2019 (10) TMI 566 - AAR - GST

Classification and nature of supply - Intermediary services or not - Marketing Pre-Sales Technical Support Services provided by the applicant - Section 2(13) of the Integrated Goods and Services Tax Act, 2017 - classification of post sales services - Post- Sales Technical Support Services provided by the applicant - whether classified as Information Technology Support Services falling under HSN Code 998313 or not? HELD THAT - The applicant is performing all the necessary pre-sale co-ordination work so that the parent company can make the supply of the relevant software. Performing the necessary work would amount to amount to facilitation of the supply, And as the applicant is facilitating the supply of goods or services or both by the parent company to other persons, and is not making the supply in its own account, he would be covered under the definition of an intermediary under the clause (13) of section 2 of the Integrated Goods and Services Tax Act, 2017 as far as the supply of marketing and pre-sales technical support services are concerned. The applicant is also of the same view that it would qualify as intermediary - Further, this supply of marketing and pre-sale technical support services is in the nature of selecting a customer, analyzing the requirements of the customers, showcasing the product, convincing of the features of the product which would meet the requirements of the customers, finalization of the product that is required by the customer, and after the order is placed on the overseas parent company, following it with the finalization of documentation and collection of invoice value - all amounts to the provision of Distributive trade services under Heading 996111, the description of which is Services provided for a fee or commission or on contract basis on wholesale trade . This is clear from the reason that the consideration for the above service is fixed as a percentage of the Sales Order Value of the respective customer. Classification of Post-Sales Technical Support Services - HELD THAT - The nature of transaction is providing the persons who have purchased Ansys Software and using it, 24 7 customer support either through e-mail or through telephone or through Web-Support. The contract is between the end customers and the parent company in US and the applicant is providing the services to the end-customers on behalf of the parent company and charging the parent company for the services provided. The consideration is also fixed as a percentage of sales order value for the customer - For the services rendered by the applicant to the end-customer of Ansys US, the recipient of supply of services would be the person who is liable to pay that consideration, and as per the terms of the contract, the parent company makes the payment of consideration to the applicant for the services rendered to the end-customers by the applicant on behalf of the parent company. The services supplied is Information Technology Support Services covered under Service Code 998313 to the end-customer on behalf of the parent company by the applicant and by virtue of the clause (91) of section 2 of the CGST Act, the recipient of such service would be the parent company, as the consideration is receivable from the parent company. The manner of computing the value of supply is not changing the nature of services provided and hence there is no need to discuss the method of valuation of supply.

Summary

Issues Involved:
1. Classification of Marketing & Pre-Sales Technical Support Services.
2. Classification of Post-Sales Technical Support Services.

Issue-wise Detailed Analysis:

1. Classification of Marketing & Pre-Sales Technical Support Services:

The applicant, a private limited company registered under GST, sought an advance ruling on whether their Marketing & Pre-Sales Technical Support Services qualify as “Intermediary services” under Section 2(13) of the IGST Act, 2017. The applicant provides these services to its parent company, Ansys US, for customers in India who place orders directly with Ansys US.

The definition of “Intermediary” under Section 2(13) of the IGST Act, 2017, describes an intermediary as someone who arranges or facilitates the supply of goods or services between two or more persons but does not supply such goods or services on his own account. The applicant argued that their role in understanding customer requirements, showcasing software, coordinating for software license agreements, and following up on invoice collections fits this definition, as they facilitate the supply of software by Ansys US to Indian customers without selling the software themselves.

The Authority for Advance Ruling (AAR) agreed with the applicant’s view, stating that the applicant performs all necessary pre-sale coordination work, amounting to facilitation of supply. Consequently, these services are classified under “Intermediary services” as per Section 2(13) of the IGST Act, 2017. The applicable HSN Code for these services is 996111, under “Services provided for a fee or commission or contract basis on wholesale trade.”

2. Classification of Post-Sales Technical Support Services:

The applicant also sought an advance ruling on whether their Post-Sales Technical Support Services fall under HSN Code 998313. These services involve providing 24*7 customer support for troubleshooting and technical queries related to Ansys Software, which is sold by Ansys US to Indian customers. The applicant provides this support through email, telephone, or web support.

The AAR examined the nature of these services and noted that the applicant provides these services on behalf of Ansys US, with the consideration being a percentage of the sales order value. According to Clause (93) of the CGST Act, the recipient of a supply of services is the person liable to pay the consideration. Since Ansys US pays the applicant for these services, Ansys US is considered the recipient.

The AAR referred to Notification No. 11/2017 and the explanatory notes issued by the Central Board of Indirect Taxes and Customs (CBIC). They concluded that Post-Sales Technical Support Services provided by the applicant fall under HSN Code 998313, which covers “Information Technology (IT) Consulting and Support Services.” This classification includes customer support for using or troubleshooting software, upgrade services, and the provision of patches and updates.

Ruling:

1. The Marketing and Pre-sales Technical Support Services provided by the applicant are classified as Intermediary services under Section 2(13) of the IGST Act, 2017.
2. The Post-Sales Technical Support Services provided by the applicant are classified as Information Technology Support Services under Service Code 998313.