In Re: M/s. Asahi Kasei India Private Limited
GST
2019 (1) TMI 1091 – AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA – 2019 (21) G. S. T. L. 243 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA – AAR
Dated:- 5-9-2018
GST-ARA-35/2018-19/B-108
GST
SHRI B.V. BORHADE, AND SHRI PANKAJ KUMAR, (MEMBER)
PROCEEDINGS
(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 Asahi Kasei India Private Limited, the applicant, seeking an advance ruling in respect of the following ISSUE. .
1. Whether the service supplied by the Applicant under the Service Agreement dated 1 March 2013 constitute a supply of “Support services” falling under HSN code 9985 “Intermediary service” classifiable under HS
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ssions, as reproduced verbatim, could be seen thus-
STATEMENT OF THE RELEVANT FACTS HAVING A BEARING ON THE QUESTIONS:
Asahi Kasei India Private Limited (hereinafter referred to as the “Applicant”) is a company incorporated in India in August 2012. The Applicant is a subsidiary of Asahi Kasei Corporation, Japan (“Asahi Japan”).
Asahi Japan is the flagship company of the Asahi Kasei group. Asahi Kasei group S fibers and textiles, petrochemicals, pharmaceuticals, polymers, electronic devices, home products, construction materials, health care etc.
The Applicant provides sales promotion and marketing support to Asahi Kasei group. For this, the Applicant has entered in to a Services Agreement dated 01 March 2013 with Asahi Japan and Marketing Services Agreement with various group companies of Asahi Kasei group. The scope of work under the Agreement is broadly stated below:
a. Collecting and analyzing information i.e. market analysis and supporting Asahi Kasei group in getting new busi
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cated Products Division (Asaclean) of Asahi Kasei Chemicals Corporation [dated 01 October 2013] as amended vide agreement dated 01 July 2016: (modified 5th January 2017 and taken over by Asahi Kasei Corporation, Japan)
d. Agreement with Asahi Kasei Plastics North America Inc. [dated 02 January 2014];
e. Agreement with Asahi Kasei Home Products Corporation [dated 01 April 2015];
f. Agreement with Bemberg Division of Asahi Kasei Fibers Corporation (dated 01 May 2015]; (modified 5th January 2017 and taken over by Asahi Kasei Corporation, Japan)
STATEMENT CONTAINING APPLICANTS INTERPRETATION OF LAW IN RESPECT OF THE QUESTIONS RAISED
Question on which advance ruling is required
Whether the service supplied by the Applicant under the Service Agreement dated 1 March 2013 constitute a supply of “Support services” falling under HSN code 9985 “Intermediary service” classifiable under HSN code 9961 /9962?
Statement of facts having a bearing on the question
The scope of the services provid
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ndia or any other mutually agreed territory) as Party A may from time to time request. In the event Party A should require more detailed information than that so provided by Party B, Party B shall exert its best efforts to obtain such further or more detailed information.
6. At such time and from time to time, as and when representatives of Party A, or its related business circles or customers visit the Territory and Party A so requests, Party B shall provide necessary assistance in business activities (including interpreting) to such representatives.
7. From time to time, as and clean requested by Party A, Party B shall make market surveys of the Products in the Territory and report the results thereof to Party A.
8. Party B shall perform services, as directed by Party A, resulting from the assignments pursuant to paragraph 4 through 7 of this Agreement, including, but not limited to, those services with regard to finance, accounting, and patent and legal matters.”
As per Clause 9
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s entered either by local agent or by Asahi Japan or other overseas group company directly.
In fulfilment of its obligation, the Applicant has undertaken following activities:
(i) Providing reports on the condition of the economy and undertaking market survey
(ii) Visit to existing and perspective customers to understand their requirement, their business plan and their feedback and reporting to Asahi Japan
(iii) Providing information on the products of Asahi Japan to the existing and perspective customers
(iv) Generating marketing leads and relaying to Asahi Japan
(v) Helping customer on the product trial
(vi) Facilitating meeting between customers and agent Asahi Japan
Statement containing the applicant's interpretation of law
1. There are two possible classifications for the services supplied by the Applicant. The relevant HSN codes along with its description are tabulated hereunder:
SR.NO.
HSN CODE
TARIFF ENTRY
i.
9961 / 9962
Intermediary service – Services in w
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son. In order to examine this limb, it would be apt to refer to the dictionary definitions of the terms “broker” and “agent”. The relevant extract of the various dictionary definitions are as follows:
a. Broker
i. Halsbury[s Laws of England, 4th Edition, Volume 1, Para 712, Page 424: – A mercantile agent who in the ordinary course of his business is employed to make contracts for the purchase or sale of property or goods of which he is not entrusted with the possession or documents of title [Alapati Ramamurthi, Gelli Krishnamurthy & Co. Vs. J. Ramanujan and Ors. (ALR 1961 AP 408) = 1960 (7) TMI 66 – ANDHRA PRADESH HIGH COURT].
ii. K J Aiyar's Judicial Dictionary: – Word meaning an agent but used generally in a more special sense for one Who buys or sells on behalf of another. He must act according to the instructions given to him and as a general rule, his task is finished when he has made a contract between a buyer and the seller… Brokers are remunerated by commission known as br
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h a manner as to put those who employ him in a condition to treat together personally;
(2) and more commonly an agent employed by one party only to make a binding contract with another.
b. Agent
i. Shorter Oxford English Dictionary (Deluxe Edition): A person who acts for another un business, politics, etc.;
ii. Section 182 of the Indian Contract Act 1872: – An “Agent” is a person employed to do any act for another or to represent another in dealings with third persons;
iii. Concise Law Dictionary (2008 Edition): – An agent acts on behalf of his principal and often uses is name and his acts in that capacity are attributable to the principal;
5. Having understood the meaning of the terms '”broker” and an “agent”, it would be imperative to examine the scope of the term ll any other person, by whatever name called”. In this regard, it is humbly submitted that the scope of this phrase is restricted by the preceding words “broker or agent” by applying the principle of “Ejusdem Generis
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e Delhi High Court decision in the case of Areva T & D India Ltd. Vs. DCIT [2012-TIOL-234-HC-DEL-IT) = 2012 (4) TMI 79 – DELHI HIGH COURT wherein the Hon'ble High Court applied the principle of ejusdem generis to interpret the expression “business or commercial rights of similar nature” referred to in section 32(1)(ii) of the Act and held that the Legislature did not intend to provide for depreciation only in respect of specified intangible assets but also to other categories of intangible assets, which were neither feasible nor possible to exhaustively enumerate.
The principle of ejusdem generis was also upheld by the Apex Court in the case of Assistant Collector of C.Ex. Vs. Ramdev Tobacco Company (1991 (51) ELT 631 (SC)] = 1991 (1) TMI 136 – SUPREME COURT OF INDIA and CCE Vs. Shital International [MANU/SC/0884/2010) = 2010 (10) TMI 19 – SUPREME COURT OF INDIA. Similar view has been affirmed in the following cases:
i. CIT vs. Rani Tara Devi [2013 (355) ITR 457 = 2013 (3) TMI
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y of selling of goods.
11, The Applicant submits that the dictionary meaning of facilitation is to make easy or easier, make something possible or aiding or helping. Thus, the dictionary meaning of facilitation is very wide and covers processing, storage, transport, advertising, sales promotion etc, all activities as each and every activity aids or smoothens supply of goods. Goods Transport service (9965), Transport support service (9967), advertising and market research service (9983) are separate service classification. If such a wide meaning is adopted, it will render many of these PP service classifications redundant. Thus, the Applicant submits that facilitate supply of goods refers to an activity directly related to the sale.
12. In the instant case, the Applicant and the Service recipient are acting as independent contractors. Moreover, the Applicant and the service recipient have no authority to create nor do they assume any obligation on behalf of each other. The point of di
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“Independent contractor' which has been defined in the Concise Law Dictionary as follows:
“One who, exercising an independent employment, contracts to do a piece of work according to his own methods, and without being subject to his employer's control, except as to the result of the work.
An independent contractor is one Who undertakes to produce a given result but so that in the execution of the work he is not under the order or control of the person for whom he does it, and may use his own discretion in things not specified beforehand.”
15. As highlighted above, the Services Agreement specifically provides a clause that the Parties do not intend to create any principal-agent relationship, Further, the consideration charged by the Applicant is not qua a particular transaction between the service recipients and their customers. Therefore, the services supplied by the Applicant to the service recipients fails to comply with the second limb of the definition of the term “intermediary”
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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”
b. It is pertinent to note that the definition of intermediary under Section 2(13) of the IGST Act is pari materia to the definition provided under the Finance Act 1994. The Education Guide, 2012 issued by the CBEC inter alia provides the various factors that needs to be considered in determining whether a person is an intermediary. The relevant extract is reproduced hereunder:
“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 princi
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ence authorizing him to act on behalf of the provider of the main service!”
19. Para 5.9.6 of the Education Guide, 2012 issued by the CBEC clarifies the scope of the term intermediary. The relevant extract is reproduced hereunder;
“Similarly, persons such as call centres, who provide services to their clients by dealing with the customers of the client on the client's behalf, but actually provided these services on their own account, will not be categorized as intermediaries.”
In the instant case, although the Applicant deals with the service recipients customers, but the same is for the purpose of providing services to the service recipient on its own account. Consequently, the services provided by the Applicant cannot be classified as Intermediary services”.
20. In an identical case as the present situation, GODADDY India Web Services Pvt. Ltd. had filed an Advance Ruling under the Service tax regime [2016 (46) STR 806 (A.A.R.)] = 2016 (3) TMI 355 – AUTHORITY FOR ADVANCE RULINGS.
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ervice, Further, applicant would provide said service as a package and the payment for the entire package would be a consolidated lump sum payment. Applicant submits that in view of these indicators, service provided by them to GoDaddy US is a bundle of services, which is bundled in the normal course of business. This point has not been controverted by the Revenue. We agree with the submissions of the applicant that proposed services are a bundle of services, bundled in normal course of business and not intermediary service.”
21. Applying the above to the present case, while the scope of services provided to the Asahi Kasei group is very wide, the same would fall within the ambit of the term “composite supply” with the marketing services being the principal supply
22. In view of the above, it is amply clear that the services provided by the Applicant cannot be considered as an “Intermediary services”. However, in order to determine the correct classification of the services provided
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rt services and other transaction processing.
Explanation – For the purposes of this clause, the expression infrastructural support services” includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretaria services, internet and telecom facilities, pantry and security;”
[Pre-negative List regime]
“Section 65B(49) “support services means infrastructural, operational, administrative, logistic, marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion, construction or works contract, renting of immovable property, security, testing and analysis;”
[Negative List regime]
24. From the above, it can be construed that marketing services, advertisement and promotion services, customer relationship management, evaluation of prospe
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features so as to assist in determining the nature and scope of the Indian market potential;
b) Assisting the service recipient in the adaptation and implementation of its advertising policy;
c) Assisting the service recipient in conducting sales prospection through participation in industry events such as scientific gatherings, exhibitions, trade shows and the like;
d) Liaising with Customers and potential Customers and to collect their product development plans and strategy and “road-maps”, as well as their product specifications; and reporting the same to the service recipient the information obtained through such interactions;
e) Providing any feedback to the service recipient that would help improve the service recipient's marketing; Facilitating the service recipient in arrangement of discussions and provision of interpretation services and cross culture advice; or the sake of clarity, neither AKI (i.e. the Applicant) nor any of its representatives shall have any authority t
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and maintaining contact with regulatory agencies) and reporting the same to the service recipient; and
j) Any other assistance in the context of the above, regarding service recipient's marketing activities that may be reasonably requested by service recipient after the effective date in writing to AKI.”
It may however be noted that the scope of service for the marketing services agreement with APNA do not include the points (c), (g) and (i) as mentioned above
Statement containing the applicant's interpretation of law
As in case of Question No. 2 above
QUESTION NO. 3
Question on which advance ruling is required
Whether the services provided by the Applicant is an export of services as defined under Section 2(6) of the Integrated Goods and Services Tax Act 2017?
Statement of facts having a bearing on the question
The Applicant receives payment in freely convertible foreign exchange i.e. Japanese Yen / United States Dollar
Statement containing the applicant's interpretation of
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ace where the person has obtained registration, the location of the supplier shall be such place of business. In the instant case, the Applicant is providing service from Maharashtra for which it has obtained GST registration. Consequently, the location of the supplier of service shall be Maharashtra i.e. in India.
b. Condition II – Recipient of service is located outside India
The term “location of the recipient of services” has been defined under section 2(14) of the IGST Act. As per the said definition, if a supply has been received from a registered place of business or registered fixed establishment, the location of the recipient shall be the respective place of business or fixed establishment. However, in other cases, the usual place of residence of the service recipient shall be the location of the service recipient. In the instant case, the Asahi Kasei group is not registered in India and therefore, their registered place of business will be their registered address (i.e. out
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le foreign exchange
As mentioned in the foregoing paragraphs, the consideration charged by the Applicant is in convertible foreign exchange i.e. Japanese Yen / United States Dollar.
e. Condition V – Supplier of service and recipient of service are not merely establishment of distinct person
Explanation 1 to Section 8 inter alia provides that where a person has an establishment in India and any other establishment outside India, then such establishments shall be treated as establishments of different legal persons. The term person has been defined to include a Company. In the instant case, the service recipient i.e. Asahi Kasei group is not an establishment formed by the Applicant and consequently, it cannot be treated as an establishment of a distinct person.
3. In view of the above, it can be construed that the Applicant fulfils all the conditions for treating the supply of services as an export of services in terms of Section (6) of the IGST Act. Therefore, the answer to Question
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3) Whether the service provided by the Applicant is an export of services as defined under Section 216) of the Integrated Goods and Service Tax Act 2017?
Statement of facts having bearing on the question (1):
Asahi Kasei India Pvt. Ltd., (hereinafter referred to as the “Applicant') has entered into Service Agreement dated 1st March, 2013 with Asahi Kasei Corporation, a Japanese Corporation. However, the address mentioned in the agreement is (The Capital, Office No.801-C, 8th floor, Plot No C70, G-Block, Bandra Kurla Complex, Bandra (East), Mumbai-400051, which is different from Advance Ruling Application of the applicant.
The scope of the services provided by the Applicant under Service Agreement with Asahi Kasei Corporation, Japan (dated 01 March 2013) as amended on 05 January 2017 are highlighted at Clauses 4 to 8 of the Agreement. The relevant extract of the agreement is reproduced hereunder:
“4. Party B (i.e. the Applicant) agrees to conduct from time to time, as and when requ
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m time to time, as and when representatives of Party A, or its related business circles or customers visit the Territory and Party A so requests, Party B shall provide necessary assistance in liasoning and coordinating activities (including interpreting) to such representatives.
7. From time to time, as and when requested by Party A, Party B shall make market surveys of the Products in the Territory and report the results thereof to Party A.
8. Party B shall perform services, as directed by Party A, resulting from the assignments pursuant to paragraph 4 through 7 of this Agreement, including, but not limited to, those services with regard to finance, accounting, and patent and legal matters.”
As per Clause 9 of the Agreement, Service consideration received by the Applicant is the direct cost+ apportioned overhead expenses+10% margin +applicable taxes.
From perusal of the above extract of the agreement it is seen that the Applicant is engaged in the activities for the party A, viz.
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gal matters.
PRAYER
In view of the above, it can be said that
i) The research on the matters related to functions of holding company such as corporate accounting, corporate finance, corporate personnel and labor relations, corporate research and development, market surveys appears to come under the category of 'Market Research services' under Heading No.998371;
ii) Research on the matter of corporate intellectual property appears to come under 'Legal documentation and certification services concerning patents, copyrights and other intellectual property rights services' which fall under Heading No.998213
iii) The economic, industrial and technical information on the products falling under the category of the Products and their markets, trends and outlook together with similar information concerning such other industries, appears to fall under 'Original compilations of facts or information' which fall under Heading No.998394' / Business Support Service(9985).
iv) Providing necessar
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ned in the agreement is 'The Capital, Office No. 801-C, 8th floor, Plot No.C70, G-Block, Bandra Kurla Complex, Bandra (East), Mumbai-400051, which is different from Advance Ruling Application of the applicant.
The scope of the services provided by the Applicant under Marketing Services Agreement with Bioprocess Division of Asahi Kasei Medical Co. Ltd., are highlighted at Article 2 of the Agreement. The relevant extract of the agreement is reproduced hereunder: Bioprocess Division of Asahi Kasei Medical Co. Ltd. referred to as “AM” in agreement dated 01 December 2012.
The services shall comprise the following activities, all of which are described with respect to the Products in the Territory, and all only to be conducted at and under the explicit direction of AM.
a) Conducting market surveys and providing the AM with information on Indian market trends and features so as to assist in determining the nature and scope of the Indian market potential;
b) Assisting AM in the adaptation
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mers visiting the territory with such assistance as may be reasonably requested by AM, including but not limited to providing information, guide, escort and interpreting services during Customers visits; for the sake of clarity, the premises of AKI (applicant) will not be the premises of AM and the same shall not be made available to employees or other personnel of AM who may visit India;
h) Providing information on products and its functioning or similar such services to AM's customers and notifying AM of any Customer complaints;
i) Monitoring regulatory developments (including, where possible, establishing and maintaining contact with regulatory agencies) and reporting on these to AM; and
j) Any other assistance in the context of the above, regarding AM's marketing activities that may be reasonably requested by AM after the Effective Date in writing to AKI(Applicant).”
From perusal of the extract of the above agreement dated 01.12.2012 it is seen that the Applicant is engaged
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negotiations on behalf of AM, connecting Customers with AM representatives for the purpose of obtaining orders and establishing and maintaining close commercial relationships between AM and customers, providing staff of AM or its customers visiting the territory with such assistance as may be reasonably requested by AM, including but not limited to providing information, guide, escort and interpreting services during Customers visits; for the sake of clarity, the premises of AKI(applicant) will not be the premises of AM and the same shall not be made available to employees or other personnel of AM who may visit India, providing information on products and its functioning or similar such services to AM's customers and notifying AM of any Customer complaints, monitoring regulatory developments (including, where possible, establishing and maintaining contact with regulatory agencies) and reporting on these to AM; and any other assistance in the context of the above, regarding AM's marketi
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and “road-maps”, as well as their product specifications, and reporting to AM abroad, information obtained through such interactions appears to be connected to the services at Para 10 above as principal supplies, therefore in terms of Section 8 of the Central Goods and Service Tax Act, 2017 read with Section 20 of the Integra ted Goods and Service Tax Act, 2017. Therefore the said service 'Original compilations of facts or information' which individually fall under Heading No.998394' / Business Support Service(9985) will be supplied as Composite Supply and in terms of Section of the IGST Act, 2017.
v) Providing any feedback to AM that would help improve AM's marketing; Facilitating AM in arrangement of discussions and provision of interpretation services and cross culture advice; for the sake of clarity, neither AKI (i.e. the Applicant) nor any of its representatives shall have any authority to conduct negotiations on behalf of AM, appears to fall under 'Other professional, technical
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his the service category is not clearly mentioned, hence, Advance Ruling should not be given for this services;
ix) Monitoring regulatory developments (including, where possible, establishing and maintaining contact with regulatory agencies) and reporting on these to AM, appears to fall under 'Other Legal services nowhere else classified' under Heading No.998216; and
x) Any other assistance in the context of the above, regarding AM's marketing activities that may be reasonably requested by AM after the Effective Date in writing to AKI(Applicant). In this, the service category is not clearly mentioned, hence, Advance Ruling should not be given for this services;
Statement of facts having bearing on the question (3):
The Term “export of services” as defined under Section 2(6) of the IGST Act and the term “intermediary” as defined under Section 2(13) of the IGST Act. The relevant extract is set out hereunder:
“(6) export of services” means the supply of any service when
(i) The s
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GST and providing the service from Maharashtra, India. Hence fulfilling the first condition with reference to term “location of the supplier of service” is located in India, as defined under Section 2(15) of the IGST Act.
b. Condition-II- Recipient of service is located outside India.
In the instant case the service recipient M/s. Asahi Kasei Corporation (Service Agreement) and Asahi Kasei Medical Co. Ltd (Marketing Service Agreement) is not registered in India and therefore their registered place of business will be their registered address (i.e outside India). Hence fulfilling the first condition with reference to term “The recipient of service is located outside India” as defined under Section 2(14) of the IGST Act.
C. Condition-III place of supply of Service is outside India.
The services provided by the Applicant is in nature of different services in the above two agreement viz, in Service agreement dated 1st March, 2013, the following services appears to be applicable
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' under Heading No.998216;
The place of supply in the instant case is determined as per general rule i.e Section 13(2) of IGST Act where the location of the recipient of services shall be the place of supply of services and Section 13(3) to 13(13) where place of supply shall be the location where services are actually performed. In the present case, the place of supply of Service regarding the two agreements, the Details are as follows:
In Service agreement dated 1st March, 2013,
1. The research on the matters related to functions of holding company such as corporate accounting, corporate finance, corporate personnel and labor relations, corporate research and development, market surveys appears to come under the category of 'Market Research services' under Heading No.998371, will be covered under Section 13(2) of the IGST Act, 2017 and place of supply of service or shall be the location of the recipient of services;
2. Research on the matter of corporate intellectual property appe
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es which fall under Heading No.99859, will be covered under Section 13(3)(b) interalia Section 13(4) of the IGST Act, 2017 and the place of supply of service shall be the location where the services are actually performed.
5. Regarding Para 8 of the agreement, it is felt that Advance Ruling cannot be given because without proper and full facts. In this Para, conditions like 'but not limited to' is mentioned, which does not give a clear picture of what services it pertains to. Hence, Advance Ruling or for Para 8 cannot be given.
6. Regarding Para 9 of the agreement, it is subject to separate treatment to any intermediary activities where place of provision of service is governed by Section 13(8) of the CGST Act, 2017.
In Marketing Service agreement dated 01.12.2012,
7. Conducting market surveys and providing the AM with the information on Indian market trends and features so as to assist in determining the nature and scope of the Indian market potential appears to fall under 'Market
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atives for the purpose of obtaining orders and establishing and maintaining close commercial relationships between AM and customers, will be covered under Section 13(8)(b) of the IGST Act,2017 as 'intermediary services' and the place of supply of service shall be the location where the services are actually performed, appears to fall under 'business support services' under Heading No.99859.;
11. Liaising with Customers and potential customers and to collect their product development plans and strategy and “road-maps”, as well as their product specifications, and reporting to AM abroad, information obtained through such interactions appears to be connected to the services at Para 10 above as principal supplies, therefore in terms of Section 8 of the Central Goods and Service Tax Act, 2017 read with Section 20 of the Integrated Goods and Service Tax Act, 2017, the said service 'Original compilations of facts or information' which will individually fall under Heading No.998394', / Busine
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ons on behalf of AM, appears to fall under 'Other professional, technical and business services nowhere else classified' under Heading No.998399, will be covered under Section 13(2) of the IGST Act, 2017 and place of supply of service or shall be the location of the recipient of services;
14. Providing staff of AM or its customers visiting the territory with such assistance as may be reasonably requested by AM, including but not limited to providing information, guide, escort and interpreting services during Customers visits; for the sake of clarity, the premises of AKI (applicant) will not be the premises of AM and the premises of AKI(applicant) in India shall not be made available to employees or other personnel of AM who may visit India, will be covered under Section 13(3)(b) interalia Section 13(4) of the IGST Act, 2017 and the place of supply of service shall be the location where the services are actually performed.
15. Providing information on products and its functioning or s
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ment in freely convertible foreign exchange i.e. Japanese Yen / United States Dollar.
e. Condition V – Supplier of service and recipient of service are not merely establishment of distinct person.
Explanation 1 to Section 8 of IGST Act provides that -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 territory, then such establishments shall be treated as establishments of distinct persons.
PRAYER
In view of the above, it can be construed that in some services (as mentioned above) the Applicant fulfils all the conditions for treating the supply of services as an export of services in terms of Section (6) of IGST Act and in some services (as
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the facts of the case. The issue put before us is in respect of a future transaction which would be on the lines thus –
The Applicant provides sales promotion and marketing support to Asahi Kasei group. For this, the Applicant has entered in to a Services Agreement dated 01 March 2013 with Asahi Japan and Marketing Services Agreement with various group companies of Asahi Kasei group. The scope of work under the Agreement is broadly stated below:
a. Collecting and analyzing information i.e. market analysis and supporting Asahi Kasei group in getting new business;
b. Providing marketing & administration support and back-office support (including accounting Support);
c. Networking i.e. co-ordinate with the government authorities and relevant universities to join relevant trade associations;
d. Supporting sales activity of Asahi Kasei group.
On this set of facts applicant has raised questions which are as under:-
Que 1: Whether the service supplied by the Applicant under the Service
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B agrees to provide Party A from time to time, as and when requested by Party A, with economic, industrial and technical information on the products falling under the category of the Products and their markets, trends and outlook together with similar information concerning such other industries in the Territory (i.e. India or any other mutually agreed territory) as Party A may from time to time request. In the event Party A should require more detailed information than that so provided by Party B, Party B shall exert its best efforts to obtain such further or more detailed information.
6. At such time and from time to time, as and when representatives of Party A, or its related business circles or customers visit the Territory and Party A so requests, Party B shall provide necessary assistance in liasoning and coordinating activities (including interpreting) to such representatives.
7. From time to time, as and when requested by Party A, Party B shall make market surveys of the P
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vices or both or securities on his own account
The concept of intermediary under the GST Act is substantially identical to the concept of intermediary under the erst while service tax regime. This concept has been explained in the Education Guide issued by CBEC in the year 2012 as under:
In order to determine whether a person is acting as an intermediary or not, following factors need to be considered:
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 a
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possible situations here- one when he acts on his own account, and the other, when he acts as an intermediary.
When he 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 single contract, on his own account (i.e, he buys-in and sells freight transport as a principal), and charges a consolidated amount to the exporter. This is a service of transportation of goods for which the place of supply is the destination of goods. Since the destination of goods is outside taxable territory, this service will not attract service tax. Here, it is presumed that ancillary freight services (i.e. services ancillary to transportation- loading, unloading, handling etc.) are “bundled” with the principal service owing to a single contract or a single pric
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he matters related to the functions of the holding company, such as corporate accounting, corporate finance, corporate personnel and labor relations, corporate research and development, quality assurance and corporate intellectual property, and provide Party A with its report of the research thereon.
2. To provide with economic, industrial and technical information on the products falling under the category of the Products and their markets, trends and outlook together with similar information concerning such other industries in the Territory.
3 To provide necessary assistance in liasoning and coordinating activities (including interpreting) to such representatives.
4. To make market surveys of the Products in the Territory and report the results thereof to Party A.
5. All other related services pertaining to above services including, but not limited to, those services with regard to finance, accounting, and patent and legal matters.
We clearly find from the scrutiny of clause 15
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'.
As a corollary of this finding, we shall now move on to decide whether the services supplied by the applicant constitute composite supply and categories as 'support services'?
Applicant has strongly relied on the definition of composite supply as defined under section 2(30) of the GST, the Education Guide-2012 and the decision of ARA in case of Godday India Web Services Pvt. Ltd. [2016 (46) 806 (AAR) = 2016 (3) TMI 355 – AUTHORITY FOR ADVANCE RULINGS to submits that the supply of services as evidenced by the Services Agreement constitute composite supply with the Marketing Services as principal supply. The expression 'Composite Supply' has been defined under GST Act, as below –
(80) “composite supply” means a supply made by a taxable person 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 pr
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upon the normal or frequent practices followed in the area of business to which services relate. Such normal and frequent practices adopted in a business can be ascertained from several indicators some of which are listed below –
The perception of the consumer or the service receiver. If large number of service receivers of such bundle of services reasonably expect such services to be provided as a package then such a package could be treated as naturally bundled in the ordinary course of business.
Majority of service providers in a particular area of business provide similar bundle of services. For example, bundle of catering on board and transport by air is a bundle offered by a majority of airlines.
The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business. If the nature of services is such that one of the services is the main service and the other services combined with such servi
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rally 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.
In the present case from the Services Agreement we find that applicant proposes to provide two different categories of services which are as below:
A) Research on the functioning of the company : Services pertaining to research on the matters related to the functions of the holding company such as – corporate accounting, corporate finance, corporate personnel and labour relations, corporate research and development, quality assurance and corporate intellectual property, and provide Party A with its report of the research thereon
B) Information on the markets in the territory : Services pertaining to information on the markets in the territory includes –
i) Economic, industrial and technical information on the products falling under the category of the Products and their markets, trends and outlook together with similar inf
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–
i) Economic, industrial and technical information on the products falling under the category of the Products and their markets, trends and outlook together with similar information concerning such other industries in the Territory.
ii) To provide necessary assistance in business activities (including interpreting) to such representatives.
iii) To undertake market surveys of the Products in the Territory and report the results thereof to Party
iv) Ancillary services to all above services, including, but not limited to, those services with regard to finance, accounting, and patent and legal matters.”
From the nature of services it is evident that these services are not interdependent but could be provided as standalone services. In as much as we can say that applicant proposes to provide two distinct category of supplies. And as such services provided by this agreement can not constitute 'composite supply' as defined under the GST Act. However, we observe that services menti
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services to determine the most appropriate service tariff code:
Sr.no.
Chapter, section, heading or group
Service code (tariff)
Service description
296
Heading 9983
Other professional, technical and business services
297
Group 99831
Management consulting and management services; information technology services
298
998311
Management consulting and management services including financial, strategic, human resources, marketing, operations and supply chain management
299
998312
Business consulting services including public relations services
300
998313
Information technology consulting and support services
301
998314
Information technology design and development services
302
998315
Hosting and information technology infrastructure provisioning services
303
998316
Information technology infrastructure and network management services
304
998319
Other information technology serv ices n
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research services
347
998372
Public opinion polling services
Sr.no.
Chapter, section, heading or group
Service code (tariff)
Service description
444
Group 99859
Other support services
445
998591
Credit reporting and rating services
446
998592
Collection agency services
447
998593
Telephone-based support services
448
998594
Combined office administrative services
449
998595
Specialised office support services such as duplicating services, mailing services, document preparation and the like
450
998596
Events, exhibitions, conventions and trade shows or organisation and assistance services
451
998597
Landscape care and maintenance services
452
998598
Other information services nowhere else classified
453
998599
Other support services nowhere else classified
From the detailed examination of above table we find that the services provided by the applicant in
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services to all above services, including, but not limited to, those services with regard to finance, accounting, and patent and legal matters would fall under service code tariff 99837 with service description market research services.
Question: – 2. Whether the service supplied by the Applicant under the Marketing Services Agreement dated 1 December 2012 constitute a supply of “Support services” falling under HSN code 9985 or “Intermediary service” classifiable under HSN code 9961 / 9962?
Applicant entered into 'Marketing Service Agreement' dated 1st December 2012 with Bioprocess Division of Asahi Kasei Medical Co. Japan (in short AM). As per the preamble the services are proposed to be provided with the sole intention to develop/ argument sales of bioprocess consumables and for that purpose AM desires to secure market support services offered by the Applicant. Applicant proposes to provide services which shall comprise of following activities.
“a) Conducting market surveys and pr
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(ire, the Applicant) nor any of its representatives shall have any authority to conduct negotiations on behalf of the service recipient;
f) Connecting Customers with representatives of the service recipient for the purpose of obtaining orders and establishing and maintaining close commercial relationships between service recipient and customers;
g) Providing staff of the service recipient or its customers visiting the territory with such assistance as may be reasonably requested by them, including but not limited to providing information, guide, escort and interpreting services during Customers visits; for the sake of clarity, the premises of AKI will not be the premises of the service recipient and the same shall not be made available to employees or other personnel of service recipient who may visit India;
h) Providing information on products and its functioning or similar such services to service recipient's customers and notifying service recipient of any consumer complaints;
i
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t applicant shall not carry out any act that will be binding on AM, such as conclusion of contracts, acceptance of sales order, invoicing, determination of sales prices, rebates or discounts, resolution of customers complaints or settlement or disputes with the customers. On this factual matrix we discuss whether the provision of services constitute 'intermediary' as defined under section 2(16) of IGST Act. The definition is already reproduced in preceding para of this ruling.
The concept of intermediary under the GST Act is substantially identical to the concept of intermediary under the erst while service tax regime. This concept has been explained in the Education Guide issued by CBEC in the year 2012 which we have already reproduced in this ruling.
We find from the scrutiny of Marketing Services Agreement that the relationship between the parties is that of independent contractors meaning that the agreement does not intend to create relationship of principal and agent. The applic
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= 2016 (3) TMI 355 – AUTHORITY FOR ADVANCE RULINGS to submit that the supply of services as evidenced by the Marketing Services Agreement Constitute composite supply with Marketing Services as principal supply. The expression 'Composite Supply' has been defined under GST Act, which we have already reproduced in the preceding paras.
Under the GST Act, a composite supply would mean a supply 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. We find that applicant proposes more than two taxable supplies to the recipient. In respect of supply which consists of more than two taxable supplies and to fall within the ambit of composite supply, it will be necessary to determine whether a particular supply is naturally bundled in the ordinary course of business and what constitutes principal supply. The co
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otential for recipient of services.
With regards to the classification of services under the rate notification 11/2017 as amended from time to time, and the annexure of classification of services we find following entries that are relevant for the present purpose.
Sr.no.
Chapter, section, heading or group
Service code (tariff)
Service description
345
Group 99837
Market research and public opinion polling services
346
998371
Market research services
347
998372
Public opinion polling services
From the perusal of above table and the finding by us as above, we hold that the services the applicant proposes to provide would fall under Group 99837 as Market Research Services.
Question: – 3. Whether the services provided by the Applicant is an export of services as defined under Section 2(6) of the Integrated Goods and Services Tax Act 2017?
The expression export of services has been defined under the GST Act as below:
“(6) export of services” means th
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of the recipient of services i.e. AM Japan, which is outside India. As the applicant satisfies all the ingredients of 'export of services' the service provided by the 'Marketing Services Agreement' would qualify as an export of taxable service.
05. 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-35/2018-19/B-108
Mumbai, dt. 05/09/2018
For reasons as discussed in the body of the order, the questions are answered thus
Question:-1. Whether the service supplied by the Applicant under the Service Agreement dated 1 March 2013 constitute a supply of “Support services” falling under HSN code 9985 “Intermediary service” classifiable under HSN code 9961 /9962?
Answer: (i) The services provided by the applicant in the nature of Research on the matter related to functioning of the holding of company such as
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