TMI Blog2018 (12) TMI 1006X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act 2017 and the Maharashtra Goods & Services Tax Act 2017 (hereinafter referred to as "Said Tax Acts" ) or would remain excluded under the said Acts as the said activities qualify as export of service in accordance to Section 2(6) of the Integrated Goods and Service Tax Act 2017 read With the said Tax Acts?" At the outset, we would like to make it clear that the provisions of both the CGST Act and the GST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the "GST Act". 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submission (Brief facts of the case), as reproduced verbatim, could be seen thus - STATEMENT RELEVANT HAVING A BEARING ON QUESTIONS ON WHICH ADVANCE RULING IS REQUIRED BACKGROUND: A. Sabre Travel Network (India) Pvt. Ltd. (hereinafter referred to as 'Applicant/Sabre India'), situated at 14th Floor, Urmi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant undertakes the following activities in relation to the marketing and promotion services provided by them under the Marketing Agreement dated 31 October 2016: According, while marketing access to the CRS Software, the sales team of the Applicant approaches potential subscribers in India to whom they explain the features of the CRS Software and the flexibility of same to integrate with the potential subscriber's system for smooth functioning; Thereafter, in the event of a positive response, the Applicant scans the credentials and the business potential of the subscriber to whom it proposes to market the CRS Software; Based or an organizational and workflow analysis of the subscriber and following a background check of their prior activities, the applicant logs on a request into the system through the website maintained by Sabre APAC called Subscriber Communication Management System. This is an automated process wherein a request is placed by the Applicant to create a Pseudo City Code; Simultaneously, provided the subscriber agrees to use the CRS Software, order forms are collected from them to begin the process for activation of the CRS Software following the creation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 'Sabre' so as to augment Sabre APAC's business in India. H. The entire gamut of services are provided in an integrated manner to Sabre APAC, and for consideration the Applicant raises a consolidated monthly invoice for the fees to be received from Sabre APAC for all the services rendered to them. The said fees, which is received in the form of convertible foreign exchange, is calculated on a cost plus a mark-up basis as per the terms of the said Marketing Agreement. Further, the amount so received is in accordance to the domestic arm's length requirements under the local transfer pricing laws. Hereto annexed and marked as 'Exhibit B" are sample copies of invoices issued to Sabre APAC. I. Basis the above facts, the various roles and responsibilities of the Applicant and Sabre APAC Under the Marketing Agreement dated 31 October 2016 are distinguished below: Sr. No Functions Duties of Sabre APAC Duties of Applicant 1. Strategic Management functions Planning, formulating and implementation of business goals and vision inter alia based on inputs from the Applicant No participation of the Applicant. 2. Engaging distributors including partners and resellers Directly enters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by Sabre APAC 7. Execution of contracts with customers Access to the CRS Software, by the allotment of Pseudo CRS Software City Code, is permitted by Sabre APAC The Applicant provides marketing support services in relation to which may include grievance redressal service, repairs and maintenance services, etc. 8. Promotional Activity Involved, as may be required on case to case basis Use of any and all advertising and promotion techniques, service and support, promotion materials, participation in trade shows, sponsorship services, etc. 9. Advising on marketing strategies and local market conditions Formulation and adoption of strategies, based on inputs of the Applicant Advise Sabre APAC on any changes in market, organization, any political, financial, legislative, industrial or other events in within the prescribed territory of India. 10. Provide information on market trends, competitors, and new products and services in the Territory Decision making based on inputs received from the Applicant Advise Sabre APAC on any changes in market, organization, any political, financial, legislative, industrial or other events in within the prescribed territory of India. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s already being undertaken by the Applicant. Thus, an advance ruling can also be sought on the activity of supply of marketing and promotion services being undertaken by the Applicant. Further, the Applicant submits that the question for which an advance ruling is sought in the present case, is not pending before any Goods and Service tax Officer, the Appellate Tribunal or any Court. Further, to best of knowledge of the Applicant, the said question of law has not already been decided by' the Appellate Tribunal or any court. As a result, the restriction as prescribed under Section 98(2) of the CGST Act With respect to issues already pending or decided under other provisions of the CGST Act would not apply in the present case. Therefore, in accordance with the legal provisions under Chapter XVII of the CGST Act, 2017 the Applicant is of the view that the present Application to 'determine the liability to pay tax on services' as prescribed under Section 97(2)(e) of the CGST Act is maintainable before the Authority. APPLICANTS INTERPRETATION OF LAW AND FACTS The principal question raised by the Applicant is whether the the marketing, promotion and distribution services (hereinafte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime where the taxable event was identified on specific events such as manufacture, sale or provision of service; under the provisions of the GST Acts, all such events have been Subsumed under the single umbrella of supply as prescribed under Section 7 of the CGST Act. 1.3.2 It is submitted that for a service to qualify as supply under Section 7 of the CGST Act, It is necessary for the provision of the same to occur in the normal course of business and within the taxable territory of India, The burden of tax is only on the final consumer. Further the scheme of the Acts is that no taxes should be exported outside the territory of India. The charge under the Acts is not on business but on the consumer, and being a destination based consumption tax the place of supply of goods or services plays a vital role in determining the eligibility to tax. 1.3.3 Based on the facts presented above, the objective and the intent of the parties under the Marketing Agreement dated 31 October 2016 is that the services are to be rendered by the Applicant from India to Sabre APAC situated in Singapore. This is an inter-state supply as defined under Sec 13 of the IGST Act, 2017 read with Sec 2(57) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) the place of supply of service is outside India; (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; and (v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8". Herein the term 'establishment of distinct persons' has been explained in explanation 1 under Section 8 of the IGST Act which read as follows: "Explanation 1 .-For the purposes of this Act, where a person has, - (i) an establishment in India and any other establishment outside India; (ii) an establishment in a state or Union territory and any other establishment outside that State or Union territory; or (iii) an establishment in a State or Union territory and any other establishment being a business vertical registered within that State or Union territory, then such establishments shall be treated as establishments of distinct persons. 1.5.2 Taking the above into consideration, it is relevant to examine the conditions for export of services as prescribed under Section 2(6) of the IGST Act in the present case: i) The supplier of service is located ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e services rendered to Sabre APAC is received in convertible foreign exchange. Sabre India Charges a fee on a cost plus markup basis in US Dollars which the Applicant is entitled to irrespective of the number of booking made on the said CRS Software by the Subscribers viz. travel agent. The Foreign Inward Remittance Certificates ("FIRC') showing that the receipt of consideration is in convertible foreign exchange is annexed and marked as Exhibit-E. v) The supplier of service and the recipient of service gre not merely establishments of a distinct person in accordance with Explanation 1 in Section 8 of the IGST Act: The Applicant is located in India and Sabre APAC is located outside India. Thus, the Applicant and Sabre APAC are distinct entities as per the terms of explanation 1 in Section 8 of the IGST Act. Moreover, they undertake operation in their own capacity on principal to principal basis and are not merely establishments of distinct persons. 1.53 It is submitted that the main service of the Applicant under the Marketing Agreement is solely to provide market access to the CRS Software and to build the Sabre System as defined in the said Agreement in India. The Applicant mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Article 11 of the Marketing Agreement enclosed as Exhibit A. 2.4 The said Article 11 reads as follows: "Nothing in this Agreement is intended to or shall operate to create a partnership or joint venture of any kind between Sabre APAC and Sabre India, or to authorize either Sabre APAC or Sabre India to act as agent for the other, and neither Sabre APAC or Sabre India shall have authority to act in the name or on behalf of or otherwise to bind the other in any way (including, without limitation, the making of any representation or warranty, the assumption of any obligation or liability and the exercise of any right or power)." 2.5 To ascertain whether the services provided by the Applicant are covered under the definition of 'intermediary or not, it is pertinent to analyze the term 'intermediary' in detail vis-a-vis activities performed by the Applicant as per the agreement entered into with Sabre APAC. 2.6 In terms of provisions of Section 2(13) of the IGST Act, 'intermediary' means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both or securities, between two or more persons, but does not inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oker. 2.11 Besides, the last phrase in the means clause of the definition of 'intermediary' contains the clause "or any other person, by whatever name called". The most appropriate rule of interpretation which is to be used while interpreting the phrase 'by whatever name called' is the principle of Ejusdem Generis. The application of this Rule is necessitated because of the use of a general phrase preceded by specific words. Ejusdem generis is a rule of interpretation that where a class of things is followed by general wording that is not itself expansive, the general wording is usually restricted things of the same type as the listed items. 2.12 Thus, applying the interpretative rule of Ejusdem Generis, the phrase 'by whatever name called' will include a person in the same genus as that of a broker or an agent. In other words, the phrase "'by whatever name called', will mean a person who is also appointed in a representative capacity. 2.13 Further, the second element of the definition provides the nature of activities performed by the broker or agent which would be classified as intermediary services. As per the definition, "only the activity of arranging or facilitating the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sabre APAC and the Subscriber. There is no privity of contract between the Applicant and the Subscriber namely travel agent in India where by the Applicant is under any obligation or duty owed to the Subscriber in terms of the arrangement with the Sabre APAC under the Marketing Agreement 2.19 Hence, the Applicant does not qualify as an 'intermediary' as per Section 2(13) of IGST Act. Moreover, considering the principal to principal character of the agreement, the Applicant provides marketing, promotion and distribution Services in relation to the CRS Software only tb Sabre APAC and not to any other party. 2.20 Given that the definition of 'intermediary' under the IGST Act is largely in line with the definition of intermediary under the erstwhile Service Tax Legislation (Finance Act, 1994), the guiding principles provided under Education Guide released by Central Board Of Excise and Customs under the erstwhile Service Tax legislation for determining whether a person acts as an intermediary can be referred in this context. The same are reproduced below for the purpose of discussion: * Nature and Value: An intermediary cannot alter the nature or value of the service, the supply o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gation to pay for the said service alone is the service receiver and no other person even if such other person were to indirectly benefit from the provision of the main service. * Identity and title: The third principle indicates that the service provided on behalf' of the principal is clearly identifiable. The Applicant submits that as per Article 11 Of the Agreement, the relationship between the parties is Clearly restricts the performance of the activity in the nature Of Agent. Therefore the Applicant submits that no services is provided by the Applicant on behalf of Sabre APAC The activities performed by the Applicant directly to Sabre APAC is only on a principal to principal basis. 2.22 Accordingly, the services rendered by the Applicant do not satisfy any of the guiding principles laid down under the erstwhile Service Tax regime in relation to intermediary services. 2.23 In the light of the above detailed analysis and discussions, it is submitted that the services provided by the Applicant are only in the nature of marketing, promotion and distribution activities. As stated earlier with reference to Educational guide above the fact that the Applicants would interact with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subscriber to enter into contract for access of CRS Software except feeding the information via the system to enable Sabre APAC register the admitted and only supports in providing product related information and engages in discussion as required by Sabre APAC. * Consideration for the service rendered is based on costs incurred by the Applicant in supplying services plus a pre-agreed mark-up which is independent of actual value / volumes of services, if any, ultimately provided by Sabre APAC. This evidences that the Applicant receives fee for provision of services to Sabre APAC and not any commission as in case of agency relationship and hence, does not arrange or facilitate any supply of services to Sabre APAC. 2.26 In light of the above detailed analysis and discussions, it is submitted that, the services SABEN provided by the Applicant are limited to marketing, promotion, distribution activities and other support activities. 3. THE SERVICES RENDERED BY THE APPLICANT IS CLASSIFIABLE AS A COMPOSITE SUPPLY AS PER THE TERMS OF SECTION 230) OF THE CGST ACT: 3.1 It is submitted that under the Marketing Agreement dated 31 October 2016 with the Sabre APAC, the Applicant provides i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices cannot be rendered in the absence of the marketing services provided by the Applicant under the Marketing Agreement. 3.6 Further, such services are not peculiar to the Applicant's case and similar services are provided by various Indian entities to their overseas customers as a single package. Besides, for the provision of the said services, the Applicant issues a Single consolidated monthly invoices on a cost plus markup basis for the entire bundle of services, irrespective of the nature of actual supplies made during the said period. Consequently, the services of marketing, consultancy, promotion, sponsorships and other related support services provided under the Marketing Agreement are naturally bundled and supplied in conjunction with each and can be classified as a 'composite supply'. SUMMARY OF INTERPRETATION OF LAW AND FACTS: Under the provisions of the Section 2(6) of the IGST Act, to avail the benefit of export of taxable services, the services are to be delivered outside India and used outside India and payment for services exported should have been received by the service provider in convertible foreign exchange. Admittedly, the services provided by the Appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reservation System Software ('CRS Software') within the territory of India. The CRS Software has been developed by Sabre GLBL Inc. as a global distribution system which performs various functions including airline seat reservations, scheduling, automated ticketing & fare displays, booking for a variety of air, car & hotel services, etc. B. Sabre APAC, the Applicant's parent company situated in Singapore, has been sub-licensed the right to market and promote the said CRS Software for Asia specific jurisdictions. Further, it has been authorised to further sub-license certain parts of its marketing rights and obligations to local-country distributors. Accordingly, Sabre APAC has appointed the Applicant as the National Marketing Company vide a Marketing Agreement dated 31 October 2016 pursuant to which the Applicant has been granted a non-exclusive right to market and distribute the CRS Software to various travel agents in India. C. Under the said Marketing Agreement, the Applicant provides a range of services relating to marketing and sales promotion which includes advertising, consultancy, public relations, promotions, marketing support services, etc. These services are rendered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Applicant under the said Marketing Agreement dated 31 October, 2016. 1.2. With respect to the services supplied by the Applicant, a reference is made to para 1.5 of the Application which deals with the nature of the Agreement entered by the parties and the services rendered thereunder which constitutes export of services by the Applicant to Sabre APAC as per Section 2(6) of the Integrated Goods and Service Tax Act, 2017 (IGST Act). 1.3. Accordingly, GST being a destination based consumption tax, the liability to discharge tax shall not arise in cases where the consumption of the supply is outside the taxable territory of India. As a result, in the present case, the Applicant would be eligible to avail the benefit of zero-rated supplies as are available to exports under section 16 of the IGST. 1.4. In this regard, reference is made to the Customs Excise Service Tax Appellate Tribunal's ('CESTAT) Chandigarh Benches order in the case of M/s. Evalueserve.com Pvt. Ltd. v. CST, Gurgaon reported in 2018 (3) TMI 1430 - CESTAT Chandigarh wherein - as is the case with the Applicant - the Appellant, in the said order viz. M/s. Evaluserve.com directly interacted with the potential customers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices would qualify as export under Rule 6A of the Service Tax Rules. The relevant extract of the said advance ruling reads as follows: "14**** However, applicant is providing to GoDaddy US services viz.; direct marketing and promotion services, supervision of quality of third party customer care center services and payment processing services, as per draft Service Agreement between the applicant and GoDaddy US. There is no contract between the applicant and the customers of GoDaddy US based in India. GoDaddy US have used said services provided by the applicant as per the draft Service Agreement. Further, applicant would charge a fee equal to the operating costs incurred by the applicant plus a mark-up of 13% on such costs, which would be received by the applicant from GoDaddy US in US Dollars. The benefit of services provided by applicant accrues to GoDaddy US outside India. In view of above, judgments relied upon are of no avail to the Revenue, as services provided by the applicant are to be consumed in US and not in India. Further, the judgment in case of Microsoft Corporation (India) Pvt. Ltd relied upon by the Revenue is an interim order regarding pre-deposit of the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - CESTAT MUMBAI wherein the Hon'ble Tribunal on the question of whether a transaction which enjoyed the benefit of export of service for the period prior to 2012 (before the Negative List) would have a different treatment under the new Rules answered as follows: 12. It is an admitted fact that the respondent had been rendering services that were, in the erstwhile pre-negative list regime, taxable but for the provider being a Export Oriented Unit under the entry in section 65(105)(za) of Finance Act, 1994. In the scheme of Export of Service Rules, 2005, the various taxable services had been categorized as object-based, performance-based and recipient-based for the purpose of exemption under section 93 of Finance Act, 1994. Though those Rules are no longer valid for the purposes of rule 5 of CENVAT Credit Rules, 1994, their guidance value cannot be discountenanced. The 'negative list' regime was not intend to be either detrimental or beneficial to existing assessees except where such intent was specifically sanctioned by legislation. The respondent, prior to 1st July 2012, was eligible for all benefits as the service rendered by them was treated as export Fifth the recipient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erritory in which it exists. The satisfaction of the customer occurs upon an outcome which is possessed by the recipient. Hence, even if some of the activities are carried out in India, by no stretch can it be asserted that the fulfillment of the activity is in India. Therefore, the inescapable conclusion is that the location of the actual performance of the service is outside India and, even with the special and specific provision of rule 4 of Place of Provision of Services, 2012, the performance of service being rendered outside India would render it to be an export. **** 1.8. By this elaboration, we have amplified our earlier decision in (re Sai Life Sciences Ltd) that it is contrary to law to isolate an expression in a rule to deny the general principle built into all indirect tax statutes for exempting export of services from levy." 1.8. In any event, as it has been held in a number of precedents, the nature of transaction and the scope of the contract depends on the intention of the parties which is to be determined on a construction of the contract. The Marketing Agreement between the Applicant and Sabre APAC clearly does not intend to create any agency, partnership or jo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1. Section 2(13) of the IGST Act, defines an intermediary to mean "a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services on his own account." 2.2. It is submitted that the above definition can be divided into three parts, viz. (i) the means clause defining the nature of the service provider (ii) the nature of services provided and (iii) the exclusionary part which carves out an exception for the "person who supplies such goods or services on his own account." 2.3. NATURE OF THE SERVICE PROVIDER 2.3.1 Based on the above, it clear that an intermediary should 'mean', a broker or an agent or any other person, by whatever name called. Here, it is pertinent to note the use of the word 'means' in the said definition. It is trite law that the use of the word 'means' in a definition governs the words following it and has a restrictive meaning. Thus, in the present case, an intermediary can mean only a broker, an agent or any other person, by whatever name called. 2.32. In this respect, the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a class of things is followed by general wording that is not itself expansive, the meaning of the general words are taken to be restricted by implication with the meaning of restricted words. 2.3.6. The rule of 'ejusdem generics' is applied in the following cases: * The statute enumerates the specific words * The subjects of enumeration constitute a Class or category * That class or category is not exhausted by the enumeration * The general terms following the enumeration, and * There is no indication of a different legislative intent. 2.3.7. In the case of CIT v. Rani Tara Devi reported in [2013] 355 ITR 457 (P & H) = 2013 (3) TMI 53 - PUNJAB & HARYANA HIGH COURT, the Hon'ble Punjab and Haryana High Court had held as follows: "The expression 'by any other name' appearing in Item (a) of clause (iii) of Section 2 (14) of the Income Tax Act has to be read ejusdem generis with the earlier expressions i.e. municipal corporation, notified area committee, town area committee, town committee." 2.3.8. The phrase 'by any other name' and 'by whatever name called' have a proximate purpose in a statute and hence the principle laid down by the P&H High Court supra will apply on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive capacity. 2.4. NATURE OF THE SERVICE 2.4.1. It is submitted that the said portion defines the nature of transactions which if provided by a broker or an agent or by any person (by whatever name called) would be covered under the services provided by an 'intermediary'. As per the definition the broker, agent of any other person will arrange for the provision of service or facilitates the provision of a service (or supply of goods) between two or more persons. The words that have been used in the definition are - (i) arranges and (ii) facilitates, As a result, it would be pertinent to understand the meaning of these words. The said two word are generally defined as under: Arrange: 'plan, organize, and carry out' Facilitate: 'to make (an action or process) easy or easier' 2.4.2. From the above definitions it is Clear that the intermediary being a broker or an agent, or any person acting on behalf of the principal, arranges or facilitates the supply of goods or services between two or more persons. Thus, the contract or agreement between the principal and agent (broker/ any other person) assumes a great deal of importance to understand whether it facilitates or arranges fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant draws support from the Statement at the end of para 5.9.6 of the CBEC Education Guide which, in the context of 'Intermediary Service' gives the following example: "Similarly, persons such as call centres, who provide services to their clients by dealing with the customers of the Client on the client's behalf, but actually provided these services on their own account, will not be categorized as intermediaries." 2.4.8. The Applicant would also like to refer to judgments under the UK VAT law, where the question of activities carried Out by an 'intermediary' had been analysed. The relevant extract of the said judgements reads as follows: 2.4.9. In 'M/s. Bookit Ltd v Customs and Excise reported in (2004) 11K V18626 (28 May 2004), it has been held that an intermediary Ought to play an active role in the capacity of an agent of the insurancel finance company and a mere introductory role or generation of leads on prospective customers shall not suffice. The assessee therein was involved in the activity of providing credit card handling services to cinema Customers booking tickets through various distribution channels including call centre, internet, WAP and digital TV. In addition, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or consideration which consisted of 10 per cent of the fee charged by the seller, and a commission of 15 per cent on the price paid by the buyer. The consideration was not dependent upon the buyer completing a contract for credit or insurance but triggered when the requirements for a chargeable lead were met. *** 41. ***The Appellant's contact with potential consumers was for the purpose of enhancing the marketability of the lead not to secure a financial product for the consumer or to match him with the most appropriate broker. I find that the Appellant's supplies were about selling leads, not about the making and negotiation of credit. ***The appellant's priority was to sell leads to the highest bidder. The Appellant's interest Ceased once the information was passed onto the buying broker. The Appellant's dealings with potential consumers whether electronically or in person were performed to obtain information for improving the marketability of the leads. The dealings were not entered into with a view to securing a contract for a loan. I find that the Appellant's supplies had no direct link with the process for negotiating credit arrangements between brokers and potential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicant are preparatory and supportive in nature rather than facilitating any provision of services by Sabre APAC * No payments are routed through the Applicant. * The Applicant merely supports and has no right to actually negotiate, finalize or change the price already fixed by Sabre APAC. 2.4.13. Also, considering the bi-partite nature of the Marketing Agreement, the Applicant provides marketing, promotion and distribution services only to Sabre APAC and not to any other party. Further, for the provision of the said services, the Applicant receives compensation from Sabre APAC, on a cost-plus markup basis, which it is entitled to irrespective of the number of booking made on the said CRS Software. Thus, even in the unlikely event of no business being generated from the territory, the Applicant will receive compensation as per the valuation enumerated in paragraph C of the background hereinabove. This itself should establish that there is no other supply except the supply to Sabre APAC and therefore the said Marketing Agreement does not create any agency between the Applicant and Sabre APAC, the services rendered by the Applicant cannot be categorized as intermediary servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the services are rendered by the Applicant to Sabre APAC on a principal-to-principal basis, the services would get covered under the exclusionary clause of the said definition under Section 2(13) of the IGST Act. Herein reliance is also placed on the ruling in the case of Global Transportation Services Pvt. Ltd. reported in 2016 (45) STR 574 (AAR) = 2016 (9) TMI 291 - AUTHORITY FOR ADVANCE RULINGS. 2.5.4. It is further submitted that the relationship of the Applicant with Sabre APAC is separate from the relationship between Sabre APAC and its clients. The Applicant engages with Sabre APAC's clients only in pursuance of the services to be rendered to Sabre APAC which it provides on its own account and not as an agent of Sabre APAC. 2.5.5. In the CBEC Circular bearing No. 334/4/2006-TRU dated 28 February 2006, issued during the erstwhile regime on introduction of business support services' the nature of the services covered under the said head has been clarified as follows: "3.13 Business Support Services: Business entities outsource a number of services for use in business or commerce. These services include transaction processing, routine administration or accountancy, customer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by them to Sabre APAC would would be treated as an export of services under Section 2(6) of the IGST Act and hence not be non-taxable for the purpose Of payment of GST under the provisions of GST Law. Details of the Marketing Agreement dated 31 October 2016 1. Backgound: 1.1. The Applicant, viz. Sabre Travel Network India Pvt Ltd, has obtained a non-exclusive, royalty-free right and license from its parent company i.e., Sabre APAC, to distribute the CRS Software in India vide a Marketing Agreement dated 31 October 2016 with effect from 01 April 2016. The scope of the services provided by the Applicant under the terms of the said Marketing Agreement are: - Marketing services including advertising, identifying potential customers, identifying business opportunities, demonstrating offerings; - Consultancy and provision of information services; - Marketing support services, including PR, promotions, sponsorship, and special events and trade shows; and - Any other services necessary or advisable to perform its obligations under the said Marketing Agreement. 1.2. The entire gamut of services are provided in an integrated manner to Sabre APAC, and for consideration the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PAC. Consequently, the scouting of potential subscribers and the said organizational and workflow analysis of such potential subscribers are the deliverables by the Applicant which is submitted in the Subscriber Communication Management System in the form of a non-binding request. 2.3. Herein, the responsibility of the Applicant, stands completed on the identification of the potential subscribers to Sabre APAC. Subsequently, their responsibility of providing marketing support services (e.g. installation of interfaces to the CRS Software, consultancy, assistance, provision of information services, etc.) relating to the CRS System arises only once Sabre APAC decides to accept the potential customer based on the analysis provided by the Applicant. 2.4. Thus, based on the analysis of the subscriber's business provided by the Applicant, Sabre APAC makes a decision on whether or not to allot a Pseudo City Code to the potential subscriber and it is only following an affirmative decision that the Applicant's engineers install user interfaces to access the CRS Software in the subscriber's computer systems. The decision to permit the subscriber's to have access to the CRS Software is based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to further sub-license certain parts of its marketing rights and obligations to local-country distributors. Accordingly, Sabre APAC has appointed the Applicant as the National Marketing Company vide a Marketing Agreement dated 31 October 2016. pursuant to which the Applicant has been granted a non-exclusive right to market and distribute the CRS Software to various travel agents in India. Under the said Marketing Agreement, the Applicant provides a range of services relating to marketing and sales promotion which includes advertising, consultancy, public relations, promotions, marketing support services, etc. These services are rendered by the Applicant to Sabre APAC for which consideration is payable by Sabre APAC in the form of convertible foreign exchange, calculated on a cost-plus markup basis. The cost-plus markup basis comprises of the monthly qualifying cost which is the sum of all costs incurred by the Applicant in the process of provision of service together with a profit margin of ten percent thereon and is the basis adopted for purpose of Transfer Pricing provision under the Income tax Act. Herein, transfer pricing study and documentation is one of the procedures to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. Sabre Network (India) Pvt. Ltd. works for Sabre APAC, but does not appears to supply the CR software on his own account and therefore, falls under the services viz. Intermediary Services and the appears liable for tax under IGST Act 2017. None of the case laws, cited by the applicant are applicable to the present case as the facts and circumstances are different. 04. HEARING The case was taken up for preliminary hearing on dt. 26.06.2018, with respect to admission or rejection of the application when Sh. Irshad Ahmed, Advocate along with Sh. Rajeev Pallath Advocate appeared and made oral and written submissions as per contentions made in ARA. The jurisdictional officer, Sh. Rajiv Kant Nirala, Inspector appeared and stated that they were not making any submissions today and would be making submission in due course. The application was admitted and final hearing was held on 17.07.2018, Sh. S. Thirumalai Advocate along With Sh. Irshad Ahmed, Advocate and Sh. Rajeev Pallath Advocate appeared and made additional written submissions . They orally made contentions as per their ARA application. The jurisdictional officer, Sh. Nijay Lande, Supdt., appeared and stated that they wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in its favor. Once the Code is allotted and the setup is activated, the Applicant's engineers install user interfaces to access the CRS Software in the subscriber's computer systems. From the submissions made by the applicant it is clear that they 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. Whilst making their submissions the applicant has claimed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply of goods and/or services between two or more persons and who cannot change the nature of supply as provided by the principal. From the facts before us we find that 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. Based on an organizational and workflow analysis of the subscriber and following a background check of their prior activities, the Applicant logs on a request into the system through the website maintained by Sabre APAC called Subscriber Communication Management System. Provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply shall be location of the supplier of services and therefore such 'intermediary services' cannot be classified as 'export of services'. We now discuss Inter-state provisions as well as Intra State provisions under the GST laws as follows:- Inter State provisions are contained under section 7 of the Integrated Goods and Service Tax Act, 2017 and since none of the specific provisions are applicable, residuary provision contained under section 7 (5) (c) shall be made applicable in the case of intermediary service, which states that inter-state supply of goods or services or both in the taxable territory shall be treated to be a supply of goods or services or both in the course of inter-state trade or Commerce, however, the same should not be an intrastate supply and should not be covered elsewhere in section 7 of the IGST Act. Section 8 of the Integrated Goods and Service Tax Act, 2017 deals with the provisions of intra-state. Applying the provisions of section 8 (2) which states that 'subject to the provisions of section 12, in case where the location of the supplier and the place of supply of services are in the same State or in the same union territory, the supply of service ..... X X X X Extracts X X X X X X X X Extracts X X X X
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