2019 (10) TMI 565 - AAR - GST

Levy of GST - Intermediary services or not - section 2(13) of the IGST Act, 2017 - pre-sales marketing services provided by the applicant - HELD THAT - Identical issue decided in the case of M/S GODADDY INDIA WEB SERVICES PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX, DELHI-IV 2016 (3) TMI 355 - AUTHORITY FOR ADVANCE RULINGS . 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 applicant 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.

Summary

Issues Involved:
1. Whether the activities carried out in India by the applicant qualify as an “intermediary” as defined under Section 2(13) of the IGST Act, 2017.
2. Whether the applicant is subject to the levy of GST.

Issue-wise Detailed Analysis:

1. Determination of Intermediary Status:

The applicant, Infinera India Private Limited, sought an advance ruling on whether their activities in India qualify them as an “intermediary” under Section 2(13) of the IGST Act, 2017. The applicant provided pre-sale marketing services for optical networking equipment developed by Infinera USA. They argued that their activities do not meet the definition of “intermediary” because they do not arrange or facilitate the supply of goods or services between two or more persons and operate on a principal-to-principal basis.

The definition of "intermediary" under Section 2(13) of the IGST Act includes a broker, an agent, or any other person who arranges or facilitates the supply of goods or services between two or more persons but does not include a person who supplies such goods or services on his own account. The applicant contended that they do not act as an agent or broker, do not negotiate prices or contractual terms, and their remuneration is not linked to sales outcomes but is on a cost-plus basis.

The Authority examined whether the applicant's activities fit within the scope of "arranging" or "facilitating" the supply of goods or services. It was found that the applicant's role in conducting market research, following up on customer leads, and making sales presentations created visibility for Infinera USA in the Indian market. This involvement was deemed to facilitate the supply of goods from Infinera USA to customers in India, even though the applicant did not directly supply the goods.

2. Applicability of GST:

The Authority concluded that the applicant's activities do qualify as intermediary services under Section 2(13) of the IGST Act. Consequently, the place of supply for intermediary services is the location of the supplier, as per Section 13(8)(b) of the IGST Act. Since the applicant is located in India, the place of supply is also in India, making the services subject to GST.

The applicant's reliance on previous rulings, such as the GoDaddy India Web Services case, was distinguished on the grounds that GoDaddy India's role was purely advisory, whereas the applicant's activities involved direct interaction with customers in India, forming a triadic relationship essential for intermediary services.

Ruling:

The Authority ruled that the activities carried out by the applicant under the "Pre-sale and Marketing Services Agreement" qualify them as an "intermediary" as defined under Section 2(13) of the IGST Act, 2017. Consequently, these activities are subject to the levy of GST.