In re Sabre Travel Network India Pvt. Ltd. (GST AAAR Maharashtra)
The Appellate Authority for Advance Ruling held that the entire gamut of activities of the Appellant is in the nature of the composite supply, of which intermediary services is the principal supply. Further, as regards the services provided by the Appellant to their Client, namely Sabre APAC is export or otherwise, we hold that we do not have jurisdiction to decide the place of supply of service, which is one of the pre requisites to determine the export of services in terms of Section 2(6) of the IGST Act, 2017 and hence we cannot pass any ruling in respect of the same.
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 Sabre Travel Network India Pvt Ltd(herein after referred to as the “Appellant”) against the Advance Ruling No. GST-ARA-08/2018-19/B-76 dated 26.07.2018.
BRIEF FACTS OF THE CASE
A. The Appellant is a private limited company incorporated under the Companies Act, 1956. It is a direct and indirect 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 APAC – located in Abacus Plaza, 3 Tampines Central 1, 4408-01, Singapore 529540, a non-exclusive right to market and promote the CRS Software for specified Asia Pacific jurisdictions. Sabre APAC has further been authorized to sub-license certain parts of its marketing rights and obligations to local-country distributors engaged in the marketing and promotion of CRS Software.
D. Accordingly, the Appellant has obtained a non-exclusive, royalty-free right and license from its parent 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. Pursuant to the said Agreement, the Appellant has been appointed as the National Marketing Company to conduct marketing and promotion of access of the CRS Software to end subscribers viz. travel agent in India.
E. The scope of the services provided by the Appellant under the terms of the said Marketing Agreement are:
i) Marketing services including advertising, identifying potential customers, identifying business opportunities, demonstrating offerings;
ii) Consultancy and provision of information services;
iii) Marketing support services, including PR, promotions, 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 Appellant undertakes the following activities ;n relation to the marketing and promotion services provided by them under the Marketing Agreement dated 31 October 2016:
– Accordingly, while marketing access to the CRS Software, the sales team of the Appellant 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 Appellant scans the credentials and the business potential of the subscriber to whom 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 Appellant logs on a request into the system through the website maintained by Sabre APAC called Subscriber Communication Management System (“SCMS”). This is an automated process wherein a request is placed by the Appellant to create a Pseudo City Code, which is a system designation which allows tracking activity of the subscriber in the CRS Software;
– 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;
– If 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 Appellant’s engineers install user interfaces to access the CRS Software in the subscriber’s computer systems.
In this manner, once the organizational and workflow analysis is complete, the Appellant undertakes reporting of the results in the SCMS owned by Sabre APAC. Consequently, the scouting of potential subscribers and the said organizational and workflow analysis of such potential subscribers are the deliverables by the Appellant which is submitted in the SCMS system in the form of a non-binding request.
Herein, the responsibility of the Appellant, 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 upon Sabre APAC deciding to accept the potential customer based on the analysis provided by the Appellant.
Thus, based on the analysis of the subscriber’s business provided by the Appellant, 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 Appellant’s engineers install user interfaces to access the CRS Software in the subscriber’s computer systems. The decision to permit the subscribers to have access to the CRS Software is based on the internal criterion set forth by Sabre APAC and the Appellant is not involved in the decision -making process.
G. Marketing Support Servicespursuant to the Marketing Agreement:
Additionally, the Appellant 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. Such services are provided with the aim 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 augment Sabre APAC’s business in India.
H. The entire gamut of services are provided in an integrated manner to Sabre APAC, and for consideration the Appellant 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.
I. Basis the above facts, the various roles and responsibilities of the Appellant and Sabre APAC under the Marketing Agreement dated 31 October 2016 are contrasted below:
