2021 (8) TMI 737 - AAR - GST

Classification of supply - intermediary services - zero Rated Supply or Normal Rated Supply? - services provided on principal to principal basis - export of services - applicant provides service of conducting market survey, providing information on Indian market trends and/or marketing of products of foreign vendor in India - HELD THAT - It is on record that the applicant had discussions with entrepreneurs as well as established manufacturers and supplied list of potential buyers to the service recipient. Without a copy of contract/Expression of Interest in this case, the scope of supply cannot be arrived at. We note that to exclude the supply from the scope of intermediary service, the applicant should supply such services on his own account. The applicant is a person who facilitates SITEC with the potential list of buyers besides the market analyses. Further with the limited material data submitted by the applicant, with no Expression of Interest/ Contract/ Agreement, we find it prudent to refrain from pronouncing a Ruling - Barring Self Assessment, the Assessment to tax is the function of Revenue. We shall not employ the concept of Best Judgement Assessment to pronounce our Ruling based on reasoning on limited information available, for without examination of relevant Agreement/ Contract, neither shall we trespass to declare subject supply taxable, if in legality it weren t, nor shall we declare it zero rated citing that applicant has noting contrary in his written submission sans Agreement/ Contract.

Summary

Issues Involved:

1. Classification of services provided by the applicant as Zero Rated Supply or Normal Rated Supply under the GST Act.
2. Determination if the services provided by the applicant can be considered as Export of Services.

Detailed Analysis:

Issue 1: Classification of Services

The applicant, M/s. Maxpressure Systems LLP, provides marketing and sales promotion services to foreign vendors outside India without any formal agreements or contracts. The services include market surveys, providing information on Indian market trends, and marketing products of foreign vendors in India. The applicant contends that these services should be classified as Zero Rated Supplies as Export of Services, arguing that they do not facilitate transactions between buyers and sellers but provide services on their own account.

The definition of "intermediary" under Section 2(13) of the IGST Act is crucial here. An intermediary is defined as a broker, agent, or any person who arranges or facilitates the supply of goods or services between two or more persons but does not include a person who supplies such goods or services on his own account. The applicant asserts that they do not fall under the category of intermediary services since they do not facilitate transactions between buyers and sellers and provide services independently.

Issue 2: Consideration as Export of Services

The applicant argues that their services fulfill all conditions under Section 2(6) of the IGST Act to be classified as Export of Services:
- 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.
- Payment for such service has been received in convertible foreign exchange.
- The supplier and recipient are not merely establishments of a distinct person.

The applicant provides services from Ahmedabad, India, to foreign vendors located outside India, receives payments in convertible foreign exchange, and there is no relationship of distinct persons between the supplier and recipient. Therefore, they argue that their services should be classified as Export of Services and thus Zero Rated Supplies.

Findings:

During the personal hearing, the applicant reiterated the absence of formal agreements or contracts with their foreign vendors. The applicant provided three sample market research and analysis reports to support their case. However, the absence of a formal agreement or contract makes it challenging to definitively classify the services provided.

The authority noted that without a formal agreement or contract, it is difficult to determine the exact scope of the services provided. The applicant's activities, such as conducting market surveys and providing lists of potential buyers, could potentially classify them as intermediaries under Section 2(13) of the IGST Act. However, due to the lack of sufficient documentation, the authority refrained from making a definitive ruling.

Conclusion:

The authority concluded that without a formal agreement or contract, it is not possible to definitively classify the services provided by the applicant as Zero Rated or Normal Rated Supplies. The applicant's assertion that their services are not intermediary services and should be classified as Export of Services remains unsubstantiated due to the absence of necessary documentation. Therefore, the authority refrained from pronouncing a ruling based on the limited information available.