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2019 (3) TMI 594 - AAR - GSTClassification of supply - Zero Rated Supply or a Normal Supply? - export of service or not - Intermediary services or not - Place of provision of services - Accounting, Sales Invoicing, Purchase Invoicing, Cash receipt posting, Bank Payment entries, other receipt entries, Credit Control work, Support Assignment work; Payroll assistance, storing and scanning of data to the data storage disk and any other work - Held that - We find from the agreement that the services being provided to their client is in the form of Administrative and support services. It is further seen from the clause no.3.3 that NES India will provide general advice and assistance in relation to the Services, as required, from time to time and such services will be charged on a time and costs basis - thus, the applicant's transaction is in the nature of supply of services. Export of services or not - Held that - The applicant located in India is supplying to their client located abroad - further, it is found that both the Applicant and their client are not establishments of the same person, even though they are group companies. The Shareholding pattern of both the companies proves that the Key management personal and Board of Directors are different and neither of them holds shares of each other and thus they do not control one another. The applicant is not a branch or an agency or a representational office of the client and both the companies are independent of each other - thus, clause no. (i),(ii), (iv),and ( v) of Section 2(6) of the IGST Act, are fulfilled by the applicant. Intermediary service or not - 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. Thus we find that applicant is not a person who arranges or facilitate supply of services between two or more persons and therefore the proposed service would not fall to be classified as 'intermediary service'. Place of provision of services - Held that - The supplier of service i.e. applicant is located in India, the recipient of service i.e. AM is located outside India -Abu Dhabi; 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. NES Abu Dhabi, 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. Thus, the applicant is an exporter of services under GST Act and the supply of services in the subject case as covered by the MSA agreement submitted it is very clear that the said transactions are covered under Zero rated supply .
Issues Involved:
1. Whether the transaction in question is a Zero Rated Supply or a Normal Supply under the GST Act? 2. If the said supply is a Zero Rated Supply, then can the same be considered as an export of service under the GST Act? Issue-wise Detailed Analysis: 1. Whether the transaction in question is a Zero Rated Supply or a Normal Supply under the GST Act? The applicant, NES Global Specialist Engineering Services Private Limited (NES India), provides support services to NES Global Talent Recruitment Services (NES Abu Dhabi) under a Master Services Agreement (MSA). The services include accounting, invoicing, payroll assistance, and other administrative functions. The applicant charges NES Abu Dhabi the cost incurred in India with a margin of 10% plus applicable taxes. The Authority for Advance Ruling (AAR) examined whether these services qualify as an export of service under Section 2(6) of the IGST Act, which defines "Export of Services" as: - The supplier of service is located in India. - The recipient of service is located outside India. - The place of supply of service is outside India. - The payment for such service has been received in convertible foreign exchange. - The supplier and the recipient are not merely establishments of a distinct person. The AAR found that NES India is located in India, NES Abu Dhabi is located outside India, and the payment is received in convertible foreign exchange. The shareholding patterns and management personnel of both companies indicate that they are independent entities, not merely establishments of a distinct person. Therefore, the transaction meets the conditions for export of services. 2. If the said supply is a Zero Rated Supply, then can the same be considered as an export of service under the GST Act? Section 16 of the IGST Act defines "zero rated supply" to include the export of goods or services. Since the transaction qualifies as an export of service under Section 2(6) of the IGST Act, it is also considered a zero rated supply. The AAR referred to Section 13 of the IGST Act to determine the place of supply. According to Section 13(2), the place of supply of services, except those specified in sub-sections (3) to (13), shall be the location of the recipient. Since NES Abu Dhabi is located outside India, the place of supply is outside India, fulfilling the third condition of export of services. The AAR concluded that the services provided by NES India to NES Abu Dhabi qualify as an export of services and are thus zero rated supplies under the GST Act. Order: The AAR ruled that the transaction between NES India and NES Abu Dhabi is a zero rated supply and qualifies as an export of service under the GST Act. The questions were answered as follows: - The transaction is a Zero Rated Supply. - The supply can be considered an export of service under the GST Act.
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