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2020 (1) TMI 1125 - AAAR - GST100% EOU - Levy of GST - intermediary services or not - software development services for the products developed by Infinera Corporation - HELD THAT - There does not seem to be any difference between the meaning of the term intermediary under the GST regime and pre-GST regime. In the pre-GST regime, an intermediary referred to a person who facilitates the provision of a main service between two or more person but did not include a person who provided the main service on his account. Similarly, in the GST regime, an intermediary refers to a person who facilitates the supply of goods or services or both between two or more persons but excludes a person who supplies such goods or services or both on his own account. The phrase such goods or services used in the definition of intermediary implies that the person should not be supplying on his risk and reward entirely, the very goods or services whose supply he is arranging or facilitating, In the instant case, the Appellant is facilitating the supply of the products of Infinera US between the Principal in USA and the Principal s customer in India. He is not supplying the products of Infinera on behalf of the Principal. He is only arranging the contact between the Principal and the Principal s customer and the actual supply of the products is done by the Principal directly to the customer. The service of facilitating a supply of goods between the Principal and the customers is provided by the Appellant to the overseas client. The Appellant is not supplying such goods on his own account. The pre-sale and marketing service provided by the Appellant of the products of the overseas client - Infinera US, is in the nature of facilitating the supply of the products of the overseas client and is appropriately classified as an intermediary service as defined under Section 2(13) of the IGST Act. The ruling of Advance Ruling authority upheld.
Issues Involved:
1. Whether the activities carried out by the appellant qualify as "intermediary services" under Section 2(13) of the IGST Act, 2017. 2. Whether the appellant's services are provided on a principal-to-principal basis or as an intermediary. Issue-wise Analysis: 1. Qualification as "Intermediary Services": The core issue is whether the appellant's activities qualify as "intermediary services" under Section 2(13) of the IGST Act, 2017. The definition of "intermediary" 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 appellant argued that their marketing support services are auxiliary and do not involve negotiating prices or concluding contracts. They maintained a principal-to-principal relationship with Infinera USA, receiving compensation on a "cost plus basis." The appellant contended that their activities do not qualify as those of an "agent" or "broker" and should not be classified as intermediary services. The appellate authority examined the appellant's "Pre-Sales and Marketing Services Agreement" and the activities performed under it, such as coordinating sales promotion, conducting market research, and providing informational programs. These activities were deemed to facilitate the supply of goods between Infinera USA and its customers in India, thereby fitting the definition of an intermediary. The authority noted that the appellant acts as a communication and coordination channel between Infinera USA and potential customers in India, which amounts to facilitating the supply of goods. The appellant's role in identifying prospective customers, promoting products, and addressing customer queries were all part of facilitating the supply of products by Infinera USA to customers in India. 2. Principal-to-Principal Basis vs. Intermediary: The appellant argued that their services are provided on a principal-to-principal basis and not as an intermediary. They cited the agreement, which states that they act as independent contractors and do not have the authority to enter into contracts or bind Infinera USA. The authority found that despite the agreement's terms, the appellant's actual activities, as outlined in the Bilateral Advance Pricing Arrangement (BAPA), involved facilitating the supply of goods. The appellant's role in promoting products, gathering customer feedback, and acting as a liaison between Infinera USA and customers in India indicated that they were facilitating the supply of goods, not supplying them on their own account. The authority also distinguished the appellant's case from the GoDaddy India Web Services case, where the services provided were deemed business support services and not intermediary services. The facts in the appellant's case were different, as their activities clearly facilitated the supply of goods between Infinera USA and customers in India. Conclusion: The appellate authority upheld the advance ruling that the appellant's pre-sale and marketing services qualify as intermediary services under Section 2(13) of the IGST Act, 2017. The appeal filed by the appellant was dismissed on all counts.
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