2020 (8) TMI 523 - AAAR - GST

Taxability under GST - Classification of supply - Composite supply or Mixed Supply - gamut of services collectively referred to as Relocation Management Service provided by the applicant - challenge to AAR decision. HELD THAT - The appellant is responsible for providing or procuring services which are necessary to complete an employees relocation. The services to be performed by the Appellant may be performed by telephone as well as in person or may be provided by third party service providers - The role of the appellant in so far as third-party service providers are concerned is different in terms of the RSA and the SOW. As per the RSA, the client shall enter into service agreements directly with third-party suppliers providing services within the scope of the agreement. However, the third-party suppliers will address/issue their invoices to the client in the name of the client, but mail the invoices to the appellant for payment processing. The appellant shall forward the third-party supplier invoices to the client who shall provide the appellant the funds for disbursement to the third-party suppliers. Therefore, in the case of the RSA, the Appellant acts as an agent for the purpose of making payments to the third-party suppliers on behalf of the client. It is evident that in the case of the RSA, the appellant is acting only as a payment agent of the client for the supplies rendered by the third-party suppliers. The supplies are made by the third-party service providers directly to the client. The recipient of the service in this case is the client but the payment for the same is made by the appellant to the third-party service provider on behalf of the client. The question of the appellant providing any service in this case does not arise. In the case of the SOW, the appellant is receiving the services from the third-party service provider and in turn billing the client for the service which he has facilitated. The pre-requisite of a composite supply or a mixed supply is that there should be two or more taxable supplies provided together. When there is no supply or only one taxable supply being provided, the question of determining whether it is a composite supply or mixed supply does not arise - Therefore, it is only with respect to the services provided by the appellant in his capacity as a service provider which are to be considered for determining whether the same is a composite supply or mixed supply. The various services relating to the relocation of an employee are already listed. As already mentioned, each of these listed services are chargeable at a specified rate which is given in the RSA as well as the SOW. In addition, the appellant also provides different packages of bundled services and there is a specific rate for each such package. The client may choose several individual services from the list (called as a la carte services) or may opt for any of the packages. The illustrations given under Section 2(30) definition of composite supply that for a supply to be considered as a composite supply, its constituent supplies should be so integrated with each other that one is not supplied in the ordinary course of business without or independent of the other. In other words, they are naturally bundled. A natural corollary of the above legal provisions and the term naturally bundled used in Section 2(30) would be that the different elements in a composite supply are integral to the overall supply and if one of the elements is removed, the nature of the supply will be affected. There is no such element in the supplies made by the appellant. The a la carte services chosen by the client is based on the requirement of client s employees and various factors viz. employee title, family make up, to/from location, etc. For example, based on the employee requirement, the client may choose only the visa services, global transportation coordination, storage management and destination service inbound whereas in the case of another employee, the client may opt for only global transportation coordination service and storage management service. The determining factor for a composite supply is the fact that they are naturally bundled. In this case, the naturally bundled aspect of the transaction is not present. Undoubtedly the various services provided work towards the common end of relocating the employee. However, it cannot be said that the services are so bundled in the ordinary course of business. Moreover, the fact that the client can choose from the list of services based on the employee requirement shows that there is no natural bundling of services in this case. The bundling of services is a construct of the appellant s business model to which there is a commercial expediency. The same does not fall within the ambit of a composite supply . The package of bundled services supplied by the appellant for a single price in terms of the RSA and SOW, is a mixed supply in terms of Section 2(74) of the CGST Act, 2017 and the taxability of the mixed supply will be determined in terms of Section 8 (b) of the said Act - The a la carte services provided by the appellant, relating to employee relocation is neither a composite supply nor a mixed supply - the observations made by the Lower Authority in the impugned order to the effect that the service provided by the appellant is covered under the definition of intermediary is expunged as being beyond the mandate of the Authority in the instant case. AAR ruling modified.

Summary

Issues Involved:
1. Whether the services provided by the appellant constitute a composite supply or a mixed supply under GST.
2. Consideration of the appellant's role as an intermediary.
3. The validity of the lower authority's order in terms of natural justice.

Issue-wise Detailed Analysis:

1. Composite Supply vs. Mixed Supply:
The appellant, engaged in providing Relocation Management Services, entered into agreements with clients for facilitating employee relocations. The agreements (RSA and SOW) list various services such as policy counseling, temporary living, move management, and more. The appellant offers these services either individually (a la carte) or as bundled packages.

The primary question was whether these services are composite or mixed supplies. The CGST Act defines a composite supply as one where two or more supplies are naturally bundled and supplied together in the ordinary course of business, with one being a principal supply. A mixed supply, on the other hand, consists of two or more individual supplies made together for a single price, which do not constitute a composite supply.

The authority found that the a la carte services chosen by clients based on specific needs are not naturally bundled and hence do not constitute a composite supply. Instead, they are individual taxable supplies. Conversely, the bundled services provided as a single package for a single price are considered mixed supplies as they are not naturally bundled but are combined for commercial expediency.

2. Intermediary Role:
The lower authority had concluded that the appellant's services fit the definition of an "intermediary" under GST laws, which was beyond the scope of the original ruling request. The appellate authority agreed that this determination was not part of the question raised and thus set aside this part of the ruling, emphasizing that the appellant's role should not be classified as an intermediary within the context of the advance ruling application.

3. Natural Justice:
The appellant argued that the lower authority's order violated principles of natural justice by considering only the RSA and not the SOW. The appellate authority rectified this by considering both documents, ensuring a comprehensive evaluation. They concluded that the services provided by the appellant, whether individually or bundled, should be classified based on the specific terms and conditions outlined in both the RSA and SOW.

Conclusion:
The appellate authority modified the lower authority's ruling, determining that:
- The bundled services provided for a single price are mixed supplies under Section 2(74) of the CGST Act, and their taxability will be determined accordingly.
- The a la carte services are neither composite nor mixed supplies.
- The lower authority's observation regarding the appellant being an intermediary was beyond the scope and thus expunged.

The appeal was disposed of on these terms, clarifying the classification and taxability of the services provided by the appellant under the RSA and SOW.