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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 ..... y shall the authority answer/give a ruling to those category of issues. From the perusal of the question it is seen that their query is with respect to assessment of their supplies based on taxability . Such query does not fall under any of the clauses mentioned from (a) to (g) of subsection (2) of section 97 of CGST ACT. The question does not fall within the purview of Section 97 of the CGST Act and is therefore not answered. X X X X Extracts X X X X X X X X Extracts X X X X ..... s, finance support, quality management system, human resources, etc. and scope of which is explained at length in the table below: Sr. No. SERVICE TYPE DESCRIPTION IN BRIEF 1. Accounts and finance support * Collating business information relating to sales, sales forecasts, expenses, etc. and preparation of reports and/or statements for management reporting * Reconciliation various financial records such as balance sheet reconciliations, tracking of material price variance etc. of the group company * Resolving the issues in accounts payable arising due to failure of three-way match in the accounting system, this exercise ensures that actual procurements and its invoice corresponds to price, quantity, and other terms and conditions of the Purchase order * Collating relevant data and information required for costing and pricing * - Various compliance measures - e.g. SOX compliances which is aimed to protect shareholders and the general public from accounting errors and fraudulent practices in enterprises, and to improve the accuracy of corporate disclosures 2. Analysis supports * Building advanced statistical models and dashboards to improve current product reliabil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. Pricing support * These services involve calculating prices of material and service required by group company and updating these in the price list * The Applicant also undertakes to collate and makes available relevant information to enable the group company determine transfer pricing * It undertakes to determine price of a part newly released by group company and addressing queries raised by customer on pricing * The Applicant also engages itself for group company in getting special prices approved from higher management of group company 8. Purchasing support * The Applicant undertakes detailed financial risk analysis of suppliers of group company, this analysis assists group company to minimize the risk in procurement of material/services * It also analyses group companies' trend in buying, price variation of commodities and recommends cost reduction measures * It also monitors prices of 150 commodities across different markets to identify potential procurement opportunities at lower costs * The Applicant also updates the records of group company relating to costs of procurement, supplier database 9. Quality support * The Applicant analyses reliability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solution * The Applicant also forecasts and communicates potential vulnerabilities (price increases from suppliers) to relevant stake holder of group company 13. Support to customer * Addressing customer queries telephonically by analyzing the cause & directing them to appropriate personnel/department for further action The services referred above ("subject supply"), being provided by the Applicant for consideration, partake the character of 'supply' as defined under Section 7 of the CGST Act. Accordingly, whenever these services are provided by the Applicant to group company in India, the Applicant discharges its liability to pay Integrated tax ('IGST') or Central and State tax ('CGST and SGST') as may be applicable. 7. When these services are provided by the Applicant to an overseas 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 8. In this regard submissions enumerated below may please be considered relevant for the present Advance Ruling. 3a. STATEMENT CONTAINING THE APPLICANT'S INTERPRETATION OF LAW AND/OR FACTS, AS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n who is liable to pay that consideration; Section 2 (70) "location of the recipient of services" means, (a) where a supply is received at g place of business for which obtained the location of such place of business; (b) where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment; (c) where a supply is received at more than one establishment, whether the gharele business or fixed establishment, the location of the establishment most directly concerned with the rest of the supply; and (d) in absence of such places, the location of the usual place of residence of the recipient; 2.5 On reading the above referred definitions in conjunction with each other, the Applicant submits that where a supply is made for a consideration then the person responsible to make the payment of consideration is to be treated as 'recipient', and the registered place of business of such recipient is to be treated as the 'location of recipient'. It further provides that if the services are not received at a registered place of business, recipient's usual place of resid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed supply'. 2.9 Having said the above, we note that subject supply relating to 'supply chain support' & 'support to customer', where the Applicant potentially may or may not interact with vendors of the group company, the possibility to overstep the thin line of distinction between the stated services as 'export' vis-å-vis 'intermediary' cannot be ruled out. 2.10 Any attempt to treat the subject transaction as intermediary would mean that it would cease to qualify as an 'export of service and would not merit assessment as accorded in zero rated supply. Thus, without prejudice to the submissions in forgoing paragraphs, the Applicant further seeks clarification that 'supply chain support' & 'support to customer' do not merit classification as intermediary service to re-affirm applicability of Zero-rated taxability based on the submissions herein below SUBJECT SUPPLY DO NOT MERIT CLASSIFICATION AS 'INTERMEDIARY SERVICES' 2.11 The term intermediary referred under Section 13(8)(b) is defined under Section 2(13) of the IGST Act and the same is reproduced below for easy reference: "(13) intermediary" means a broker, an agent or any other person, by whatever name called, who ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 7 of the CGST Act, in as much as there exists a transaction between the Applicant and group company for various independent support functions in the course of business, on payment of consideration. It is evident that consideration for Applicant's services is independent from any transaction that the group company may undertake. Thus, owing to the independence of the activities to be undertaken by the Applicant irrespective of any other transaction between group company and its vendor or customer, subject supply is not in the nature of any facilitation or arrangement as necessitated by the definition of intermediary'. These activities to be undertaken by the Applicant while providing subject supply are therefore not in the nature of merely facilitating or arranging any supply. 2.18 Independent existence of the Applicant's obligation can further be substantial as by relevant clauses of the agreement which clearly state that the Applicant is not an agent of group company. We have reproduced one sample clause from the Applicant's agreement with one of its group company viz. Cummins Limited: 10. Relationship of the Parties For the purpose of this agreement, nothing herein sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is not authorized to enter into any contract or arrangement on behalf of GoDaddy US or which would bind it in any manner whatsoever. GoDaddy US will directly contract and render services to customers in India. It will directly engage relevant third party service providers in India such as marketing agencies and call centers... The only service to be performed by the Applicant is provided to GoDaddy US on a principal-to principal and arm's length basis 14. It has been ruled by us that in the present case, proposed service to be provided by the Applicant to GoDaddy US is business support service and not intermediary service in terms of Rule 2(f) of POPS It is observed that said proposed service does not fall under any of the Rules of POPS but for Rule 3. Rule 3 of POPS inter alia envisages that the place of provision of a service shall be the location of the recipient of service. 15. In view of above, we rule as under; In the facts and circumstances of the case, the place of provision of business support service provided by the Applicant, is outside India in terms of Rule 3 of the Place of Provision of Service Rules, 2012 2.23 Uniformity in the facts of the above ruling and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Universal Services India Pvt. Ltd. [2016 (42) S.T.R. 585 (A.A.R.)] =2016 (5) TMI 750 - AUTHORITY FOR ADVANCE RULINGS wherein the Applicant was entrusted with the activity of payment processing by an overseas entity viz. WWD US who was engaged in providing web hosting services to Indian customers. The Applicant was thus to collect the money on behalf of WWD US and pay it to WWD US without any markup and for this activity an earmarked consideration was agreed between the parties. While passing the ruling, the authorities observed that the payment processing activity is undertaken by the Applicant on its own account and thereby would not qualify as an 'intermediary' relevant portion of the said Ruling is extracted below: Therefore, it transpires that the main service provided by WWD US to the customers in India is domain name registration, web hosting services, etc. The Applicant is not at all concerned with respect to this service. However, service provided by the Applicant to WWD US is processing of payments, which is the main service. Further, the Applicant is providing this service to WWD US on his own account for a fee equal to the operating costs incurred by the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided by 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'. 3. The Applicant is a group company of M/s. Cummins Inc. 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. Apart from these, the Applicant possesses necessary manpower and expertise at the best competitive cost to provide various support services as enumerated above to its group companies in India and abroad. 4. The Applicant submitted that they have entered into Agreements with various group companies for providing its services on principal-to-principal basis. These services are provided to group companies and billed out on the basis of cost of providing services plus pre-agreed mark-up for each of the service to be provided. The services referred above being provided by the Applicant for consideration, partake the character of 'supply' as defined under Section 7 of the CGST Act, 2017. Accordingly, whenever these services are provided by the Applicant to group companies in India, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assifying these supply under 'Zero rated supply' category only. If the Applicant fulfil all the conditions laid under Section 2(6) of the IGST Act. 2017 and any other notification issued thereunder. they need not seek the ruling of the Hon'ble Authority. 8. Hence, in view of the above, the application filed by the applicant is appears to be not maintainable and is not required to be admitted, as the law is fairly clears in the concerned matter. They should be advised to follow the law enumerated in this regard in letter and spirit. 04. HEARING Preliminary hearing in the matter was held on 02.04.2019. Sh. Vivek Bhaj, C.A. appeared and requested for admission of their application. Jurisdictional Officer Sh. B. K. Mishra, Suptt., Division-V, Pune also appeared and made written submissions The application was admitted and called for final hearing on 07.05.2019. Sh. Rohit Jain, Advocate appeared, made oral and written submissions. Jurisdictional Officer Sh B. K. Mishra, Suptt., Division-V, Pune appeared. 04. OBSERVATIONS 4.1 We have gone through the facts of the case, documents on record and submissions made by both, the applicant as well as the jurisdictional office. 4.2 The app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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