マーケティングサービス契約に基づき提供されるマーケティングサービスは、サービスの輸出に該当するかどうか。

Held by Hon’ble Authority for Advance Ruling, Maharashtra

In the matter of M/s. Gulf Turbo Solutions LLP [Case no. GST-ARA-101/2019-20/B-53 dated April 27, 2022]

1. Summary of the judgment

Gulf Turbo Solutions LLP (hereinafter referred to as the ‘Applicant’) is in the business of service and repairs of various types of turbochargers. It also supplies spare parts required for turbochargers and ship spares.

The Applicant is entering in a Marketing agreement with Gulf Turbo Repairs and Services FZC (hereinafter referred as ‘GTRS’). This marketing agreement requires the Applicant to provide a bundle of services.

With regard to the services proposed in the agreement, the Applicant has sought advance ruling in respect of the following questions –

1. 申請者が締結予定のマーケティングサービス契約に基づき提供するマーケティングサービスは、HSNコード9985に該当する「サポートサービス」の提供となるのか、それともHSNコード9961/9962に分類される「仲介サービス」となるのか。
2. 申請者が提供するマーケティングサービスは、2017年統合物品サービス税法（IGST法）第2条(6)に定義されるサービスの輸出に該当するか。

• Judgment of Hon’ble AAR regarding the nature of service provided

The Applicant contended that the agreement clearly states that the relationship between the parties is that of independent contractors. They are not allowed to carry out various activities such as negotiation of price, invoicing etc. All costs and expenses incurred for providing the specified services will be borne by the Applicant. Accordingly, the proposed marketing services should not be classified as ‘intermediary’ services.

Applicant further submitted these bundles of services will constitute a composite supply with marketing service being the principal supply.

判断 - 事前裁定当局は、申請者が顧客や見込み客とGTRSを繋ぐ役割を果たしていると判断した。さらに、申請者は顧客との連絡調整を行い、顧客から得た情報をGTRSに報告する。申請者はGTRSと顧客との間に緊密な商業関係を構築・維持する。また、規制の動向を監視する（規制当局との連絡の確立・維持などを含む）。これらの活動は、実質的に物品またはサービスの供給を仲介・促進するものである。

提供される活動に関連して、申請者は自己の計算ではなく、GTRSの代理として行動していると見なされる。IGST法で規定される仲介業者の要件をすべて満たしているため、事前裁定当局は、申請者が提供を予定しているサービスは「仲介」サービスであると判断した。

Ruling on whether services proposed to be provided qualify as export

判断 – IGST法第13条(8)の規定に基づき、仲介サービスの供給地は供給者の所在地、すなわち本件では申請者の所在地であるマハーラーシュトラ州となる。供給地がインド国内であるため、IGST法第2条(6)に規定されるサービスの輸出の要件は満たされない。したがって、事前裁定当局は、提案されているサービスは輸出には該当しないと判断した。

2. Brief facts of the case

• Gulf Turbo Solutions LLP（「申請者」または「GTS LLP」）は、各種ターボチャージャーの修理・整備事業を営んでいる。また、ターボチャージャーおよび船舶用スペアパーツの供給も行っている。
• Gulf Turbo Repairs and Services FZC（「GTRS」）は、アラブ首長国連邦のシャールジャに登記された企業であり、同様に各種ターボチャージャーの修理・整備事業を営んでいる。
• 両社の株式の過半数は、Rehan Marzban Karanjia氏が保有している。
• マーケティング契約に基づくサービス範囲には、市場調査の実施、インドおよび国際的な市場動向や特徴に関する情報のGTRSへの提供、イベント参加を通じたGTRSの販売開拓支援が含まれる。
• また、GTRSの広告方針の適応と実施の支援、顧客のターボチャージャー回収のための連絡調整、顧客の需要把握、および顧客から得た情報のGTRSへの報告が含まれる。申請者は、GTRSと見込み客を繋ぎ、GTRSと顧客との間に緊密な商業関係を維持する。
• 契約に基づき、申請者は価格、納期、仕様、その他の契約条件について見込み客と合意する権限を持たない。ビジネスの受諾および契約条件の決定は、GTRSの単独の裁量によるものとする。

3. Question before the Hon’ble AAR

1. Whether Marketing Services agreed to be provided by the Applicant under Marketing Services Agreement agreed to enter into will constitute supply of ‘Support Services' falling under HSN Code 9985 or as ‘Intermediary Services’ classifiable under HSN Code 9961/9962?

2. Whether Marketing 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?

3.1 Relevant Legal Extracts

• Section 2(6) of the IGST Act defines export of service as –

“export of services” means the supply of 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 [or in Indian rupees wherever permitted by the Reserve Bank of India]; 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;

• Section 2(13) of the IGST Act defines intermediary as –

“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”

• A relevant extract of section 13(8) which provides place of supply for intermediary services is provided below –

The place of supply of the following services shall be the location of the supplier of services, namely:––

(a) ….

(b) intermediary services;

(c ) ……

4. Contention of Applicant

• The Marketing services agreement clearly defines the relationship between the parties as independent contractors. Further, the Applicant has no authority to carry out negotiations, conclusion of contracts, acceptance of orders, pricing, invoicing, settlement of customer disputes, or resolution of complaints.
• As per Applicant’s interpretation of the agreement the services will be individually classified as below –

• Applicant submits that supply of these services will constitute to be a composite supply with marketing-related services as the Principal supply as conducting market surveys and providing market trends is the main activity. Applicant will be providing two or more taxable services which is naturally bundled in the ordinary course of business. Bouquet of services proposed to be provided would constitute a package for single consideration.
• GTS LLP will not represent itself to be agent of GTRS but provide service on his own account to GTRS to further augment its business of turbocharger repairing services and supply of ship spare parts in India and globally. Consideration for all these services is worked out on a cost-plus margin basis without any correlation with sale of service or business transactions.
• On the basis of the above, it was submitted by the Applicant that services proposed to be provided should be classified as Market Research Services which will qualify to be export of service as defined under section 2(6) of the IGST Act.

5. Findings of Hon’ble AAR

• Hon’ble AAR mentioned that the conditions to be satisfied for an ‘intermediary’ as provided in the IGST Act are –
  • 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 the Applicant connects GTRS with the customers/ prospective customers in India, the applicant is actually arranging or facilitating the supply of goods or services between two or more persons. Further, the Applicant will also be liaising with the customers, collecting part specifications and requirements, report information obtained from customers to GTRS, notify customer complaints to GTRS, and monitoring regulatory developments.
• With regard to the above-mentioned services, condition (ii) of arranging and facilitating supply of goods and services was inferred to be satisfied.
• The hon’ble authority stated that GTRS appears to be providing service of connecting business of GTRS with customers with an intention of promoting business of GTRS in India. From applicant’s submissions, it was clear that they are not providing service on their own account rather acting on behalf of GTRS. Accordingly, condition (iii) of the definition is also satisfied.
• The Hon’ble AAR further supported its findings by drawing reference to the Transfer pricing-related clause mentioned in the agreement. The authority stated that the fact that companies propose to enter into a Transfer pricing agreement implies that they are related parties and are not dealing on a principal to principal basis.
• Since all the criteria of the definition of intermediary is satisfied it was held that Applicant is an intermediary.
• Further, place of supply of intermediary as per section 13(8) of the IGST Act is the location of the supplier, that is location of the Applicant in this case which is Maharashtra.
• Since place of supply in India, condition (iii) of export of service as provided in section 2(6) of the IGST Act is not satisfied. Accordingly, the services will not qualify to be export of service.

6. Conclusion

• While marketing-related services appeared to be the main activity for which the agreement was proposed to be entered between both the parties, the Hon’ble AAR discussed the other services in detail for holding that the Applicant is an ‘intermediary’ under GST.
• Further, since the place of supply for intermediary services was Maharashtra, Hon’ble AAR held that the services do not qualify as export.