2018 (12) TMI 1006 - AAR - GST

Levy of GST - marketing, promotion and distribution services provided by Sabre India to Sabre APAC - export of service - Section 2(6) of the Integrated Goods and Service Tax Act 2017 read With CGST Act - place of supply of services - distinct person - Composite supply - intermediary services - Held that - Applicant are on the lookout for potential subscribers who are willing to use the CRS software in their business. It is also important to note that these potential subscribers also require such software for use in their business and require the help/ assistance of the applicant to reach out to Sabre APAC to obtain the said software. Admittedly, the Applicant also undertakes sales promotion and marketing support activities to advance the business of Sabre APAC in India by way of giving marketing support services which includes activities such as PR, promotions, sponsorship, special events and trade shows, as well as any other services necessary to perform its obligations under the Marketing Agreement and to make the CRS Software the reservation system of choice for subscribers and to strengthen the subscribers trust in the brand Sabre so as to augment Sabre APACs business in India. Whether or not the applicant is providing Intermediary Services? - Held that - If the services provided are Intermediary Services then as per the GST Laws the applicant will be liable to tax. An intermediary can be a broker, an agent or any other person and either facilitates the supply of goods and/or services between two or more persons and who cannot change the nature of supply as provided by the principal - the applicant is covered by the said definition of an intermediary because they are definitely acting as a broker/ agent, etc and facilitating the process for sale of CRS Software belonging to their foreign parent company, to the Indian subscribers because they identify such subscribers on their own in India. It is the sales team of the Applicant which approaches potential subscribers in India to whom they explain the features of the CRS Software and the flexibility of said software to integrate with the potential subscriber s system for smooth functioning. Once the applicant gets a positive response from the subscriber, they scan the credentials and the business potential of the subscriber to whom it is proposed to market the CRS Software. The applicant is not providing services on their own account but on account of Sabre APAC, and thus it is very apparent that the applicant is providing Intermediary Services in the instant case - Since the applicant, being the supplier of service is located in India and the recipient of Service i.e. supplier of goods is located outside India, Section 13 of the IGST Act, 2017 would be applicable to determine the place of service - Since the place of supply of services in the instant case is in taxable territory, the said intermediary services cannot be treated as export of services under the provisions of the GST laws. As per intra-state provisions contained in Section 8(2), the said provisions are subject to the provisions of section 12 of the IGST Act. As per section 12, the provisions of section 12 would be applicable only for determining the place of supply of service where the location of supplier of services and the location of recipient of the services is in India. When recipient is located outside India the said provisions of section 12 cannot be made applicable and since provisions of section 8(2) are inter-linked with provisions of section 12, the same cannot be made applicable in case the recipient of service is located outside India. Ruling - The marketing, promotion and distribution services provided by the applicant to Sabre APAC would be subject to tax under the provisions of the GST Act.

Summary

Issues Involved:
1. Whether the services provided by the applicant qualify as "export of services" under Section 2(6) of the IGST Act.
2. Whether the services rendered by the applicant fall under the category of "intermediary services" as per Section 2(13) of the IGST Act.
3. Whether the services provided by the applicant can be classified as "composite supply" under Section 2(30) of the CGST Act.

Issue-wise Detailed Analysis:

1. Qualification as Export of Services:
The applicant, Sabre Travel Network India Pvt Ltd, sought to determine if their marketing, promotion, and distribution services to Sabre APAC qualify as export of services under Section 2(6) of the IGST Act. The applicant contended that:
- The supplier of service (Sabre India) is located in India.
- The recipient of service (Sabre APAC) is located outside India.
- The place of supply of service is outside India.
- Payment for such service is received in convertible foreign exchange.
- The supplier and recipient are not merely establishments of a distinct person as per Explanation 1 in Section 8 of the IGST Act.

The applicant argued that their services meet all the conditions for export of services, thus qualifying for zero-rated supplies under Section 16 of the IGST Act. They emphasized that the services are provided on a principal-to-principal basis and not as an intermediary.

2. Classification as Intermediary Services:
The applicant argued that their services do not fall under the definition of "intermediary services" as per Section 2(13) of the IGST Act. They contended that:
- The Marketing Agreement does not create a partnership or agency relationship between Sabre India and Sabre APAC.
- The applicant provides services on their own account and not on behalf of Sabre APAC.
- The services provided by the applicant are standalone activities such as market survey, advising on marketing strategies, and conducting promotional activities.

The applicant referred to various legal precedents and the CBEC Education Guide to support their claim that they are not intermediaries. They emphasized that they do not facilitate or arrange the supply of goods or services between Sabre APAC and its customers.

3. Classification as Composite Supply:
The applicant argued that the services provided under the Marketing Agreement constitute a "composite supply" as defined under Section 2(30) of the CGST Act. They contended that:
- The services provided are naturally bundled and supplied in conjunction with each other.
- The principal supply is the marketing and promotion services, with other services being supplementary.

The applicant emphasized that they issue a single consolidated monthly invoice for the entire bundle of services, further supporting the classification as a composite supply.

Authority's Findings:
The Authority for Advance Ruling (AAR) examined whether the services provided by the applicant qualify as intermediary services. They found that:
- The applicant acts as a broker/agent facilitating the sale of CRS Software belonging to Sabre APAC to Indian subscribers.
- The applicant's role includes identifying potential subscribers, explaining the software features, and assisting in the activation process.
- The applicant does not supply the CRS Software on their own account but acts as an intermediary between Sabre APAC and the subscribers.

The AAR concluded that the applicant's services fall under the definition of intermediary services as per Section 2(13) of the IGST Act. Consequently, the place of supply of intermediary services is the location of the supplier (Sabre India), making the services taxable under the GST Act. The services do not qualify as export of services since the place of supply is within India.

Final Ruling:
The AAR ruled that the marketing, promotion, and distribution services provided by the applicant to Sabre APAC are subject to tax under the provisions of the GST Act and do not qualify as export of services.