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TMI Blog2024 (10) TMI 1308X X X X Extracts X X X X X X X X Extracts X X X X ..... pport Services as well as Engineering Support Services (ITS). It is stated to have entered into a Service Level Agreement with its parent and holding company M/s Atlan Pte. Ltd. [Atlan Singapore] located in Singapore for rendering ITS. The petitioner avers that the service provided to Atlan Singapore would amount to an 'export of services' as defined in the Integrated Goods and Services Tax Act, 2017 [IGST]. 4. On 27 October 2022 and 11 January 2023 the petitioner filed two applications for refund seeking the return of unutilized Input Tax Credit [ITC] amounting to INR 46,05,196/- for the period June 2020 to September 2020 and INR 23,61,049/- for the period October 2020 to December 2020. It was these applications which came to be rejected by the Order-in-Original with the authority taking the view that the petitioner was liable to be treated as an "intermediary" between Atlan Singapore and others and consequently the services supplied not being entitled to be placed in the category of 'export of services'. It was these orders which ultimately came to be challenged by way of appeal which met a similar fate in terms of the order dated 22 June 2023 and which too stands impugned befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use shall apply in the case of services supplied in respect of goods which are temporarily imported into India for repairs or for any other treatment or process and are exported after such repairs or treatment or process without being put to any use in India, other than that which is required for such repairs or treatment or process;] (b) services supplied to an individual, represented either as the recipient of services or a person acting on behalf of the recipient, which require the physical presence of the recipient or the person acting on his behalf, with the supplier for the supply of services. (4) The place of supply of services supplied directly in relation to an immovable property, including services supplied in this regard by experts and estate agents, supply of accommodation by a hotel, inn, guest house, club or campsite, by whatever name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including that of architects or interior decorators, shall be the place where the immovable property is located or intended to be located. (5) The place of supply of services supplied by way of admission to, or organi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such institutions, as the Reserve Bank of India may, with the previous approval of the Central Government and by notification in the Official Gazette, specify. [***] (10) The place of supply in respect of passenger transportation services shall be the place where the passenger embarks on the conveyance for a continuous journey. (11) The place of supply of services provided on board a conveyance during the course of a passenger transport operation, including services intended to be wholly or substantially consumed while on board, shall be the first scheduled point of departure of that conveyance for the journey. (12) The place of supply of online information and database access or retrieval services shall be the location of the recipient of services. Explanation.--For the purposes of this sub-section, person receiving such services shall be deemed to be located in the taxable territory, if any two of the following non-contradictory conditions are satisfied, namely:-- (a) the location of address presented by the recipient of services through internet is in the taxable territory; (b) the credit card or debit card or store value card or charge card or smart card or an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rage the resources and wherewithal of the Service Provider towards fulfillment of Service Recipient's Purpose outside India and had approached the Service Provider to provide an expression of interest to render the Services (as defined below) to the Service Recipient; D. The Service Provider has expressed its willingness to provide the Services to the Service Recipient from the Execution Date, on the terms and conditions as mutually agreed between the Parties, towards fulfillment of Service Recipient's Purpose outside India; and E. Pursuant to various rounds of discussions between the Service Recipient and the Service Provider, the Parties are now executing this written agreement to record the terms and conditions agreed between them in respect of the Services and certain rights and obligations inter se the Parties. THE PARTIES HERETO AGREE AS FOLLOWS: 1. Services. 1.1 The Service Provider shall act as an independent contractor to the Service Recipient and as per requirement of the Service Recipient, shall render certain services to the Service Recipient, as specified in Annexure A hereto ("Services"), on a principal to principal basis. 1.2 The Parties hereby ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the payment of the Service Fees shall be promptly made by the Service Recipient SGD/USD/INR denomination to the designated bank account of the Service Provider. It is further agreed between the Parties that the Service Fees shall be adjusted in order to cover any loss incurred by the Service Provider on account of foreign exchange fluctuation and all the risk relating to foreign exchange fluctuation shall be borne by the Service Recipient. Similarly, any gain on account of foreign exchange fluctuation shall be adjusted by the Service Provider in the subsequent invoice. The payment of Service Fees shall not be unreasonably withheld by the Service Recipient in the event of the Service Provider being prevented from performing the Services or a part thereof due to any reason or happening of any event beyond the control of the Service Provider. 2.4 Out of Pocket Expenses- Any out of pocket expenses incurred by the Service Provider pursuant to providing Services to the Service Recipient under the Agreement, including, but not limited to, expenses incurred on account of travel, food, accommodation, server usage and tech expense (subscription to online tools and other platforms), i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same. 4. Roles and obligations of the Service Provider. 4.1 Quality of Service. The Service Provider shall make reasonable endeavour that the Services are performed in a professional and competent manner, consistent with industry standards reasonably applicable to such services. 4.2 Approvals and Authorizations. The Service Provider shall procure, or cause to be procured, all necessary information, approvals, permissions, authorisations or decisions (collectively, "Approvals") that are reasonably necessary to render the Services to the Service Recipient. In an event the Service Provider requires certain Approvals from the Service Recipient, the Service Recipient or its authorized representatives shall respond promptly, and in any case, within 7 (seven) days, to any requests by the Service Provider or its authorized personnel in writing to this effect. 4.3 Performance of the Services. The Service Provider, and not the Service Recipient, shall have the right to control the manner and means by which the Services are to be completed by the Service Provider pursuant to this Agreement. The Service Recipient shall retain the right, however, to ensure that the Services are being pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms, including legal and accounting firms, in order to properly render its roles and responsibilities under this Agreement in India. (d) Branding and Publicity. The Service Provider shall engage in branding and publicity of Service Recipient's Business by engaging and investing the necessary resources and using its best efforts towards advertising, marketing and promoting the Service Recipient's Business." 10. We additionally take note of Circular No. 159/15/2021-GST dated 20 September 2021 issued by the GST Policy Wing of the Central Board of Indirect Taxes and Customs, which had issued a clarification on the doubts raised with respect to the scope of 'intermediary' services. The said Circular reads as follows: "Subject: Clarification on doubts related to scope of "Intermediary"-reg. Representations have been received citing ambiguity caused in interpretation of the scope of "Intermediary services" in the GST Law. The matter has been examined. In view of the difficulties being faced by the trade and industry and to ensure uniformity in the implementation of the provisions of the law across field formations, the Board, in exercise of its powers conferred by section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es" another supply (the "main supply") between two or more other persons and, does not himself provide the main supply. 3.2 Two distinct supplies: As discussed above, there are two distinct supplies in case of provision of intermediary services; (1) Main supply, between the two principals, which can be a supply of goods or services or securities; (2) Ancillary supply, which is the service of facilitating or arranging the main supply between the two principals. This ancillary supply is supply of intermediary service and is clearly identifiable and distinguished from the main supply. A person involved in supply of main supply on principal to principal basis to another person cannot be considered as supplier of intermediary service. 3.3 Intermediary service provider to have the character of an agent, broker or any other similar person: The definition of "intermediary" itself provides that intermediary service provider means a broker, an agent or any other person, by whatever name called....". This part of the definition is not inclusive but uses the expression "means" and does not expand the definition by any known expression of expansion such as "and includes". The use of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision of place of supply of 'intermediary services' under section 13 of the IGST Act shall be invoked only when either the location of supplier of intermediary services or location of the recipient of intermediary services is outside India. 4. Applying the above mentioned guiding principles, the issue of intermediary services is clarified through the following illustrations: Illustration 1 `A' is a manufacturer and supplier of a machine. 'C' helps 'A' in selling the machine by identifying client 'B' who wants to purchase this machine and helps in finalizing the contract of supply of machine by 'A' to 'B'. 'C' charges 'A' for his services of locating 'B' and helping in finalizing the sale of machine between 'A' and 'B', for which 'C' invoices 'A' and is paid by 'A' for the same. While 'A' and 'B' are involved in the main supply of the machinery, 'C', is facilitating the supply of machine between 'A' and 'B'. In this arrangement, 'C' is providing the ancillary supply of arranging or facilitating the 'main suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;. 'B' provides customer care service to 'A' by interacting with the customers of 'A' and addressing / processing their queries / complains. 'B' charges 'A' for this service. 'B' is involved in supply of main service 'customer care service' to 'A', and therefore, "B' is not an intermediary. 5. The illustrations given in para 4 above are only indicative and not exhaustive. The illustrations are also generic in nature and should not be interpreted to mean that the service categories mentioned therein are inherently either intermediary services or otherwise. Whether or not, a specific service would fall under intermediary services within the meaning of sub-section (13) of section 2 of the IGST Act, would depend upon the facts of the specific case. While examining the facts of the case and the terms of contract, the basic characteristics of intermediary services, as discussed in para 3 above, should be kept in consideration. 6. It is requested that suitable trade notices may be issued to publicize the contents of this Circular. 7. Difficulty, if any, in the implementation of this Circular may be brought to the no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view that was taken by the respondents in this regard. As is manifest from a reading of that agreement, the ITS was envisaged to be provided by the writ petitioner itself to the entity situate outside India. The petitioner was clearly not one which was facilitating the supply between two or more persons. It was itself directly engaged in the provision of supply. In view of the above, the foundational basis of the impugned orders itself is rendered unsustainable. 15. The view taken by the respondents is additionally rendered wholly untenable and erroneous when tested on the basis of the Circular extracted hereinabove. The impugned orders do not rest on any material or evidence which could have been even remotely read as being suggestive of the petitioner being an intermediary as explained. The consistent stand of the petitioner had been that it was supplying service on a principal to principal basis. The respondents do not rest their decision on a finding that there was a tripartite agreement for the supply of services. 16. The stress which was sought to be laid upon the petitioner being entitled to a mark-up is equally misconceived when we bear in consideration that the serv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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