2019 (10) TMI 788 - AAR - GST

Classification of services - in the nature of employment or independent service or intermediary service - applicant is required to make presentation of products of the company to the prospective clients of the company. The applicant reports to the Sales Manager of the company. HELD THAT - In the instant case, the applicant is making presentation before the prospective clients and facilitates the supply of goods by the company for whom he is providing services and he does not supply such goods on his own account and hence squarely falls under the category of intermediary as per section 2(13) of the IGST Act, 2017. Since the word intermediary is not defined in the CGST Act but defined in the IGST Act, the same meaning as assigned to it under the IGST Act would be applicable even under the CGST Act, 2017 - the applicant is providing management services in marketing as an intermediary with a HSN Code of 9983 11. The nature of service rendered by the applicant, if it is an intra-State transaction, falls under clause (ii) of entry no. 21 of the Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 and hence is liable to tax at 9% under the CGST Act. Similarly it is also liable to tax under Karnataka Goods and Services Tax Act 2017 at 9% as per clause (ii) of entry no. 21 of the Notification (11/2017) No. FD 48 CSL 2017 dated 29.06.2017. But if it is an inter-State transaction, it would be liable to tax at 18% under clause (ii) of entry no. 21 of the Notification No. 8/2017 -Integrated Tax (Rate) dated 28.06.2017. Time of supply in relation to the transaction - HELD THAT - The time of supply would have to be determined as per the provisions of sub-section (2) of section 13 of the CGST Act, 2017. Regarding the value of the supply of services, the amount received by the applicant in relation to the services provided both directly and indirectly would be the value of supply of services. This would also include the amount of consideration reimbursed by the company to the applicant in the form of expenses incurred by the applicant, which will also form the consideration.

Summary

Issues Involved:
1. Whether the services provided by the applicant amount to a supply of services.
2. Classification of the services rendered by the applicant.
3. Requirement for the applicant to be registered under the CGST Act, 2017.
4. Liability of the applicant to pay tax on the services rendered.
5. Time and value of the supply of services rendered by the applicant.

Issue-wise Detailed Analysis:

1. Supply of Services:
The applicant, employed as an "Independent Regional Sales Manager" for the Middle East and Indian Markets by an overseas company, sought clarification on whether his services amount to a supply of services. The applicant argued that his services should be classified under Entry 1 of Schedule III of the CGST Act, 2017, as they are provided in the course of employment. However, the authority found that the applicant is not an employee but an independent service provider, as evidenced by the income declared under "Income from Business or Profession" and the lack of a formal employment agreement. Thus, the services provided by the applicant to the company are considered a supply of services.

2. Classification of Services:
The nature of the applicant's work involves making presentations and facilitating the supply of goods by the company to prospective clients, without concluding contracts himself. This activity classifies the applicant as an "intermediary" under Section 2(13) of the IGST Act, 2017, which defines an intermediary as a person who arranges or facilitates the supply of goods or services between two or more persons. Consequently, the services provided by the applicant are classified under HSN 9983.11 as "Other professional, technical and business services."

3. Requirement for Registration:
The applicant is required to be registered under the CGST Act, 2017, as he provides taxable services and the consideration received exceeds the threshold limit. The authority emphasized that the services rendered fall under the taxable category, necessitating registration.

4. Liability to Pay Tax:
The tax liability for the services provided by the applicant is determined based on the nature of the supply:
- For intra-State supply, the tax rate is 9% under the CGST Act and 9% under the KGST Act.
- For inter-State supply, the tax rate is 18% under the IGST Act.

5. Time and Value of Supply:
The time of supply is determined according to sub-section (2) of section 13 of the CGST Act, 2017. The value of the supply includes the amount received by the applicant for the services provided and any reimbursements for expenses incurred during the provision of these services.

Ruling:
1. The services provided by the applicant to the company result in the supply of services within the meaning of that term.
2. The services are classified under HSN 9983.11 as "Other professional, technical and business services."
3. The applicant is required to be registered under the CGST Act, 2017.
4. The applicable tax rates are:
- Intra-State supply: 9% CGST and 9% KGST.
- Inter-State supply: 18% IGST.
5. The time of supply is determined as per section 13(2) of the CGST Act, 2017, and the value of supply includes the amounts received and reimbursed for expenses.