2019 (10) TMI 787 - AAR - GST

Taxability under GST - Rate of tax - marketing service provided by the application - export of services or not - intermediary services. Whether the applicant is acting as an intermediary of McAfee Singapore? - HELD THAT - The applicant is performing services to support and facilitate the selling, marketing and distribution of Products by the Company and other affiliates. Hence this is clearly in line with the definition of the term Intermediary who is a person who facilitates the supply of goods or services or both, between two or more persons. Whether the services supplied by the applicant to McAfee Singapore is marketing services or intermediary services? - HELD THAT - The exception clause in the definition states that the term intermediary does not include a person who supplies such goods or services or both or securities on his own account. The applicant is not supplying the goods or services on his own account and the ultimate supply of goods or services is made by the parent company directly and hence the applicant is not covered under the exception clause as well. It is pertinent to note the use of words such and this relates to the supply of such goods or services which is facilitated by the applicant and not the services provided by him - It is clear from the above agreement the applicant is providing services to the foreign affiliates as an intermediary - thus, the business services of the intermediaries are covered under the SAC 998599. Whether the services supplied qualifies as export of services and hence zero-rated? - HELD THAT - The issues involved are verified and found there is no doubt that the applicant, i.e., the supplier of services is located in India, the recipient of service is located outside India and the consideration is received in convertible foreign exchange and also that the applicant and overseas entity are two separate legal entities as per the agreement. The only issue to be decided is whether the place of supply is outside India or not and this is outside the jurisdiction of this authority. Unless this is decided, there is no question of determining whether the transaction is that of export of services or inter-State supply of services. Hence this authority cannot give a ruling on this issue.

Summary

Issues Involved:
1. Whether the applicant is acting as an intermediary of McAfee Singapore.
2. Whether the services supplied by the applicant to McAfee Singapore are marketing services or intermediary services.
3. Whether the services supplied qualify as export of services and hence zero-rated.

Issue-wise Detailed Analysis:

1. Whether the applicant is acting as an intermediary of McAfee Singapore:

The definition of "intermediary" under Section 2(13) of the IGST Act, 2017, is analyzed. The term includes a broker, an agent, or any other person 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 argument that they are not intermediaries because they operate on a principal-to-principal basis is rejected. The ruling emphasizes that the definition includes any person who arranges or facilitates the supply, regardless of the nature of their relationship with the principal.

2. Whether the services supplied by the applicant to McAfee Singapore are marketing services or intermediary services:

The agreement between the applicant and McAfee Singapore is examined. The applicant provides services to support and facilitate the selling, marketing, and distribution of McAfee products. These services include identifying potential business contacts, liaising with customers, advising on compliance with local laws, assisting in product demonstrations, and providing reports to McAfee Singapore. The ruling finds that these activities align with the definition of intermediary services, as they involve facilitating the supply of goods or services between McAfee Singapore and its customers. The services are classified under SAC 998599, which covers business services of intermediaries and brokers.

3. Whether the services supplied qualify as export of services and hence zero-rated:

The applicant argues that the services provided to McAfee Singapore qualify as export of services under Section 2(6) of the IGST Act, 2017. The conditions for export of services include the supplier being located in India, the recipient being located outside India, the place of supply being outside India, the payment being received in convertible foreign exchange, and the supplier and recipient being separate legal entities. While the applicant meets most of these conditions, the ruling states that determining the place of supply is outside the jurisdiction of the Authority for Advance Ruling. Therefore, no advance ruling is given on whether the services qualify as export of services.

Ruling:

1. The services supplied by the applicant to McAfee Singapore are covered under SAC 998599 (if not treated as Export of Services) and attract a tax of 9% under CGST Act, 9% under KGST Act, and 18% under IGST Act.
2. No advance ruling is given on the issue of whether the services qualify as export of services, as it involves the determination of the place of supply, which is outside the jurisdiction of the Authority.
3. The services provided by the applicant are in the nature of services supplied by an intermediary.