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TMI Blog2019 (10) TMI 1135X X X X Extracts X X X X X X X X Extracts X X X X ..... rties to the Company and the invoicing is also done to the Companies by the third parties. The actual liability of paying the consideration is also on the Company and hence the Company is the recipient of service. The supplier of service is the Third Party Service Provider and each of these services may be provided by different Service providers. Hence this cannot be a composite supply, less so in the hands of the applicant - The billing is done as per the Schedule and includes Direct Cost of such service plus Service Fees plus taxes applicable. Each service has a separate service fees and the services are separately classifiable and if such services are billed in a common invoice that does not amount to a naturally bundled supply and hence the same is not a composite supply. Mixed supply or not - HELD THAT:- The transaction of the applicant is verified and in case where the third parties supplies individual services to the company where invoicing is done to the company directly, the same does not come under services supplied by the applicant in relation to such supply. But where the services are actually supplied by the applicant as authorised services by himself to the company, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facilitation/administration/management of relocation of client's employees from one location to another. In this regard, the Applicant enters into relocation service agreements/ statement of work with its clients. Sample agreements denoting the rendition of relocation management service by the Applicant to its clients are provided below: i. Relocation Service Agreement entered between the Applicant and Client 1 executed on 14 November 2011 (hereinafter referred as 'RSA') ii. Statement of work entered between the Applicant and Client 2, in reference to the Master Service Agreement executed on 28 December 2009 (hereinafter referred as 'SOW') d. The primary objective of the Applicant of rendering Relocation Management Service can be substantiated by referring to the Objective and Scope clause of the SOW, that is reproduced below: "Cartus, in its role as a fully outsourced relocation service provider, will manage, administer and facilitate the relocation of Client's employees from one location to another, as directed by Client, Cartus will provide all required support and coordination necessary to complete as employee relocation." e. Currently, for the purposes of GST, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices as detailed below: A. Home Finding Programs 1) Accompanied Home Finding (By Cartus preferred Local Destination Service provider ("DSP")). Employee is accompanied by DSP providing direct personal support throughout all home search activities. DSP co-ordinates home search activities, negotiates leases, and manage all real estate brokers. B. Leasehold Assistance 1) Lease Coordination and Negotiation, (for Employees who have already found a property). Lease review (if legal review is required the cost will be charged as a Direct Expense), negotiation of lease terms, coordination of all signatures required, property walkthrough and completion of a property condition form. 2) Leasehold Improvements, Assistance with negotiated improvements prior to move-in to property. Coordination of improvements and repairs to the property as required by the employee and approved by the landlord. 3) Lease coordination and Renewal, (For Employees who are extending lease at current location). Lease review (if legal review is required cost will be charged as a Direct Expense), and coordination of all signatures required. 4) Leave Novation, Negotiation of change of name (landlord or ten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctors viz. employee title, family makeup, to/from location etc. In this regard, drawing reference from the RSA, the Applicant offers packages under the relocation Management Service, in either of the following ways: a. Bundled program of a single consideration: Under this program, the Applicant offers a multitude of services in a package that are essential for the relocation of an employee and/ or his family to another location. This program is a constitution of different packages that involves various services brought under a bundled form. The said packages offer options to the clients befitting to their specific needs. Therefore, the client opts for the package that is most suitable, for relocating a specific employee (with or without family) to any other location. This program may be referred to as the standard program wherein certain sets of packages have been formed and could be opted with no customizations. It is imperative to note that such services are provided for a single consideration, wherein the separate line-item wise pricing is not identified. An illustrative list of this program is outlined herein below: Bundled program Services Included Standard & Premier - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Management Service. The said arrangements are elaborated in Article 24 (Fee Schedule) of the RSA and Exhibit A of the SOW. Direct costs typically represents remittances made to third party vendors by the Applicant. 5. Regarding the issue for which advance ruling is sought, the applicant makes the following submissions: A. The entire gamut of services discussed in Annexure A involve provision of Relocation Management Service wherein an element of provision of one service is combined with an element of provision of another service A.1 The taxable event under the Goods and Services Tax laws (hereinafter referred to as 'GST laws;) is the supply of goods and services. Classification of a supply is essential in order to determine the applicable rate of GST with respect to a particular supply. It is customary that certain transactions would require supply of a combination of services or combination of goods or combination of both goods and services that may be exigible to different rates of GST. A.2 In view of the above, the determination of classification of a transaction appears to be of utmost importance. The GST laws require that provision of more than one supply is to be classif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description. (3) Subject to the provisions of sub-section (2), the taxability of a bundled Service shall be determined in the following manner, namely:- (a) if various elements of such Service are naturally bundled in the ordinary course of business, it shall be treated as provision of the single Service which given such bundle its essential character; (b) if various elements of such service are not naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which results in highest liability of service tax. Explanation.- For the purposes of sub-section (3), the expression 'bundled service" means a bundle of provision of various services wherein an clement of provision of one service is combined with an element or elements of provision of any other service or services.)." B.2 In light of the above, where a service involves different elements, but which are rendered with a common intent towards provisioning of a main Service, each of those separate elements shall not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... example, service of stay in a hotel is often combined with a service or laundering of 3-4 items of clothing free of cost per day. Such service is an ancillary' service to the provision of hotel accommodation and the resultant package would be treated as services naturally bundled in the ordinary course of business. (iv) The other illustrative indicators, not determinative but indicative of bundling of services in ordinary course of business are: * There is a single price or the customer pays the same amount, no matter how much of the package they actually receive or use; * The elements are normally advertised as a package; * The different elements are not available separately; * The different elements are integral to one overall supply- if one or more is removed, the nature of the supply would be affected The Education Guide further prescribes that no straight jacket formula can be laid down to determine whether a service is naturally bundled in the ordinary course of business. Each case has to be individually examined in the backdrop of several factors some of which are outlined above. B.6 On a combined reading of the above and the definition of composite supply under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ger or any other similar activity, whether or not is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or clause of business; (e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members; (f) .......... (g) .......... (h) .......... (i) .......... B. 12 The question, whether an activity or service is rendered in the ordinary course of business or not is for the taxpayer to answer. The Indian judicial authorities, at various occasions, have held that the department cannot assume the role of a businessman for determining the reasonableness of a business operation. In a judicial pronouncement by the Hon'ble Supreme Court in the case of Commissioner of Income Tax v. Walchand Co. Private Limited 1976] 65 ITR 381 (SC) = 1967 (3) TMI 2 - SUPREME COURT, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e combined and connected with each other for rendering the Relocation Management Service. The construction of Applicant's business is such that the management of these services constitute a single supply of service that is offered and marketed to the clients. The manner adopted by the Applicant for providing the Relocation Management Service has a commercial expediency of the business and the same cannot be refuted by the department as unreasonable. C. Global jurisprudence- Meaning of composite supply C.1 The subject of composite supply has been dealt with globally in terms of the GST/ Indirect tax laws. The concept of composite supply is rich in jurisprudence belonging to various countries and the same has been discussed in subsequent paragraphs: Australia C.2 Composite supply under GST laws in Australia means: "a. supply that contains a dominant part and includes something that is integral, ancillary or incidental to that part. Composite supply is treated as supply of one thing." C.3 A federal court of Australia, in the case of Commissioner of Taxation v. Luxottica Retail Australia Pvt. Ltd., 2011 FCAF 20, has discussed the scope of supply' and observed that while supply i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Plan Ltd v. Commissioners of Customs & Excise, European Court Reports 1999 -00973, the ECJ pronounced that a service must be regarded as ancillary to a principal service if it does not constitute for customers an aim in itself, but a means of better enjoying the principal service supplied. C.8 Even in the instant case, the incidental and ancillary services are provided by the Applicant to the clients, with an aim to provide the Relocation Management Service fulfilling the conditions of managing and facilitating a smooth transition of an employee as prescribed by the RSA (enclosed as Annexure A to the Statement of Facts as enumerated in Annexure I) or the SOW. D. The Relocation Management Service provided by the Applicant qualifies as a composite supply under the GST Law D.1 It can be inferred that where a transaction involves supply of two or more different taxable services, but are rendered by a supplier with a common aim or intention, each of the said different services should be construed to be clubbed/ aggregated together to provide the main intent of the supplier. The clubbed services are rendered under a single classification, which provides the most specific descripti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Finance Act. E. Ambit of mixed supply E.1 The term mixed supply defined under Section 2(74) of the CGST Act, means:- "two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply" E.2 A bare reading of the above definition suggests that to qualify as a mixed supply, the supplies shall be individual supplies of goods or services and not naturally bundled in the ordinary course of business. It is further essential that the said supplies shall not qualify as a composite supply. For example, a supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on each other. E.3 For the purpose of taxability in the case of mixed supply, it is to be treated as the supply of that particular supply which attracts the highest rate of tax. E.4 It is relevant to understand that under a mixed supply arrangement, each of the supplies can be supplied separately as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided by the Applicant under the RSA/SOW are inter-connected with each other and cannot be supplied independently. E.8 Therefore, in the given scenario, the gamut of services provided by the Applicant cannot be denoted as independent of each other since the whole set of services are provided with a view to meet a single supply of Relocation Management Service. Thus, applying the above principles and observations to the facts of the Applicant's case, it is evident that the Relocation Management Service provided by the Applicant to its clients is a naturally bundled service and should constitute as a composite supply taxable in terms of Section 8(a) of the CGST Act." 6. FINDINGS & DISCUSSION: We have considered the submissions made by the applicant in their application for advance ruling as well as the additional submissions made by Sri.Harish Bindumadhavan and Ms Disha Gusahaney, Advocates, during the personal hearing. We also considered the issues involved on which advance ruling is sought by the applicant and relevant facts. At the outset, we would like to state that the provisions of both the CGST Act and the KGST Act are the same except for certain provisions. Therefore, u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices, from within the legal boundaries of India and to provide relocation management services by placing two of its employees on site at a mutually agreeable Company facility and the Company agrees to provide suitable workspace and facilities to the applicant at no cost to the applicant. (h) Regarding the agency relationship - it is clearly stated in the Article 13 that the company does appoint the applicant as its true and lawful agent to act for the Company, in their name, place and stead, for the purposes of procuring and making payments on behalf of the Company to third party suppliers who provide services within the scope of the agreement. The applicant will act as a pure agent of the Company to incur certain expenditures and costs and the applicant would neither intend to hold nor would the applicant hold any title to the goods or services so procured as pure agent. The applicant would not use such goods or services so procured and the same shall be directly used by Company or is employees and the applicant would receive from Company on actual amounts incurred to procure such goods or services from Company. (i) It is also stated that the Company shall enter into Servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e service taxes, cesses and duties levied by the Government of India, or any other State or local authority within India, in connection with the services rendered under this agreement. The applicant will not charge service tax on reimbursement which are incurred in the capacity of a pure agent or service tax would be charged only on the service charges and Direct Costs incurred in the course of providing the services and not on reimbursements. All the above points in the agreement show that the applicant is only acting as an agent of the Company to which it is providing service and the service is based on the requirement of each of the employee of the Company. The employee of the Company chooses the services required for him and the applicant facilitates the provision of such services and each of the value of the services is fixed by the agreement and separate Service Charges are fixed. Hence there is no common price involved in the entire service and hence is not covered under a single package. Composite Supply is defined under clause (30) of section 2 of the CGST Act as under: "(30) "composite supply means a supply made by a taxable person to a recipient consisting of two or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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