2018 (12) TMI 1006 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – TMI – Levy of GST – marketing, promotion and distribution services provided by Sabre India to Sabre APAC – export of service – Section 2(6) of the Integrated Goods and Service Tax Act 2017 read With CGST Act – place of supply of services – distinct person – Composite supply – intermediary services – Held that:- Applicant are on the lookout for potential subscribers who are willing to use the CRS software in their business. It is also important to note that these potential subscribers also require such software for use in their business and require the help/ assistance of the applicant to reach out to Sabre APAC to obtain the said software.
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Admittedly, the Applicant also undertakes sales promotion and marketing support activities to advance the business of Sabre APAC in India by way of giving marketing support services which includes activities such as PR, promotions, sponsorship, special events and trade shows, as
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heir own in India. It is the sales team of the Applicant which approaches potential subscribers in India to whom they explain the features of the CRS Software and the flexibility of said software to integrate with the potential subscriber’s system for smooth functioning. Once the applicant gets a positive response from the subscriber, they scan the credentials and the business potential of the subscriber to whom it is proposed to market the CRS Software.
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The applicant is not providing services on their own account but on account of Sabre APAC, and thus it is very apparent that the applicant is providing Intermediary Services in the instant case – Since the applicant, being the supplier of service is located in India and the recipient of Service i.e. supplier of goods is located outside India, Section 13 of the IGST Act, 2017 would be applicable to determine the place of service – Since the place of supply of services in the instant case is in taxable territory, the said intermedi
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ROCEEDINGS (Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as the CGST Act and MGST Act ] by Sabre Travel Network India Pvt Ltd, the applicant, seeking an advance ruling in respect of the following question. Whether the marketing, promotion and distribution services (hereinafter referred to as the Said Services ) provided by Sabre India to Sabre APAC would be subject to tax under the Central Goods & Services Tax Act 2017 and the Maharashtra Goods & Services Tax Act 2017 (hereinafter referred to as Said Tax Acts ) or would remain excluded under the said Acts as the said activities qualify as export of service in accordance to Section 2(6) of the Integrated Goods and Service Tax Act 2017 read With the said Tax Acts? At the outset,
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owned subsidiary of Sabre Asia Pacific Pte. Ltd. (hereinafter referred to as Sabre APAC ), a leading provider of travel solutions and services across the globe. B. Sabre GLBL Inc an affiliate of Sabre APAC and Sabre India, has developed a global distribution system which uses a Computer Reservation System Software ( CRS Software ) which it owns and operates. The said CRS Software performs various functions including airline seat reservations, scheduling, booking for a variety of air, car and hotel services, automated ticketing and fare displays, etc. C. Sabre GLBL Inc., had granted to Sabre Marketing Nederland B-V., a non-exclusive right to market and promote the CRS Software outside the United States, which it had subsequently sub-licensed to Sabre APAC – located in Abacus Plaza, 3 Tampines Central 1, # 08-01, Singapore 529540 – for specified Asia Pacific jurisdictions. Sabre APAC has further been authorized to sub-license certain parts of its marketing rights and obligations to local
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ns, sponsorship, and special events and trade shows; and iv) Any other services necessary or advisable to perform its obligations under the said Marketing Agreement. F. Marketing Agreement and its Operation: In view of the above, the Applicant undertakes the following activities in relation to the marketing and promotion services provided by them under the Marketing Agreement dated 31 October 2016: According, while marketing access to the CRS Software, the sales team of the Applicant approaches potential subscribers in India to whom they explain the features of the CRS Software and the flexibility of same to integrate with the potential subscriber s system for smooth functioning; Thereafter, in the event of a positive response, the Applicant scans the credentials and the business potential of the subscriber to whom it proposes to market the CRS Software; Based or an organizational and workflow analysis of the subscriber and following a background check of their prior activities, the ap
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scouting of potential subscribers and the said organizational and workflow analysis of such potential subscribers are the deliverables by the Applicant which is submitted in the SCMS system in the form of a non-binding request. Herein, the responsibility of the Applicant, stands completed on the identification of the potential subscribers to Sabre APAC. Subsequently, their responsibility of providing marketing support services (e.g. installation of interfaces to the CRS Software, consultancy, assistance, provision of information services, etc.) relating to the CRS System arises only once Sabre APAC decides to accept the potential customer based on the analysis provided by the Applicant. Thus, based on the analysis Of the subscriber s business provided by the Applicant, Sabre APAC makes a decision on whether or not to allot a Pseudo City Code to the potential subscriber and it is only following an affirmative decision that the Applicant s engineers install user interfaces to access the
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pplicant raises a consolidated monthly invoice for the fees to be received from Sabre APAC for all the services rendered to them. The said fees, which is received in the form of convertible foreign exchange, is calculated on a cost plus a mark-up basis as per the terms of the said Marketing Agreement. Further, the amount so received is in accordance to the domestic arm s length requirements under the local transfer pricing laws. Hereto annexed and marked as Exhibit B are sample copies of invoices issued to Sabre APAC. I. Basis the above facts, the various roles and responsibilities of the Applicant and Sabre APAC Under the Marketing Agreement dated 31 October 2016 are distinguished below: Sr. No Functions Duties of Sabre APAC Duties of Applicant 1. Strategic Management functions Planning, formulating and implementation of business goals and vision inter alia based on inputs from the Applicant No participation of the Applicant. 2. Engaging distributors including partners and resellers D
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plicant identifies potential customers, demonstrates offerings, etc. In context with the scope and explanation of Para 2.3 and 2.4 of the said agreement, it is evident that the applicant has the right to negotiate and execute agreements with Subscribers. Subscribers agreement entered into by the Applicant in its own name and on its own account. The clauses referred pertains to the incentives and other benefits that Sabre India may offer to the Subscribers viz. travel agents and others who may want to use the CRS. This is because the use of CRS is generally free and there is nothing of significance normally charged by Sabre India or Sabre APAC for registration of subscribers. 4. Responding to enquiries Provide inputs as and when specifically sought by the Applicant Attend to product and services related queries of the potential and existing subscribers as and when required. 5. Consultancy Services Basis the business analysis undertaken by the Applicant, Sabre APAC makes a decision on wh
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ions Formulation and adoption of strategies, based on inputs of the Applicant Advise Sabre APAC on any changes in market, organization, any political, financial, legislative, industrial or other events in within the prescribed territory of India. 10. Provide information on market trends, competitors, and new products and services in the Territory Decision making based on inputs received from the Applicant Advise Sabre APAC on any changes in market, organization, any political, financial, legislative, industrial or other events in within the prescribed territory of India. J. Further, Article 11 of the Agreement provides that there is no partnership or agency activity performed by the applicant. The relevant Article is reproduced as below for ready reference: ARTICLE 11 No Partnership/Agency Nothing in this agreement is intended to or shall operate to create a partnership or joint venture of any kind between Sabre APAC and Sabre India, or to authorize either Sabre APAC or Sabre India to
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l to this application and accordingly submits this application before the Hon ble Authority for Advance Ruling. Grounds for Application /Interpretation of law in respect of the questions on which advance ruling is sought The Applicant makes the following factual and legal submissions in relation to the aforesaid questions: The Applicant is a registered Goods and Service Tax (hereinafter referred to as GST ) assesse holding registration certificate bearing no. 27 AAACA4836H2ZR and is engaged in the business of providing marketing, promotion and distribution services to Sabre APAC. As per the definition of Advance Ruling under Section 95(a) of the Central Goods and Service Tax Act, 2017 (hereinafter referred to as CGST Act ), an Applicant already engaged in business activities can seek an advance ruling in respect of matters or questions specified in Section 97 (2) of the CGST Act, in relation to the supply of goods either proposed to be undertaken or is already being undertaken by the A
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INTERPRETATION OF LAW AND FACTS The principal question raised by the Applicant is whether the the marketing, promotion and distribution services (hereinafter referred to as Said activities ) provided by the Applicant to Sabre APAC would be subject to tax under the Central Goods & Services Tax Act 2017 and the Maharashtra Goods & Services Tax Act 2017 (hereinafter referred to as Said Tax Acts ) or would remain excluded under the said tax Acts as the said activities qualify as export of service in accordance with Section 2(6) of the Integrated Goods & Services Tax Act 2017 read with the Said Tax Acts. In other words the question is as to whether the said activities provided to Sabre APAC qualifies as an export of service in accordance to Section 2(6) of the Integrated Goods and Service Tax Act 2017 (hereinafter referred to as IGST Act ) read with Section 16 of the said Act so as to come under the definition of zero rated supplies which are eligible to qualify as export servi
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e eligibility to tax of any activity is dependent on two aspects, viz. whether it is taxable under the provisions Of the GST Acts and secondly whether the same is eligible for any exclusion for purpose of taxation under the GST Acts. Accordingly, it is necessary to first identify the taxability of the services under GST Acts and further the parameters for any exclusion from tax as are applicable in the facts and circumstances of the present case. 1.3 Determination of taxability: 1.3.1 It is submitted that as opposed to the erstwhile indirect tax regime where the taxable event was identified on specific events such as manufacture, sale or provision of service; under the provisions of the GST Acts, all such events have been Subsumed under the single umbrella of supply as prescribed under Section 7 of the CGST Act. 1.3.2 It is submitted that for a service to qualify as supply under Section 7 of the CGST Act, It is necessary for the provision of the same to occur in the normal course of bu
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of the above, the incidence of GST will follow the destination principle and the tax revenue will accrue to the state where the goods or services are consumed. For this reason only, specific provisions have been framed under the IGST Act for the determination of the place of consumption of goods and services. In this manner, for the supply of any services where the location of the supplier or the location of the recipient is located outside India, the place of supply would be determined as per SABR Section 13 of the IGST Act. The said provision reads as follows: 13. (1) The provisions of this section shall apply to determine the place of supply of services where the location of the supplier of services or the location of the recipient of services is outside India. (2) The place of supply of services except the services specified in sub-sections (3) to (13) shall be the location of the recipient of services: Provided that where the location of the recipient of services is not available
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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 . Herein the term establishment of distinct persons has been explained in explanation 1 under Section 8 of the IGST Act which read as follows: Explanation 1 .-For the purposes of this Act, where a person has, – (i) an establishment in India and any other establishment outside India; (ii) an establishment in a state or Union territory and any other establishment outside that State or Union territory; or (iii) an establishment in a State or Union territory and any other establishment being a business vertical registered within that State or Union
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c 2(70) of CGST Act, 2017 and reads as follows. (a) where a supply is received at a place of business for which the registration has been 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 place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and (d) in absence of such places, the location of the usual place of residence of the recipient; In the facts of the case, the Certificate of Registration for Sabre APAC is at its registered office in Abacus Plaza, 3 Tampines Central 1, Abacus Plaza, #08-01, Singapore 529540 and is evidenced by the same copy of which is attached as Exhibit-c. iii) The place of supply of services is outside India: the servic
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ttance Certificates ( FIRC ) showing that the receipt of consideration is in convertible foreign exchange is annexed and marked as Exhibit-E. v) The supplier of service and the recipient of service gre not merely establishments of a distinct person in accordance with Explanation 1 in Section 8 of the IGST Act: The Applicant is located in India and Sabre APAC is located outside India. Thus, the Applicant and Sabre APAC are distinct entities as per the terms of explanation 1 in Section 8 of the IGST Act. Moreover, they undertake operation in their own capacity on principal to principal basis and are not merely establishments of distinct persons. 1.53 It is submitted that the main service of the Applicant under the Marketing Agreement is solely to provide market access to the CRS Software and to build the Sabre System as defined in the said Agreement in India. The Applicant merely identifies potential clients and only on acceptance of the same by Sabre APAC does the Applicant provide any
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CANNOT FALL UNDERINTERMEDIARY SERVICES AS PER THE TERMS OF SECTION 2013 OF THE IGST ACT: The services rendered by the Appellant are not in the nature of intermediary services. 2.1 At the outset the Applicant wishes to reiterate and emphasize that, the Applicant provides the services to Sabre APAC on principal to principal basis with the only intention of promoting and marketing of CRS Software in India. 2.2 In this regard it is also necessary to examine the scope of the expression intermediary as defined under Section 2(13) of the IGST Act. 2.3 It is submitted that the Marketing Agreement between the Applicant and Sabre APAC do not intend to operate so as to create a partnership or a joint-venture between the Applicant and Sabre India. It is a contractual relationship is between to two distinct entities for the supply of services from India and the receipt of the same in Singapore. Furthermore, neither does any clause of the Marketing Agreement requires any facilitation or any similar
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efinition of intermediary or not, it is pertinent to analyze the term intermediary in detail vis-a-vis activities performed by the Applicant as per the agreement entered into with Sabre APAC. 2.6 In terms of provisions of Section 2(13) of the IGST Act, intermediary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account. As per the said definition, the person who arranges or facilitates transactions in securities will as be considered as an Intermediary. 2.7 The above definition of intermediary has following three parts: Such person should be a broker or an agent or similar person Such person should arrange or facilitate Supply of goods or services or both or securities between two or more persons Should not be a person who supplies goods or services or bo
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whom the principal confides his whole business or all transactions or functions of a designated class; or he is a person who is authorized by his principal to execute all deeds, sign all contracts, or purchase all goods, required in a particular trade, business, or employment. 2.10 The dictionary meanings extracted above, clearly indicate that, an element of representation of acting on behalf of the other person should be mainly present for a person to be considered as broker or agent . In other words, Agent or a Broker represent and act on behalf of another person i.e. the principal, and do not work at their own behest but as a representative of on behalf of their principal. Therefore, it can fairly be concluded that a principal – agency relationship between persons forms the core requirement of an agent or a broker. 2.11 Besides, the last phrase in the means clause of the definition of intermediary contains the clause or any other person, by whatever name called . The most appropria
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ating the supply of goods or services or both, or securities between two or more persons, by a broker or an agent would be tantamountata intermediary services. 2.14 The said definition makes it clear that only a person being a broker or an agent or any person acting on behalf of the principal, arranging or facilitating the supply of goods or services or both between two or more persons would be construed to be an intermediary. 2.15 Moreover, the said definition also contains an exclusion in as much as any person (including a broker, agent or any other person) who provides the main supply on his own account will not qualify as an intermediary. In other words, if a person provides the supply on his own account, then such a supplier is not covered under the definition of term intermediary. 2.16 Accordingly, having regard to the analysis of definition of intermediary services it can clearly be said the Applicant being a person who supplies the main services on its own account does not qual
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ment i.e. such arrangement ought to have at least three parties – seller, buyer and the agent. Whereas, no clause of the Marketing Agreement between the Applicant and Sabre APAC, mentions the rendering of facilitation or arrangement of services by the Applicant between Sabre APAC and the Subscriber. The Agreement does not facilitate nor does it enable the facilitation of any supply of services between Sabre APAC and the Subscriber. There is no privity of contract between the Applicant and the Subscriber namely travel agent in India where by the Applicant is under any obligation or duty owed to the Subscriber in terms of the arrangement with the Sabre APAC under the Marketing Agreement 2.19 Hence, the Applicant does not qualify as an intermediary as per Section 2(13) of IGST Act. Moreover, considering the principal to principal character of the agreement, the Applicant provides marketing, promotion and distribution Services in relation to the CRS Software only tb Sabre APAC and not to a
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dentifiable from the main supply of service that he is arranging. It can be based on an agreed percentage of the Sale or purchase price. Generally, the amount charged by an agent from his principal is referred to as commission Identity and title: The service provided by the intermediary on behalf of the principal is clearly identifiable. Further the said Educational Guide at para 5.9.6 has stated as follows: Similarly, persons such as call centres, who provide services to their clients by dealing with the customers of the client or the client s behalf, but actually provide these services on their own account, will not be categorised as intermediaries ………………….. (emphasis supplied) 2.21 It is imperative to analyze the nature of services rendered by the Applicant in light of the above guiding principles. Accordingly the same is discussed in the below paragraphs: Nature and value: Applicant is facilitating service between travel agents and S
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alone is the service receiver and no other person even if such other person were to indirectly benefit from the provision of the main service. Identity and title: The third principle indicates that the service provided on behalf of the principal is clearly identifiable. The Applicant submits that as per Article 11 Of the Agreement, the relationship between the parties is Clearly restricts the performance of the activity in the nature Of Agent. Therefore the Applicant submits that no services is provided by the Applicant on behalf of Sabre APAC The activities performed by the Applicant directly to Sabre APAC is only on a principal to principal basis. 2.22 Accordingly, the services rendered by the Applicant do not satisfy any of the guiding principles laid down under the erstwhile Service Tax regime in relation to intermediary services. 2.23 In the light of the above detailed analysis and discussions, it is submitted that the services provided by the Applicant are only in the nature of m
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wing reasons: i) Services provided by the Applicant only involve standalone activities such as market survey, advising Sabre APAC on marketing strategies, conducting promotional activities and responding to prospective queries that may arise out of the same ii) in any case, the Applicant does not arrange or facilitate any supply of goods or services inter alia due to the following reasons: The Applicant cannot conclude the contracts on behalf of Sabre APAC or to make any commitment on the behalf of Sabre APAC as an agent or otherwise or to bind Sabre APAC in any respect. The Applicant does not have any authority to allow the creation of the Pseudo City Code in favour of the subscriber to grant access to the CRS Software. The applicant s role is limited to undertaking marketing and promotional activities, undertake market research and informing of Sabre APAC of interest of potential customers immediately by raising a request for grant of a Pseudo City Code. It does not have any authorit
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ately provided by Sabre APAC. This evidences that the Applicant receives fee for provision of services to Sabre APAC and not any commission as in case of agency relationship and hence, does not arrange or facilitate any supply of services to Sabre APAC. 2.26 In light of the above detailed analysis and discussions, it is submitted that, the services SABEN provided by the Applicant are limited to marketing, promotion, distribution activities and other support activities. 3. THE SERVICES RENDERED BY THE APPLICANT IS CLASSIFIABLE AS A COMPOSITE SUPPLY AS PER THE TERMS OF SECTION 230) OF THE CGST ACT: 3.1 It is submitted that under the Marketing Agreement dated 31 October 2016 with the Sabre APAC, the Applicant provides in an integrated manner, a bundle of services in relation to marketing and promotion of CRS Software within the territory of India which includes advertising, identification of potential business opportunities, demonstrating offerings, consultancy, promotion, sponsorships an
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to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply 3.4 Thus, for a supply to be treated as a composite supply, it has to meet the following conditions: the supply should consist of two or more taxable supplies; they should be naturally bundled together; they should be sold in conjunction with each other; and One of the supplies should be the principal supply, i.e, the predominant portion of the supply to which the other supply is ancillary 3.5 It is submitted that in the present case, the services like consultancy, promotion, sponsorships and other related support services are of a supplementary nature which facilitate the provision of the marketing and promotion services rendered by the Applicant to Sabre APAC. Therefore, said service of marketing access to the CRS Software is of
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IGST Act, to avail the benefit of export of taxable services, the services are to be delivered outside India and used outside India and payment for services exported should have been received by the service provider in convertible foreign exchange. Admittedly, the services provided by the Applicant of identification of potential customers are non-binding in nature with Sabre APAC having the option to not follow the recommendations/evaluations made by the Applicant. The Appellant is not involved in the decision making process of the service recipients with regard to the provision of access of the CRS Software. Further, the marketing support services too are provided by the Applicant to Sabre APAC under of the marketing Agreement. Thus, no part of the Marketing Agreement facilitates or arranges the supply of services, but actually creates an obligation to provide the said services directly to Sabre APAC on a principal-to-principal basis. Additionally, although the overseas clients use t
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Section (30) of the CGST Act and thus all such supplementary activities would also be excluded from the Said Acts. Without prejudice to above submission, the Applicant respectfully requests Your Honor to grant an opportunity of personal hearing in this matter in order to explain the matter more lucidly. The Applicant reserves their right to modify, rescind or alter any part of submissions and to place additional evidence in support of their contention at the time of personal hearing. WRITTEN SUBMISSION AT THE PERSONAL HEARING ON 10 JULY 2018 Brief Background: A. Applicant is private limited company engaged in the provision of marketing, promotion & distribution of the Computer Reservation System Software ( CRS Software ) within the territory of India. The CRS Software has been developed by Sabre GLBL Inc. as a global distribution system which performs various functions including airline seat reservations, scheduling, automated ticketing & fare displays, booking for a variety o
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e foreign exchange, calculated on a cost-plus markup basis. The cost-plus markup basis comprises of the monthly qualifying cost which is the sum of all costs incurred by the Applicant in the process of provision of service together with a profit margin of ten percent thereon and is the basis adopted for purpose of Transfer Pricing provision under the Income tax Act, Herein, transfer pricing study and documentation is one of the procedures to be followed under the Income Tax laws of India and it forms the basis for assessment of corporate taxes by the Income Tax department D. However, the Marketing Agreement between the Applicant and Sabre APAC, does not establish any agency between the parties and all the services are rendered by the Applicant on a principal-to-principal basis. Further, the said Agreement does not operate to create any partnership or joint venture of any kind between the Applicant and Sabre APAC. E. In light of the above, the Applicant has preferred an Application befo
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e required. Further, all promotion and marketing support services provided by the Applicant is towards the objective of building the customer base of the CRS Software in India or in relation to the same. Hereto annexed and marked as Annexure 1 is a scope of the services rendered by the Applicant under the said Marketing Agreement dated 31 October, 2016. 1.2. With respect to the services supplied by the Applicant, a reference is made to para 1.5 of the Application which deals with the nature of the Agreement entered by the parties and the services rendered thereunder which constitutes export of services by the Applicant to Sabre APAC as per Section 2(6) of the Integrated Goods and Service Tax Act, 2017 (IGST Act). 1.3. Accordingly, GST being a destination based consumption tax, the liability to discharge tax shall not arise in cases where the consumption of the supply is outside the taxable territory of India. As a result, in the present case, the Applicant would be eligible to avail th
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nt to note that, although M/s. Evaluserve.com interacts with the Client s customers, the actual service recipient is the client and not the Client s end customers. Based on these facts, on the question of whether the services rendered by M/s. Evaluserve.com qualifies as intermediary services , the Hon ble CESTAT at Chandigarh held as follows: 13. In view of the above analysis, we find that there are various decisions relied upon by the appellant in support of their argument and also had had observed the Same. Therefore, we hold that the appellant are not intermediaries in terms of Rule 2(f) of the Place of Provision of Service Rules, 2012. Therefore, the appellants are not liable to pay service tax being provider of service in India in terms of Rule 9 of the Place of Provision of Service Rules, 2012. Therefore, the demands against the appellants are not sustainable. Consequently, refund claim filed by the appellants are admissible. (emphasis supplied) 1.5. Further, in the ruling of the
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as follows: 14**** However, applicant is providing to GoDaddy US services viz.; direct marketing and promotion services, supervision of quality of third party customer care center services and payment processing services, as per draft Service Agreement between the applicant and GoDaddy US. There is no contract between the applicant and the customers of GoDaddy US based in India. GoDaddy US have used said services provided by the applicant as per the draft Service Agreement. Further, applicant would charge a fee equal to the operating costs incurred by the applicant plus a mark-up of 13% on such costs, which would be received by the applicant from GoDaddy US in US Dollars. The benefit of services provided by applicant accrues to GoDaddy US outside India. In view of above, judgments relied upon are of no avail to the Revenue, as services provided by the applicant are to be consumed in US and not in India. Further, the judgment in case of Microsoft Corporation (India) Pvt. Ltd relied upo
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ervices in convertible foreign exchange and applicant and GoDaddy US are not merely establishments of a distinct person in accordance with item (b) of Explanation 3 of clause (44) of Section 65B of the Finance Act, 1994. As all the ingredients enlisted under Rule 6 A ibid are satisfied, said service will qualify as export of taxable service. In view of above, we rule as under; In the facts and circumstances, the services to be provided by the applicant to GoDaddy US would fall to be classified under Rule 3 of the Place of Provision of Services Rules, 2012 qualify as export of taxable services in terms of Rule 6A of the Service Tax Rules, 1994 (inserted vide Notification No. 36/2012-S.T. dated 20.6.2012) and therefore remain non-taxable for purpose of payment of service tax under the Finance Act 1.6. Similar view has been taken by the Hon ble Advance Ruling Authority at New Delhi in the case of M/s Universal Services India Pvt. Ltd. v. CST, Delhi- IV reported in 2016 (42) STR 585 (AAR)
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f Service Rules, 2005, the various taxable services had been categorized as object-based, performance-based and recipient-based for the purpose of exemption under section 93 of Finance Act, 1994. Though those Rules are no longer valid for the purposes of rule 5 of CENVAT Credit Rules, 1994, their guidance value cannot be discountenanced. The 'negative list' regime was not intend to be either detrimental or beneficial to existing assessees except where such intent was specifically sanctioned by legislation. The respondent, prior to 1st July 2012, was eligible for all benefits as the service rendered by them was treated as export Fifth the recipient of the service being outside the country. The corresponding provision in Place of Provision of Services Rules, 2012 is rule 3 which brings the service within the ambit of export of service in rule 6A of Service Tax Rules, 1994. Revenue has not made any submission of legislative intent to deprive a provider of 'scientific or techni
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a recipient; it is upon the consumption of the service by the recipient that service is deemed to have become taxable. This has been so held by the Hon'ble Supreme Court in All India Federation of Tax Practitioners v. Union of India & others [ below: '7. In the light of what is stated above, it is clear that Service Tax is a VAT which in turn is destination based consumption tax in the sense that it is on commercial activities and is not a charge on the business but on the consumer and it would, logically, be leviable on services provided within the country. It would appear from the exposition in the judgment that the tax was intended as a levy on activities that would otherwise be performed by the recipient for itself. The new industry of hiving out or outsourcing of what was, conceivably, being done within the enterprise was intended to be subject to the new levy. In the matter of service rendered by respondent, this activity could, but for commercial viability, well be
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on and the scope of the contract depends on the intention of the parties which is to be determined on a construction of the contract. The Marketing Agreement between the Applicant and Sabre APAC clearly does not intend to create any agency, partnership or joint-venture between them. 1.9. It is a settled principle in law that the intention of the parties to the document is more relevant than words used in the document. The same is even described in the legal maxim uihaeret in literahaeret in cortice. 1.10. In the case of Ramdev Food Products (P) Ltd. v. Arvindbhai Rambhai Patel reported in (2006) 8 SCC 726 = 2006 (8) TMI 528 – SUPREME COURT, the Supreme Court quoted with approval the principles of construction of contracts from Interpretation of Contracts by Kim Lewison, Q.C. which states that for the purpose of the construction of contracts, the intention of the parties is the meaning of the words they have used. There is no intention independent of that meaning. Herein, reliance is al
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agent would have documentary evidence authorizing him to act on behalf of the provider of the main service. 1.13. In the present case, the Marketing Agreement does not entrust such authority on the Applicant, nor is there any other authorising document establishing agency between the Applicant and Sabre APAC. Thus, the services rendered by the Applicant are on a principal to principal basis and qualify as export as export of services and the same cannot be considered to be intermediary services as per Section 2(13) of the IGST Act. 2. Submission with interpretation of the term intermediary services under Section 2(13) of the IGST Act 2.1. Section 2(13) of the IGST Act, defines an intermediary to mean a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services on his own account. 2.2. It is submitted that
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gains and contracts between other persons, in matters of trade, commerce, or navigation, for a compensation commonly called brokerage Broker: One who represents and acts for another under the contract or relation of agency, 9. v. Classification. Agents are either general or special. Agent: A general agent is one employed in his capacity as a professional man or master of an art or trade, or one to whom the principal confides his whole business or all transactions or functions of a designated class; or he is a person who is authorized by his principal to execute all deeds, sign all contracts, or purchase all goods, required in a particular trade, business, or employment. 2.3.3. The dictionary meanings extracted above, clearly indicate that there is an element of representation or acting on behalf of the other person present in the words. ln other words, agent and a broker do not work at their own behest or instruction but as a representative or on behalf of their principal. Further, the
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because of the use of a general phrase preceded by specific words. The words ejusdem generis mean of the same kind or nature . Ejusdem generis is a rule of interpretation whereby when a class of things is followed by general wording that is not itself expansive, the meaning of the general words are taken to be restricted by implication with the meaning of restricted words. 2.3.6. The rule of ejusdem generics is applied in the following cases: The statute enumerates the specific words The subjects of enumeration constitute a Class or category That class or category is not exhausted by the enumeration The general terms following the enumeration, and There is no indication of a different legislative intent. 2.3.7. In the case of CIT v. Rani Tara Devi reported in [2013] 355 ITR 457 (P & H) = 2013 (3) TMI 53 – PUNJAB & HARYANA HIGH COURT, the Hon ble Punjab and Haryana High Court had held as follows: The expression by any other name appearing in Item (a) of clause (iii) of Section
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e the application of the provisions not on the basis of mere nomenclatures, but notwithstanding name, they must fall within the genus 'taxation' to which expression 'Tax', 'Duty', 'Cess' or 'Fee' as a. group of its specie belong vis. compulsory exaction in the exercise of State's power of taxation where levy and collection is duly authorised by law as distinct from amount chargeable on principle as consideration payable under contract. 2.3.9. The Applicant also relies on the CBEC Circular bearing No. 83/1/2006-ST dated 4 July 2006 issued by the CBEC, wherein the applicability of the principle of ejusdem generis with respect to the term any other person was interpreted to be mean as follows: 3. Banking and other financial services are defined under section 65(12). Such Services provided to a customer by a banking company or a financial institution including a non-banking financial company or any other body corporate or any other person to a cu
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intermediary . As per the definition the broker, agent of any other person will arrange for the provision of service or facilitates the provision of a service (or supply of goods) between two or more persons. The words that have been used in the definition are – (i) arranges and (ii) facilitates, As a result, it would be pertinent to understand the meaning of these words. The said two word are generally defined as under: Arrange: plan, organize, and carry out Facilitate: to make (an action or process) easy or easier 2.4.2. From the above definitions it is Clear that the intermediary being a broker or an agent, or any person acting on behalf of the principal, arranges or facilitates the supply of goods or services between two or more persons. Thus, the contract or agreement between the principal and agent (broker/ any other person) assumes a great deal of importance to understand whether it facilitates or arranges for the provision of service or supply of goods between two or more perso
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lained above. 2.46. The Applicant would also like to refer to qualifying conditions for intermediary services described in para 5.96 of the CBEC Education Guide. The said conditions are reproduced below for ease of reference: Nature and value: An intermediary cannot alter the nature or value of the service, the supply of which he facilitates on behalf of his principal, although the principal may authorize the intermediary to negotiate a different price. Also, the principal must know the exact value at which the service is supplied (or obtained) on his behalf, and any discounts that the intermediary obtains must be passed back to the principal. Separation of value: The value of an intermediary s service is invariably identifiable from the main supply of service that he is arranging. It can be based on an agreed percentage of the sale or purchase price. Generally, the amount charged by an agent from his principal is referred to as commission! Identity and title: The service provided by t
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in (2004) 11K V18626 (28 May 2004), it has been held that an intermediary Ought to play an active role in the capacity of an agent of the insurancel finance company and a mere introductory role or generation of leads on prospective customers shall not suffice. The assessee therein was involved in the activity of providing credit card handling services to cinema Customers booking tickets through various distribution channels including call centre, internet, WAP and digital TV. In addition, the assessee was also providing information, data processing services, credit management services and record keeping to cinema operator for other card transactions. The relevant para of the judgment has been excerpted: **** 88. However the statute must be interpreted consistently with the Sixth Directive as interpreted by the Court of Justice. In CSC the Court of Justice said this at paragraph 39, Negotiation is a service rendered to, and remunerated by a contractual party as a distinct act of mediati
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milarly in Leadx v. Revenue & Customs reported in (2008) UKVAT V20904 (19 December 2008) it has been held that introducing customers to the seller is not sufficient for a service provider to qualify to be an intermediary. In this case the assessee was inter alia engaged in the activity of facilitating telecommunication and data services for trading of loan and insurance leads. In other words, the assessee was engaged in providing an open market for purchase/ sale of loans and insurance products from brokers via its internet based bidding system. The relevant para of the judgement is extracted hereunder for the ease of reference: 16. The Appellant s relationship with the seller and buyer was governed by the same generic contract. Under the contract the appellant granted the seller and buyer a non-exclusive licence to use the Appellant s software platform in return for consideration which consisted of 10 per cent of the fee charged by the seller, and a commission of 15 per cent on th
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process for negotiating credit arrangements between brokers and potential consumers. *** 59.1, therefore, hold that the Appellant was not an insurance agent or broker. The Appellant had no relationship with the insurer or the insured. The Appellant sold leads and did not introduce potential Clients. The Appellant s supplies were not related services. Their character had nothing to do with insurance. The information gathering and sorting exercise was for the purpose of making the lead marketable not to facilitate an insurance transaction. The supplies did not form a close nexus with an insurance transaction and effectively constituted a separate deal outside any insurance negotiations 60.*** My findings that the Appellant had no relationship with potential consumers for insurance products or insurers and that its supplies constituted a discrete and self-contained activity between brokers with no connection with insurance transactions demonstrated that the Appellant did not provide the s
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the terms of the contract. 2.4.12. The above-mentioned principles can be applied into the present factual matrix to determine whether the Applicant qualifies as an intermediary . Thereby, as per the various clauses of the Marketing Agreement between the Applicant and Sabre APAC, the following factual position emanates: The Applicant is providing business support services and allied activities to Sabre APAC Services provided by the Applicant are preparatory and supportive in nature rather than facilitating any provision of services by Sabre APAC No payments are routed through the Applicant. The Applicant merely supports and has no right to actually negotiate, finalize or change the price already fixed by Sabre APAC. 2.4.13. Also, considering the bi-partite nature of the Marketing Agreement, the Applicant provides marketing, promotion and distribution services only to Sabre APAC and not to any other party. Further, for the provision of the said services, the Applicant receives compensat
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LUSIONARY PART – SUPPLY ON HIS OWN ACCOUNT 2.5.1. The exclusionary part of the Said definition as stated in Para 2.2 above excludes from its purview any person (including a broker, agent or any other person) who provides the main supply on his own account will not qualify as an intermediary. In other words, if a person provides the supply on his own account, then such a supplier is not covered under the definition of term intermediary. 2.5.2. Herein a reference is made to para 5.9.6 of the CBEC Education Guide 2012, wherein the situation where services are rendered on the persons own account is specifically highlighted. The relevant extract reads as follows: When the freight forwarder acts on his own account (say, for an export shipment) A freight forwarder provides domestic transportation within taxable territory (say, from the exporter s factory located in Pune to Mumbai port) as well as international freight service (say, from Mumbai port to the international destination), under a s
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since all the services are rendered by the Applicant to Sabre APAC on a principal-to-principal basis, the services would get covered under the exclusionary clause of the said definition under Section 2(13) of the IGST Act. Herein reliance is also placed on the ruling in the case of Global Transportation Services Pvt. Ltd. reported in 2016 (45) STR 574 (AAR) = 2016 (9) TMI 291 – AUTHORITY FOR ADVANCE RULINGS. 2.5.4. It is further submitted that the relationship of the Applicant with Sabre APAC is separate from the relationship between Sabre APAC and its clients. The Applicant engages with Sabre APAC s clients only in pursuance of the services to be rendered to Sabre APAC which it provides on its own account and not as an agent of Sabre APAC. 2.5.5. In the CBEC Circular bearing No. 334/4/2006-TRU dated 28 February 2006, issued during the erstwhile regime on introduction of business support services the nature of the services covered under the said head has been clarified as follows: 3.13
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APAC, but on its own account on a principal-to-principal basis. 2.5.7. In the above case, while there is an arrangement involving the Applicant, Sabre APAC as well as the customers of Sabre APAC, the Applicant s engagement with Sabre APAC s customers is in pursuance of the promotion and distribution activities carried out by the Applicant. The Applicant approaches the potential customer and subsequently may even undertake analysis of their business activities in order to determine the viability for use of the CRS Software, but the actual provision of the services of access to CRS Software is provided by Sabre APAC. Besides, even the interaction with the potential or confirmed customer of Sabre APAC is done by the Applicant on its own account and not as an agent of Sabre APAC. 2.5.8. Herein, the Applicant places reliance on the following judgments of the CESTAT which hold that the person could at the same time act as an agent and also on principal to principal basis with respect to the
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nt company i.e., Sabre APAC, to distribute the CRS Software in India vide a Marketing Agreement dated 31 October 2016 with effect from 01 April 2016. The scope of the services provided by the Applicant under the terms of the said Marketing Agreement are: – Marketing services including advertising, identifying potential customers, identifying business opportunities, demonstrating offerings; – Consultancy and provision of information services; – Marketing support services, including PR, promotions, sponsorship, and special events and trade shows; and – Any other services necessary or advisable to perform its obligations under the said Marketing Agreement. 1.2. The entire gamut of services are provided in an integrated manner to Sabre APAC, and for consideration the Applicant raises a consolidated monthly invoice for the fees to be received from Sabre APAC for all the services rendered to them. The said fees, which is received in the form of convertible foreign exchange, is calculated on
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om it proposes to market the CRS Software; – Based on an organizational and workflow analysis of the subscriber and following a background check of their prior activities, the Applicant logs on a request into the system through the website maintained by Sabre APAC called subscriber Communication Management System. This is an automated process wherein a request is placed by the Applicant to create a Pseudo City Code; – Simultaneously, provided the subscriber agrees to use the CRS Software, order forms are collected from them to begin the process for activation of the CRS Software following the creation of the Pseudo City Code; It the subscriber meets all the criterion set forth by Sabre APAC for subscription, it is registered successfully and a Pseudo City Code is allotted in its favor. Once the Code is allotted and the setup is activated, the Applicant s engineers install user interfaces to access the CRS Software in the subscriber s computer systems. 2.4. In this manner, once the orga
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cant, Sabre APAC makes a decision on whether or not to allot a Pseudo City Code to the potential subscriber and it is only following an affirmative decision that the Applicant s engineers install user interfaces to access the CRS Software in the subscriber s computer systems. The decision to permit the subscriber s to have access to the CRS Software is based on the internal criterion set forth by Sabre APAC and the Applicant is not involved in the decision making process. 3. Marketing Support Services: 3.1. Additionally, the Applicant also undertakes sales promotion and marketing support activities to advance the business of Sabre APAC in India. This includes marketing support services such as PR, promotions, sponsorship, special events and trade shows, as well as any other services necessary to perform its obligations under the Marketing Agreement. 3.2. Such services are provided with the aim to make the CRS Software the reservation system of choice for subscribers and to strengthen t
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. M/s. Sabre Network (India) Pvt. Ltd. (hereinafter referred as the Applicant) is private limited company engaged in the provision of marketing, promotion and distribution of the Computer Reservation System Software ( CRS Software ) within the territory of India. The CRS Software has been developed by M/s. Sabre GLBL Inc. as a global distribution system which performs various functions including airline seat reservations, scheduling, automated ticketing and fare displays, booking for a variety of air, car and hotel services, etc. Sabre APAC, the Applicant s parent company situated in Singapore, has been sub-licensed the right to market and promote the said CRS Software for Asia specific jurisdictions. Further, it has been authorised to further sub-license certain parts of its marketing rights and obligations to local-country distributors. Accordingly, Sabre APAC has appointed the Applicant as the National Marketing Company vide a Marketing Agreement dated 31 October 2016. pursuant to w
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he basis for assessment of corporate taxes by the Income Tax department. However, the Marketing Agreement between the Applicant and Sabre APAC, does not establish any agency between the parties and all the services are rendered by the Applicant principal-to-principal basis. Further, the said Agreement does not operate to create any partnership or joint venture of any kind between the Applicant and Sabre APAC. In light of the above, the Applicant has preferred an Application before this Authority for Advance Ruling seeking to determine Whether there arises any liability to discharge Goods and Service Tax ( GST ) on the services rendered to Sabre APAC situated outside India. FINDINGS:- In this context, it is to submit that:- M/s. Sabre GLBL Inc, is the foreign company who developed the CR software. Secondly, M/s. Sabre APAC, Singapore based company has been sub-licensed the right to market and promote the said CRS Software for Asia specific jurisdictions. At lastly, Sabre APAC has appoin
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and once the said customer is accepted by Sabre APAC, it provides after-sales services as may be required. Further, all promotion and marketing support services provided by the Applicant is towards the objective of building the customer base of the CRS Software in India or in relation to the same. As stated above, M/s. Sabre Network (India) Pvt. Ltd. works for Sabre APAC, but does not appears to supply the CR software on his own account and therefore, falls under the services viz. Intermediary Services and the appears liable for tax under IGST Act 2017. None of the case laws, cited by the applicant are applicable to the present case as the facts and circumstances are different. 04. HEARING The case was taken up for preliminary hearing on dt. 26.06.2018, with respect to admission or rejection of the application when Sh. Irshad Ahmed, Advocate along with Sh. Rajeev Pallath Advocate appeared and made oral and written submissions as per contentions made in ARA. The jurisdictional officer,
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Agreement, the Applicant has been appointed as the National Marketing Company to conduct marketing and promotion of access of the CRS Software to end subscriber s viz. travel agents in India. Sabre GLBL Inc., an affiliate of Sabre APAC and the applicant, had developed a global distribution system which uses a Computer Reservation System Software ( CRS Software ) which it owned and operated and for sales outside the USA, granted to Sabre Marketing Nederland B.V., a non-exclusive right to market and promote the said CRS software, which was further sub licensed to Sabre APAC for the Asia Pacific region. In view of the Marketing Agreement dated 31 October 2016 between Sabre APAC and the applicant, to market the CRS software, the sales team of the Applicant approaches potential subscribers in India to whom features of the CRS Software and the flexibility of the same to integrate with the potential subscriber s system for smooth functioning are explained. In the event of a positive response
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install user interfaces to access the CRS Software in the subscriber s computer systems. From the submissions made by the applicant it is clear that they are on the lookout for potential subscribers who are willing to use the CRS software in their business. It is also important to note that these potential subscribers also require such software for use in their business and require the help/ assistance of the applicant to reach out to Sabre APAC to obtain the said software. Admittedly, the Applicant also undertakes sales promotion and marketing support activities to advance the business of Sabre APAC in India by way of giving marketing support services which includes activities such as PR, promotions, sponsorship, special events and trade shows, as well as any other services necessary to perform its obligations under the Marketing Agreement and to make the CRS Software the reservation system of choice for subscribers and to strengthen the subscribers trust in the brand Sabre so as to
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s then as per the GST Laws the applicant will be liable to tax. It is seen that the applicant has given detailed submissions, which are reproduced above, contending that the service provided by them are not in the nature of Intermediary Services and therefore it is their contention that the subject services provided by them to Sabre APAC are actually export of services as per the GST Laws. In view of the above details we need to examine whether the services provided by the applicant are Intermediary Services or not: In simple terms intermediary can be taken to be as a firm or a person, etc. who acts as a link between parties for the conduction of business, etc. We find from the question posed that the applicant is having doubts as to whether their services are taxable under CGST Act and MGST Act or whether their services are exempt under the IGST Act, being export of services. To arrive at a decision we first take up the definition of an intermediary as per GST laws. The term Intermedi
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licant which approaches potential subscribers in India to whom they explain the features of the CRS Software and the flexibility of said software to integrate with the potential subscriber s system for smooth functioning. Once the applicant gets a positive response from the subscriber, they scan the credentials and the business potential of the subscriber to whom it is proposed to market the CRS Software. Based on an organizational and workflow analysis of the subscriber and following a background check of their prior activities, the Applicant logs on a request into the system through the website maintained by Sabre APAC called Subscriber Communication Management System. Provided the subscriber agrees to use the CRS Software, order forms are collected from them to begin the process for activation of the CRS Software. Once the subscriber is registered successfully and a Pseudo City Code is allotted in its favor. Once the Code is allotted and the setup is activated, the Applicant s engin
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that the applicant is not providing services on their own account but on account of Sabre APAC, and thus it is very apparent that the applicant is providing Intermediary Services in the instant case. Since the applicant, being the supplier of service is located in India and the recipient of Service i.e. supplier of goods is located outside India, Section 13 of the IGST Act, 2017 would be applicable to determine the place of service. As per Section 13 (8) (b) of the said Act, the place of supply of Intermediary Services shall be the location of the supplier of services, in this case, the applicant. Since the place of supply of services in the instant case is in taxable territory, the said intermediary services cannot be treated as export of services under the provisions of the GST laws. In order to classify as export of service , as per section 2(6) of the Integrated Goods and Service Tax Act, 2017, one of the crucial condition as contained under sub-clause (iii) requires that the place
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sions of intra-state. Applying the provisions of section 8 (2) which states that subject to the provisions of section 12, in case where the location of the supplier and the place of supply of services are in the same State or in the same union territory, the supply of service shall be treated as intra-state supply . The above provisions of inter-state supply and intra-state supply has clarity when both the recipient and the supplier of services are located in India. However as in the subject case, when the recipient is located outside India provisions of section 7 (5) (c) shall be applicable. Section 7(5)(c) is reproduced as under-: (5) Supply of goods or services or both,- (a) when the supplier is located in India and the place of supply is outside India; (b) to or by a Special Economic Zone developer or a Special Economic Zone unit; or (c) in the taxable territory, not being an intra-State supply and not covered elsewhere in this section, shall be treated to be a supply of goods or s
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seen that none of the case laws are applicable in respect of the present case as the facts context and circumstances are different. 06. In view of the extensive deliberations as held hereinabove, we pass an order as follows: ORDER (Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) NO.GST-ARA-08/2018-19/B-76 Mumbai, dt. 26.07.2018 For reasons as discussed in the body of the order, the questions are answered thus – Question:- Whether the marketing, promotion and distribution services (hereinafter referred to as the Said Services ) provided by Sabre India to Sabre APAC would be subject to tax under the Central Goods & Services Tax Act 2017 and the Maharashtra Goods & Services Tax Act 2017 (hereinafter referred to as Said Tax Acts ) or would remain excluded under the said Acts as the said activities qualify as export of service in accordance to Section 2(6) of the Integrated Goods and Service Tax Act 2017 read wit
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