2021 (7) TMI 263 - AAR - GST

Classification of services - services of support services to Airbus SAS which is separately compensated with a service fees computed on a cost-plus markup basis - Intermediary services or business support services? - Zero-Rated Supply or a Normal Supply - relationship of principal and agent - HELD THAT - The applicant is of the opinion that the activities undertaken by them are classifiable under Heading 9983 with description of Other professional, technical and business services . As per the explanatory notes to the scheme of classification of services, heading 998399 offers the same description. This heading includes specialty design services including interior design, design originals, scientific and technical consulting services, original compilation of facts/ information services, translation services, trademark services and drafting services. Intermediary services or not - HELD THAT - The reliance on principal to principal relationship or calling oneself as an independent contractor is not relevant for the purpose of determining an intermediary as per the definition. An intermediary will merely facilitate or arrange the supply of goods or services between two or more people but will not be providing such supplies on his own account. Here, the word, such is of paramount importance. Such goods in the present case are the raw materials supplied by the vendors to Airbus Invest SAS, France - the activities performed by the applicant are fulfilling the parameters mentioned in the definition of Intermediary as per Section 2 (13) of IGST Act, 2017. The activities carried out in India by the Applicant would constitute a supply as Intermediary services classifiable under SAC 998599 - The services rendered by the Applicant do not qualify as export of services in terms of sub-section 2 of Section 6 of the IGST 2017 and consequently, are exigible to GST at the rate of 18% in terms of clause (iii) of entry no. 23 of N/N. 11/2017-Central Tax (R) dated 28.06.2017.

Summary

Issues Involved:
1. Classification of services provided by the applicant.
2. Determination of whether the services qualify as "export of services" and are zero-rated under GST.

Detailed Analysis:

1. Classification of Services:

Applicant's Argument:
- The applicant, a subsidiary of Airbus Invest SAS, provides professional, technical, and business support services to its parent company.
- The applicant contends that these services should be classified under HSN code 9983 as "Other professional, technical and business services."

Authority's Findings:
- The applicant's activities include identifying local suppliers, conducting on-site assessments, monitoring performance, and providing guidance regarding Airbus's product expectations.
- The applicant does not engage in selecting vendors, issuing purchase orders, deciding price quotations, or making payments to vendors.
- The services provided are not covered under HSN 998399, which includes specialty design services, scientific and technical consulting services, and other professional services.
- The definition of "intermediary" under Section 2(13) of the IGST Act, 2017, includes a broker, agent, or any person 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's role in facilitating the supply of goods from vendors to Airbus Invest SAS qualifies as intermediary services.
- The applicant's activities are classified under SAC 998599, which includes business brokerage and appraisal services, business services of intermediaries and brokers, and other business support services not elsewhere classified.
- The applicable GST rate for these services is 18%.

2. Qualification as Export of Services:

Applicant's Argument:
- The applicant claims that the services provided should qualify as "export of services" under Section 2(6) of the IGST Act, 2017, and be zero-rated under Section 16 of the same act.

Authority's Findings:
- The definition of "export of services" requires that the supplier of service is located in India, the recipient of service is located outside India, the place of supply is outside India, payment is received in convertible foreign exchange, and the supplier and recipient are not merely establishments of a distinct person.
- The applicant's services are classified as intermediary services, and the place of supply for intermediary services is determined as the location of the supplier, which is India, as per Section 13(8) of the IGST Act, 2017.
- Consequently, the services provided by the applicant do not qualify as "export of services" and are subject to GST at the rate of 18%.

Ruling:
1. The activities carried out in India by the applicant constitute a supply of "Intermediary services" classifiable under SAC 998599.
2. The services rendered by the applicant do not qualify as "export of services" under Section 2(6) of the IGST Act, 2017, and are subject to GST at the rate of 18%.

Conclusion:
The Authority for Advance Rulings, Karnataka, concluded that the applicant's services are intermediary services and do not qualify as export of services. The services are classified under SAC 998599 and are subject to an 18% GST rate.