST Act, 2017. The application was answered in the negative.