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TMI Blog2020 (6) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... the liability to pay tax from the hands of the supplier to the recipient. It does not create any liability. We have to first see whether there is any liability and if there is a liability to pay tax on a particular transaction then the liability to pay tax on that transaction would shift from the usual supplier to the exceptional recipient as per Notification No. 10/2017-IGST (Rate) dated 28-06-2017. If the transaction itself is exempt, there is no liability on the recipient of service. Since Type 3 is not an OIDAR service, there wont be any special liability on the supplier located outside India and hence the entire transaction is exempted both in the hands of the supplier and also the recipient by virtue of Sl No. 10 of Notification No. 09/2017-IGST (R) dated 28.06.2017. Self-administered test taken by the candidates - the candidate is required to go to the test center, where an administrator will verify the identity of the candidate, validate test registration and appointment of the candidate - Whether the service provided for type 2 test (the specified service) classifies as Online Information and Database Retrieval Services ? - HELD THAT:- The service provided for type 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Principal Commissioner of Central Tax, Bengaluru West, who has been designated for the grant of registration in such cases. Hence the matter is heard. STATEMENT OF FACTS 4. NCS Pearson Inc.,( hereinafter referred to as the applicant), a Minnesota Corporation, having its registered office at 5601 Green Valley Drive, Bloomington, Minnesota - 55437, USA, , has a business division Pearson VUE engaged in the provision of computer based test (alternatively referred to as exams) administration solutions to its clients (test sponsors) like educational institutes, professional licensing organizations, etc. 5. The activities undertaken by the applicant in performing the services and delivery to its clients broadly include the following: a) Software development services - the applicant provides electronic software to enable candidates (alternatively referred to as test-takers ) to take the online test on such electronic platform; b) Appointment or establishment of test centers worldwide in cities or other locations where candidates can take the online exam; c) Test / exam registration services; d) Test delivery; e) Exam scoring; f) Data man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the candidate has completed the test, the scores are provided by a computer-based algorithm on the electronic software and the test-taker gets the result immediately on completion of the test at the test center itself. The test administrator is responsible for sharing the candidate s printed unofficial score report. In addition to this, the entire process is recorded by cameras as a video and such video recording of the test-taker s testing session is reviewed by a test security official to validate any testing issues (or to confirm any testing suspicions) that may have arisen during the test administration. Type 3 Test: 6.3 These tests contain a mixture of multiple choice questions and analytical writing assessment section i.e. essay-based questions. For candidates from India, the test is taken at test centers in India at a computer workstation which is physically administered and supervised by an invigilator (proctor) as described in the type 2 test above. The candidates may create a profile, schedule the appointment and remit payment using a registration center (call center). The test is completed in parts viz. at the end of the exam, the test-taker is able to see th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsidiary company of the applicant to act as Pearson VUE Authorized Test Centers (hereinafter referred to as Testing centers). These third party service providers though independent operators have entered into a contract with the applicant to provide secure test center services to the applicant for delivery of the tests including verification of candidates identity, invigilation etc. 10. Applicant submitted that under Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as IGST Act ), the applicant is of the opinion that the type 1 test which is entirely automated, falls under the category online information and database access or retrieval services (hereinafter referred to as OIDAR service) as defined under section 2(17) of the IGST Act. Further, the individual test takers (service recipients) who register for the test qualify as non-taxable online recipients in terms of section 2(16) of the IGST Act. Accordingly, in terms of section 14(1) of the IGST Act, the applicant, being a service provider located in non-taxable territory, has obtained GST registration and is discharging IGST on the supply of OIDAR service to a non-taxable online recipient in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possible in the absence of information technology. The applicant submitted that while assessing the classification of OIDAR services all the above four conditions have to be taken into account on equal basis and does not place more value to some of these elements and less to others. In the instant case, the delivery of the all the three types of test is mediated by information technology over an electronic network and the set-up of the online test is such that it is impossible to ensure supply in the absence of information technology. 12.2 The applicant submitted that in the case of Type 1 tests which are self-administered by the candidates (test-takers) and are entirely digital in nature. The test-taker uses an Internet browser for the entire experience ranging from creating a personal profile, selecting the desired test, remitting payment directly to the applicant, taking the test, scoring and viewing results. The tests are not required to be taken from the test centers and can be taken from any location as desired by the candidate. In this type 1 test no invigilation is required as a result, the entire test process requires minimal human intervention and accordingly, all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Exhibit B) . This circular provides an indicative list of OIDAR services. At serial no. 16(5)(b) of the circular, it is specifically stated that workbooks completed by pupils online and marked automatically, without human intervention should be treated as OIDAR services. The relevant extract of the same is reproduced below for your ready reference: (5) supply of distance teaching. (a) Automated distance teaching dependent on the Internet or similar electronic network to function and the supply of which requires limited or no human intervention, including virtual classrooms, except where the Internet or similar electronic network is used as a tool simply for communication between the teacher and student; (b) workbooks completed by pupils online and marked automatically, without human intervention. 12.6 In the conext of the minimal human intervention applicant place a reliance on the guidance issued in other countries wherein similar tax provisions exists. Applicant refer to the Guidelines agreed by the VAT Committee of the European Commission dated 28 February 2017 (attached as Exhibit C ) to understand the notion of minimal human intervention. The guidelin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also required for evaluation and scoring of essay-based questions (by 1 st stage evaluator) and also for the expert evaluation if the difference in scores provided by the computers algorithm and 1 st stage human-evaluator is more than 1 point. 12.9 The applicant submitted that type 3 test is an extension of type 2 test and similarly requires more than minimal human intervention in order to complete the provision of the service. In this regard applicant again palace a reliance on Circular No. 202/12/2016-Service Tax dated 9 November 2016 providing clarification on taxability and classification of OIDAR service by referring serial no. 16(5)(b) of the circular. 12.10 Therefore, the applicant submitted that the taxability criteria of OIDAR services under the GST regime remains the same as prevalent under the service tax regime. Thus, it can be understood that automatic marking is critical for a service to qualify as OIDAR service and hence, if the marking is done by a human evaluator then this will involve more than minimal human intervention and hence, will not qualify as OIDAR service. Hence, the applicant submits that Type 3 test should not qualify as OIDAR service. 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the Applicant in their application for advance ruling as well as the submissions made by them during the personal hearing. We have also considered the issues involved, on which advance ruling is sought by the applicant, and relevant facts. 14.1 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, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the KGST Act. 14.2 The applicant is an intermediary located in non taxable territory and provides services of online exams/ tests via electronic software to the non taxable online recipients in India which he has classified into three categories. For activities mentioned under Type 1, the applicant is clear regarding the taxability and has approached the Authority only for Type 2 and Type 3 activities performed by them. In the following paras, we will discuss Type 2 and Type 3 activities as mentioned by the applicant. 14.3 The test taker in TYPE 2 needs to create a profile, schedule an appointment for the test and remit paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cussed in detail and explained with illustrations. The applicant have specifically relied upon the following guideline: Where such individual supply made to the customer requires human intervention on the side of the supplier it should be seen as involving more than just minimal human intervention. Here, the applicant has interpreted the guideline quite literally by stating that the administrator is verifying the identity of each individual test taker. However, we understand that the Commission is more focused on catering to every individual and thereby a distinct need of the service recipient in a specific manner by the supplier will make the activity something more than minimal human intervention. This is evident from para 2.2 (6) (9) of Guidelines agreed by the VAT Committee of European Commission dated 28.02.2017 which are reproduced below: The activity of (a) real person(s) organized by the supplier of services (like for example a person spinning the wheel of the roulette or drawing physical cards to play black jack or baccarat), performed independently from the requests made to provide a particular supply to an individual customer, is to be seen as falling withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter human intervention, Type 3 tests requires more than minimal human intervention in order to complete the provision of the service. They have also relied upon CBEC Circular No. 202/ 12/2016-Service Tax dated 09.11.2016 and flyer prepared by NACEN for reference on OIDAR under GST. 14.8 We observe that Board has provided an indicative list of OIDAR Services and among others, we quote the following relevant service: Workbooks completed by pupils online and marked automatically, without human intervention. We note that since tests are scored after human intervention in type 3, it should be outside the purview of OIDAR. Infact, the second example provided by the applicant in the grounds of applications while discussing Type 2 case, helps and fits in type 3 scenario. 14.9. The applicant have asked that if their activity under type 2 or type 3 tests are not falling under OIDAR Services, then is tax to be paid on RCM as per Sl. No. 1 of Notification No. 10/2017-IGST (R) dated 28.06.2017 or will the activity be considered exempted in terms of Sl No. 10 of Notification No. 09/2017-IGST (R) dated 28.06.2017. 14.10. Sl No. 10 of Notification No. 09/2017-IGST (R) dated 28.06. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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