In re Sabre Travel Network India Pvt Ltd (GST AAR Maharashtra)
Briefly stated the Applicant has stated that they have 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 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.
Read AAAR order – AAAR do not have jurisdiction to decide place of supply of service
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 augment Sabre APAC’s business in India.
n view of the submissions made by the applicant we find that the issue before us is whether or not the applicant is providing Intermediary Services. If the services provided are Intermediary Services then as Per the GST Laws the applicant will be liable to tax.
It is seen that the applicant contended 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.
Applicant is covered by the definition of an intermediary because they are definitely acting as a broker/agent, etc and facilitating the process for sale of CRS Software belonging to their foreign parent company, to the Indian subscribers because they identify such subscribers on their own in India.
It is very clear from the facts of transaction 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.
Thus we find that in case the intermediary services are provided to the recipient located outside India, the inter-state provisions as contained under section 7(5) (c) shall be applicable and hence IGST is payable under such transaction.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, MAHARASHTRA
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, we would like to make it clear that the provisions of both the CGST Act and the GST 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 provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the “GST Act”.
02. FACTS AND CONTENTION – AS PER THE APPLICANT
The submission (Brief facts of the case), as reproduced verbatim, could be seen thus –
STATEMENT OF RELEVANT FACTS HAVING A BEARING ON THE QUESTIONS ON WHICH ADVANCE RULING IS REQUIRED
BACKGROUND:
A. Sabre Travel Network (India) Pvt. Ltd. (hereinafter referred to as ‘Applicant/Sabre India’), situated at 14th Floor, Urmi Estate, 95, Ganpatrao Kadam Marg, Mumbai – 400013, is a private limited company incorporated under the Companies Act, 1956. It is a wholly 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-country distributors engaged in the marketing and promotion of CRS Software.
D. Accordingly, the Applicant 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 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 agent in India. Hereto annexed and marked as “Exhibit A” is a copy of the Marketing Agreement dated 31 October 2016.
E. The scope of the services provided by the Applicant 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 Applicant undertakes the following activities in 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 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 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; 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 Applicant’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 Applicant undertakes reporting of the results in the Subscriber Communication Management System 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 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 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.
G. Marketing Support Services pursuant to the Marketing Agreement:
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. 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 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 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:
