9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (1) TMI 1091 - AAR - GSTClassification of services - services provided by the applicant in the nature of Research on the matter related to functioning of the holding of company - services provided by the applicant in the nature of Information on Market in the territory - service supplied by the Applicant under the Marketing Services Agreement dated 1 December 2012 - export of services - supply of Support services or intermediary services - future transaction - naturally bundled services - Export of services or not - Section 2(6) of the Integrated Goods and Services Tax Act 2017 - Whether the service supplied by the Applicant under the Service Agreement dated 1 March 2013 constitute a supply of Support services falling under HSN code 9985 or Intermediary service classifiable under HSN code 9961/9962? Whether the service supplied by the Applicant under the Service Agreement dated 1 March 2013 constitute a supply of Support services falling under HSN code 9985 Intermediary service classifiable under HSN code 9961 /9962? - Held that - The relationship between the parties is that of independent contractors meaning that the agreement does not intend to create relationship of principal and agent. The applicant shall not represent itself to be agent of party A and vice-versa. Further applicant have no authority to conclude or negotiate any contracts or secure any orders or maintain any stock of goods on behalf of Party A in this case. On the contrary applicant would provide service on own account to party A to improve functioning of holding company and further augment its business vis a vis sale of all products manufactured and or sold or to be manufactured and or sold in India territory. Thus we find that applicant is not a person who arranges or facilitate supply of services between two or more persons - Thus applying the test mentioned in the Education Guide to the facts of the case we can safely conclude that the proposed service would not fall to be classified as intermediary service . Under the GST Act, a composite supply would mean a supply consisting of two or more taxable supplies of goods or services or both or any combination thereof which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply - In respect of supply which consist of more than two taxable supplies and to fall within the ambit of composite supply, it will be necessary for us to determine whether a particular supply is naturally bundled in the ordinary course of business and what constitutes principal supply. Services, naturally bundled or not? - Held that - The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business. If the nature of services is such that one of the services is the main service and the other services combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main service. For example service of stay in a hotel is often combined with a service or laundering of 3-4 items of clothing free of cost per day. Such service is an ancillary service to the provision of hotel accommodation and the resultant package would be treated as services naturally bundled in the ordinary course of business - From the nature of services it is evident that these services are not interdependent but could be provided as standalone services. In as much as we can say that applicant proposes to provide two distinct category of supplies. And as such services provided by this agreement can not constitute composite supply as defined under the GST Act. However, we observe that services mentioned at (i) (ii), (iii), (iv) of category B above constitute composite supply among them as these services are clearly independent where the market survey gives bouquet of services its essential character. Whether the services provided under the Service Agreement Merit classification as support services falling under HSN code 9985? - Held that - The services provided by the applicant in the nature of Research on the matter related to functioning of the holding of company such as - corporate accounting, corporate finance, corporate personnel and labour relations, corporate research and development, quality assurance and corporate intellectual property, and provide Party A with its report of the research thereon would fall under service code tariff 998599 as other support services nowhere elsewhere classified. Whether the service supplied by the Applicant under the Marketing Services Agreement dated 1 December 2012 constitute a supply of Support services falling under HSN code 9985 or Intermediary service classifiable under HSN code 9961 / 9962? - Held that - The concept of intermediary under the GST Act is substantially identical to the concept of intermediary under the erst while service tax regime. This concept has been explained in the Education Guide issued by CBEC in the year 2012 - We find from the scrutiny of Marketing Services Agreement that the relationship between the parties is that of independent contractors meaning that the agreement does not intend to create relationship of principal and agent. The applicant in no way carries out activities such as conclusion of contracts, acceptance of sales orders, invoicing, determination of sales prices, rebate, discounts, resolution of customers complaints, or settlement of disputes with customers - thus,the proposed service would not fall to be classified as intermediary service . Whether the services supplied by the applicant constitute supply of support services ? - Held that - Applying the test as per Education Guide to the facts of the present case, we find that bouquet of services proposed to be provided would constitute as a package for single consideration. Further we find from nature of services that applicant s role in respect of adoption and implementation of AM s advertising policy, conducting sales promotion through exhibition trade, liaising with customer etc. is in the nature of assistance to AM in conducting said activities and not actual provision of services on his own account - the services the applicant proposes to provide would fall under Group 99837 as Market Research Services. Whether the services provided by the Applicant is an export of services as defined under Section 2(6) of the Integrated Goods and Services Tax Act 2017? - Held that - The supplier of service i.e. applicant is located in India, the recipient of service i.e. AM is located outside India -Japan; payment is received in convertible foreign exchange, the supplier of service and the recipient of service are not merely establishment of a distinct person and applicant not being an intermediary and services are not specified in sub-section (3) to (13) of section 13, the place of supply of service would be the location of the recipient of services i.e. AM Japan, which is outside India. As the applicant satisfies all the ingredients of export of services the service provided by the Marketing Services Agreement would qualify as an export of taxable service. Ruling - The services provided by the applicant in the nature of Research on the matter related to functioning of the holding of company such as - corporate accounting, corporate, finance, corporate personnel and labour relations, corporate research and development, quality assurance and corporate intellectual property, and provide Party A with its report of the research thereon would fall under service code tariff 99859 as other support services nowhere elsewhere classified. The services provided by the applicant in the nature of Information on Market in the territory would fall under service code tariff 99837 with service description market research services. The services supplied by the applicant under the Marketing Services Agreement would fall under Group 99837 as Market Research Services. The service provided by the Marketing Services Agreement would qualify as an export of taxable service.
Issues Involved:
1. Classification of services under the Service Agreement dated 1 March 2013. 2. Classification of services under the Marketing Services Agreement dated 1 December 2012. 3. Determination of whether the services provided constitute an export of services under Section 2(6) of the Integrated Goods and Services Tax Act 2017. Detailed Analysis: Issue 1: Classification of Services under the Service Agreement dated 1 March 2013 Facts and Contentions: - The applicant provides various services to Asahi Japan under a Service Agreement, including research on corporate functions, market surveys, and providing economic, industrial, and technical information. - The applicant contends that these services should be classified as "Support services" under HSN code 9985 rather than "Intermediary services" under HSN code 9961/9962. Analysis: - The agreement specifies that the applicant acts as an independent contractor, not as an agent or broker, and does not have authority to conclude contracts or negotiate on behalf of Asahi Japan. - The definition of "intermediary" under Section 2(13) of the IGST Act includes a broker or agent who arranges or facilitates the supply of goods or services between two or more persons but excludes those who supply such goods or services on their own account. - The applicant's activities, such as research and market surveys, do not involve arranging or facilitating supplies between two parties, thus failing to meet the criteria for "intermediary services." - The services provided by the applicant are classified under "Other support services" (HSN code 99859) and "Market research services" (HSN code 99837). Conclusion: - The services provided under the Service Agreement are classified as "Other support services" (HSN code 99859) and "Market research services" (HSN code 99837). Issue 2: Classification of Services under the Marketing Services Agreement dated 1 December 2012 Facts and Contentions: - The applicant provides marketing services to various Asahi Kasei group companies, including market surveys, assisting in advertising, liaising with customers, and providing feedback to improve marketing. - The applicant contends that these services should be classified as "Support services" under HSN code 9985 rather than "Intermediary services" under HSN code 9961/9962. Analysis: - The Marketing Services Agreement specifies that the applicant acts as an independent contractor and does not have authority to negotiate or conclude contracts on behalf of the service recipient. - The applicant's role is limited to providing market support and facilitating business activities without acting as an intermediary. - The services provided, such as market surveys and assisting in advertising, are classified under "Market research services" (HSN code 99837). Conclusion: - The services supplied under the Marketing Services Agreement are classified as "Market research services" (HSN code 99837). Issue 3: Determination of Export of Services Facts and Contentions: - The applicant receives payment in freely convertible foreign exchange and contends that the services provided qualify as an export of services under Section 2(6) of the IGST Act. Analysis: - The definition of "export of services" under Section 2(6) of the IGST Act requires that the supplier is located in India, the recipient 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 meets all these conditions: the supplier is in India, the recipient is outside India, payments are received in convertible foreign exchange, and the supplier and recipient are distinct legal entities. Conclusion: - The services provided by the applicant qualify as an export of services as defined under Section 2(6) of the IGST Act. Order: Question 1: - The services provided under the Service Agreement dated 1 March 2013 are classified as "Other support services" (HSN code 99859) and "Market research services" (HSN code 99837). Question 2: - The services supplied under the Marketing Services Agreement dated 1 December 2012 are classified as "Market research services" (HSN code 99837). Question 3: - The services provided by the applicant constitute an export of services as defined under Section 2(6) of the IGST Act.
|
