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TMI Blog2019 (7) TMI 1388X X X X Extracts X X X X X X X X Extracts X X X X ..... a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST Act. 2. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- STATEMENT OF THE RELEVANT FACTS HAVING A BEARING ON THE QUESTION(S) ON WHICH THE ADVANCE RULING IS REQUIRED 1. This Application is being preferred on behalf of Cummins Technologies India Private Limited ("CTIPL/the Applicant"), a company incorporated in India under the provisions of the Companies Act, 1956 having its registered office at Cummins India Office Campus, Tower A, 2nd, 4th & 8th floor, Survey No. 2 1, Balewadi, Pune - 411045 2. The Applicant is a group company of Cummins Inc. ("Cummins") situated in Columbus, Indiana and as such is engaged in manufacture and sale of products and provide services relating to turbo technologies, emission solutions, etc. The Applicant is duly registered under the Central Goods and Service Tax Act, 2017 ("CGST Act") and Maharashtra Goods and Service Tax Act, 2017 ("MGST Act") bearing GSTIN 27AABCT2018B1ZY. 3. Apart from the above stated activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to performance of the product, the Applicant prepares maintenance modules inter alia scheduling replacement of parts, periodic maintenance, cleaning, over-hauling etc for the engines sold by the group company 3. HMLD support * Analyzing statistical data relating to warranty, product failure rate, time lag to service, etc. this information enables the group company to minimize the costs relating to warranty * Preparation of reports on failure rate prediction, supplier's warranty, gap charts. This information enables group company to improvise in efficiently providing warranty services 4. HR support * Undertaking HR functions relating to recruitment, employee remunerations and compensations, employment policy benefits etc. for group company * The Applicant provides relevant information of the prospective employee, however the actual decisions relating to recruitment are taken by the group company by itself 5. IT support * The Applicant undertakes to manage information technology infrastructure and address day-to-day issues faced by employees of group company using the said infrastructure. The support is provided when the employee approaches its respective group c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the product effectively * It also extracts periodical reports to evaluate performance of the product and analyses if it necessitates any peculiar measures for group company to perform its obligation under warranty clauses * The Applicant also analyzes discrepancies reported by customer relating to shipments e.g. short fall in quantity, error in invoice, etc. and assists the group company to address the same 10. Sales & Marketing * The Applicant prepares product sales training module which can be referred by the sales personnel of the group company * The service also involves configuring tool to quote product price and accordingly prepare communication strategy * It also undertakes market research for identification of current product & new product opportunities, * It also calculates discounts to be offered by group company to its customers * In case of introduction of new product, it aids in preparation of product introduction plans * It integrally assists the sales team of group company to co-ordinate and continuously improve demand planning * It also undertakes to manage integration of software relating to sales e.g. sales force 11. Should cost support/Proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for determination is: Whether the liability to pay tax on the subject supplies can be assessed based on taxability as accorded to Zero rated supply'? 2. SUBMISSIONS ON INTERPRETATION OF LAW IN THE PROPOSED FACT SITUATION SUBJECT SUPPLY QUALIFY AS 'EXPORT OF SERVICE' AND MERITS TAXABILITY ACCORDED TO 'ZERO RATED SUPPLY 2.1 The term 'Zero rated supply' is explained under Section 16 of the Integrated Goods and Services Tax Act, 2017 ('IGST Act') to include export of goods, export of services, and supply of goods and/or services to SEZ. It is submitted that the subject supply being made to an overseas group company and is essentially in the nature of a 'service' it merits analysis qua 'export of service'. 2.2 The term Export of Service is defined under Section 2(6) of the IGST Act and it provides below summarized conditions for any transaction to qualify as export of service: i. Supplier of service should be in India; ii. Recipient of service should be outside India; iii. Consideration for such services must be received in convertible foreign exchange; iv. Supplier and recipient should not be establishment of distinct person; and v. Place of supply of service should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to the Applicant, it qualifies as recipient, Further, since such group company is not registered under Goods and Service Tax (GST') in India, the usual place of residence, i.e. respective location where these group companies are incorporated, qualify as the 'locations of recipient'. Subject supply is classifiable as 'export of service' 2.7 Based on the fact that location of recipient in the subject supply is determined to be outside India, place of supply thereof also residually occurs outside India in view of Section 13(2) of the IGST Act, inasmuch as none of the services referred under subsection (3) to sub-section (13) of Section 13 cover the subject supply in its scope. We have broadly summarized below the services referred in each of the sub-section (3) to Sub-section (13) below: SUB-SECTION SERVICE REFERRED 2 Any service that is not covered under sub-section 3 to Sub-section 13 3 - Performance based services where goods are required to be made physically available, -- Services where physical presence of recipient/ person representing recipient is required 4 Services supplied, directly in relation to an immovable property 5 Services by way of admission to or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods or services or both or securities on his own account 2.12 It is submitted on a scrutiny of the referred definition, that a broker or agent or any other person partakes the character of an intermediary if: vi. He arranges or facilitates supply between two or more persons; and vii. The activities undertaken by him are not in the nature of a supply on his own account. 2.13 The conditions as referred above operate in conjunction and breach of either condition results in exclusion from the scope of the term 'intermediary'. These conditions are therefore analyzed below qua subject supply to be made by the Applicant. Subject supply to be made by the Applicant is not in the nature of facilitation arrangement of supply between group company and any other/third party 2.14 The Applicant submits that role of an intermediary is stipulated to be of facilitation or arrangement of a supply between two or more persons. The term facilitation or arrangement is not defined under IGST Act, and therefore we refer to meaning of these terms as understood in common parlance. Reference is thus made to the Black's Law Dictionary, Ninth Edition wherein the term 'facilitation' is explained to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave the power to obligate or bind the other in any manner whatsoever. 2.19 The Applicant also submits that, remuneration of an intermediary is proportionately Inked with the transaction between the parties which the intermediary arranges or facilitates. Such consideration may also become payable based on successful completion of transaction that the intermediary is mediating. However, in the present facts the remuneration of the Applicant is independent of any other transaction of group company. Relevant sample portion from the Applicants agreement with Cummins Limited (referred above) is reproduced below: 10. Relationship of the Parties ....CTIPL acknowledges that it has freely and knowingly entered into this agreement for separate and sufficient consideration unrelated to any other engagement, relationship. CTIPL acknowledges that any rights, benefits, or other terms and conditions of any such engagement relationship do not apply to and excluded from this Agreement. 2.20 These contractual stipulations further fortify the position that scope of the Applicant's rights and duties are limited only to the transaction of providing subject supply and is completely independent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting team of GoDaddy US regarding various events taking place in India where advertisements can be broadcasted The Applicant provides the analysis and other support services necessary for group company to ensure qualitative uniformity and standardization The content of advertisement would be prepared by the marketing team of GoDaddy USA itself. Also, such advertisement would be directly placed on social media b GoDaddy USA Group company would instruct the Applicant about scope of analysis and support services that it requires Godaddy India will have no role to play with regard to appointment of the advertisement agency in India or payment of consideration to the advertisement agency by Godaddy USA The analysis and other support services would be utilized by group company for deciding its business strategy, taking internal development measures etc. and the Applicant has no role to play in these activities Godaddy India is not authorized to enter into any contract or arrangement on behalf of Godaddy USA or which would bind it in any manner whatsoever The Applicant is not authorized to enter into any contract with any other/third party on behalf of group company Godaddy India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the main service on his own account. In the present case, the Applicant is providing main service, i.e., "business support services" to WWD US and on his own account. Therefore, the Applicant is not an "intermediary" and the service provided by him is not intermediary service. 2.26 The ruling emphasizes on absence of any nexus between the services of Applicant therein and the services of its overseas counterpart to its customer to draw the conclusion that services of Applicant are not in the nature of intermediary. The ruling further notes that activities of Applicant qualify as a supply on its own account which further corroborates the conclusion derived by it 2.27 Drawing an analogy from the referred Ruling, the Applicant submits that since it has no dependence on the supplies to be made by the group company, services of Applicant are not in the nature of an intermediary which are also further corroborated by the fact that services of Applicant independently qualify as 'supply' on its own account. Therefore, services of Applicant cannot be treated as an intermediary, and such position of law is also well supported by the Judicial precedents of the erstwhile regime referred abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rseas group company, the transaction merits analysis qua 'export of service' to determine if the liability to pay tax on these supplies can be assessed based on taxability as accorded to 'Zero rated supply'. 5. The term 'Export of Service' is defined under Section 2(6) of the IGST Act, 2017 and it provides below summarized conditions for any transaction to qualify as export of service: '(6) "export of services" means the supply of any service when,- (i) the supplier of service is located in India; (ii) the recipient of service is located outside India; (iii) 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;' To qualify the term "export of services", the services supplied by any taxpayer should fulfil the above mentioned conditions. 6. The applicant's submissions in Annexure II of their application dated 04.03.2019 in a nut-shell affirms that they fulfil all the conditions mentioned under Section 2(6) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them for consideration to an overseas group company, the liability to pay tax on the subject supplies can be assessed based on taxability as accorded to 'Zero rated supply'. 4.3 We now reproduce the question raised by them in the subject application which is as under: "Whether the liability to pay tax on the subject supplies can be assessed based on taxability as accorded to Zero rated supply?. 4.4 This authority can give rulings only as per the provisions mentioned in Sections 95 and 97 of the Act. Section 95 says that the term 'advance ruling' means a decision provided by this authority to the applicant on matters or questions specified in subsection 2 of Section 97, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. For the sake of better understanding, Section 97 is reproduced as below: Section 97 reads as below: (1) an applicant desirous of obtaining an advance ruling under this Chapter may make an application ........................ (2) The question on which the advance ruling is sought under this Act, shall be in respect of,- (a) classification of any goods or services or both; (b) applicabili ..... X X X X Extracts X X X X X X X X Extracts X X X X
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