In re Mayank Jain (GST AAAR Maharashtra)
Once it has been decided that the entire gamut of activities of the Appellant, which are in the nature of the facilitation of the main services between the Consultant Manager and its customers, i.e. prospective investors, are those of an intermediary, we proceed to the determination of the other issues as to whether the activities carried out by the Appellant are export of services or not. As regards the aforesaid issue of the determination of the Appellant’s activities as the export of services or otherwise, we are of the view that the determination of the export in respect of supply of any goods, or services, or both are out of the ambit of the Advance Ruling in terms of section 97(2) of the CGST Act, 2017, which lays down the set of questions, in respect of which advance ruling can be sought under the GST Act, 2017. The said set of questions do not cover the determination of the place of supply of any goods, or services, or both. Further, to determine the export of services in terms of section 2(6) of the IGST Act, 2017, place of supply of the services has to be determined so as to ascertain whether the supply of services under question can be considered as export of service or not. Now, since the place of supply is beyond the ambit of the advance ruling as discussed above, we cannot pass any ruling in relation to the issue of the export. Accordingly, the Advance Ruling Authority should also have refrained from passing the ruling in the issues of export raised by the Appellant in his application.
FULL TEXT OF ORDER OF APPELLATE AUTHORITY OF ADVANCE RULING, MAHARASHTRA
PROCEEDINGS
(under Section 101 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the MGST Act.
The present appeal has been filed under Section 100 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 Mayank Jain (herein after referred to as the “Appellant”) against the Advance Ruling No. GST-ARA-103/2018-19/B- 63 Dated 01.06.2019.
BRIEF FACTS OF THE CASE
1. Mayank Jain (“the Appellant”) is an individual exploring business opportunity in providing marketing and advisory services to the Consultant Managers in relation to the Employee Based Immigration: 5th Reference Program notified by the United States Citizenship and Immigration Services (“the EB-5 Program”). The EB-5 Program envisages that an investor is eligible to a permanent residence permit in the United State of America subject to an investment of US$ 500,000 and job creation in a commercial entity or investment fund, commonly referred to as a “Regional Centre” or a “Company”, which is approved and recognized by the Government of the United States of America. “Consultant Manager” (located outside India) acts for the Regional Centre or Company enabling them to receive investments from the prospective investors.
2. Under the proposed Agreement titled as “Foreign Immigration Advisor Agreement”, the Appellant shall provide two distinct services, viz., (i) Marketing services; and (ii) Handholding services, as detailed below:
i. Marketing services:
a. Collecting and analysing information i.e. market analytics, intelligence, preparing and drafting reports, strategy and providing leads to the Consultant Manager;
b. Market the EB-5 Program in India to prospective investors;
c. Address queries of the Consultant Manager as and when required from the Applicant;
d. Marketing support services such as arranging premises for the Consultant Manager and prospective investor to meet and negotiate/ discuss at their discretion and without interference of the Appellant.
ii. Handholding services:
Upon confirmation of a proposed investment from the Consultant Manager and prospective investor, provide hand-holding services thereto.
3. The consideration for both the aforesaid services shall be fixed and contingent upon successful investment / repatriation by the investor. In other words, upon successful investment / repatriation by the investor, the Appellant will get paid separately for each of the Marketing services and Handholding services.
4. The Appellant filed an application before the Maharashtra Authority for Advance Ruling (“AAR”), vide Application No. 103 dated 21 December 2018 (“AAR Application”), wherein it sought the ruling on the following questions:-
a. Whether the Marketing services to be supplied by the Appellant under the proposed Agreement would constitute supply of “Support services” classified under SAC 9985 or “Intermediary service” classifiable under SAC 9961 / 9962 or any other heading?
b. Whether the Handholding services to be supplied by the Appellant under the proposed Agreement would constitute supply of “Support services” falling under SAC 9985 or “Intermediary service” classifiable under SAC 9961 / 9962 or any other heading?
c. Whether the Marketing services to be provided by the Appellant will be an export of services as defined under Section 2(6) of the Integrated Goods and Services Tax (“IGST”) Act 2017?
d. Whether the Handholding services to be provided by the Appellant will be an export of services as defined under Section 2(6) of the IGST Act, 2017?
5. The Appellant made the following submissions before the AAR with respect to each of the questions referred above:
5.1 (a). Whether the Marketing services to be supplied by the Appellant under the proposed Agreement would constitute supply of “Support services” classified under SAC 9985 or “Intermediary service” classifiable under S SC 9961 / 9962 or any other heading?
i. The Appellant would be providing pure marketing services to the Consultant Manager. The Appellant is an independent service provider and would be providing services at his own risk and cost. It is also expressly provided in the proposed Agreement that neither party would represent itself to be an agent of the other nor shall either party accept service of legal process or create or assume any obligation of any kind or nature whatsoever on behalf of the other party. Further, the Appellant would not have the authority to conclude or negotiate any contracts or secure any orders on behalf of the Consultant Manager.
ii. In fulfilment of its obligation, towards Marketing services, the Appellant would undertake the following activities:-
a. Planning and conducting market surveys to identify the market and prospective investors;
b. Prepare reports, marketing plans, market intelligence and compile list of prospective investors;
c. Formulate strategy;
d. Address queries of the Consultant Manager in relation to the above; and
e. Conduct sales prospection.
iii. The Appellant would not fall within the ambit of the definition of ‘intermediary’ on account of the following reasons:-
a. Only persons appointed in representative capacities can be covered within the scope of the term ‘Intermediary’. However, in the present case the Appellant would not be acting in the representative capacity and hence, cannot be regarded as an intermediary.
b. The Appellant is acting on their volition in providing services to the Consultant Manager; there can be no question of facilitation. Hence, the Appellant is clearly not covered within the definition of intermediary for this bucket of marketing services.
c. Since the services are rendered at Appellant’s own risk and reward it does not act in the representative capacity of the Consultant Manager, the services would fall outside the purview of the definition of ‘intermediary’.
d. The Appellant merely provides marketing and advertising solutions which include sending out pamphlets, posting banners, and using print and electronic media. Nothing amongst these activities mandates there being a communication or any kind of decision making on behalf of the foreign entity.
iv. The services to be provided by the Appellant would be correctly classified under Entry 9985 as “Business Support Service”.
5.2 (b). Whether the Handholding services to be supplied by the Appellant under the proposed Agreement would constitute a supply of “Support services” falling under SAC 9985 or “Intermediary service” classifiable under SAC 9961 / 9962 or any other heading?
i. The Appellant will be an independent service provider providing services at his own risk and cost. It is expressly provided in the Agreement that the Appellant would not represent itself to be the agent of the other party or assume any obligation of any kind or nature whatsoever on behalf of Consultant Manager. Neither shall have the authority to conclude or negotiate any contracts or secure any orders on behalf of each other.
ii. The scope of the services to be provided by the Appellant to the Consultant Manager, under the Handholdmg services would mainly include the following:-
a. Identify and report to the Consultant Manager, the prospective investors who qualify the eligibility criteria and are willing to deposit the requisite amount in an escrow account and pay applicable fees for the purpose of EB-5 programme.
b. Assist the Consultant Manager in obtaining personal information of the qualified investor.
c. Assist the qualified investor in coordinating and staffing informational meeting about EB-5 program.
d. Assistance relating to documentation.
e. Provide information collecting documents, filling out forms, addressing any possible issues or difficulties.
f. Communicate immigration status / processing related updated to the qualified investor.
iii. The Appellant would not fall within the ambit of the definition of ‘intermediary’ on account of the following reasons:-
a. The Appellant will never participate in the actual sales negotiation or profess to act on behalf of the Consultant Manager or help in concluding the investment by the prospective investor.
b. The Appellant and the Consultant Manager will have no authority to create, nor will they assume any obligation on behalf of each other. The services rendered by the Appellant will be limited in this respect. Although the Appellant would assist the person of interest in filling of the forms, providing direction to get the necessary security clearances, and getting together all the financial information required as per the Consulting Manager, these duties are purely procedural in nature and do not at any point in time extend to facilitating the investment.
c. The Appellant has no role whatsoever to play in respect of the facilitation, negotiations, manner and mode of investment.
d. The services to be provided by the Appellant will be as an independent contractor. Therefore, the Appellant will fall within the exclusion provided in the third limb of the definition, i.e. providing services on his own account.
iv. The services to be provided by the Appellant would be correctly classified under entry 9985 as “Business Support Service”.
5.3 (c). Whether the Marketing services to be provided by the Appellant will be an export of services as defined under Section 2(6) of the IGST Act?
i. All conditions for ‘export of services’ provided under Section 2(6) of the IGST Act are satisfied.
ii. Place of supply of the services, being support services, would be outside India as the recipient of service (i.e. the Consulting Manager) is located outside India.
5.4 (d). Whether the Handholding services to be provided by the Appellant will be an export of services as defined under Section 2(6) of the IGST Act?
i. All conditions for ‘export of services’ provided under Section 2(6) of the IGST Act are satisfied.
ii. Place of supply of the services, being support services, would be outside India as the recipient of service (i.e. the Consulting Manager) is located outside India.
6. In the course of hearing, the Appellant relied on the following judicial precedents in support of its contentions:
a. Sunrise Immigrations Consultants Private Limited vs. CCEST, Chandigarh [Order No. 62221/20181]:
In this case the Appellant was providing services by way of providing referrals, to foreign universities and foreign banks, of students / potential investors who wish to study or settle in Canada. The consideration of the Appellant was based on the on successful admission (of student) or successful investment (by the investor). The question before the Hon. CESTAT was whether the aforesaid activity would be covered within the definition of ‘intermediary’ under Finance Act, 1994 which has an identical definition of intermediary as Section 2(13) of the IGST Act. In this case, while deciding the matter in favor of the Appellant,
Hon. CESTAT made the following key observations:
