In re DKV Enterprises Private Limited (GST AAR Andhra Pradesh)
Whether the marketing and consultancy services supplied by the applicant are liable under export of service or not?
The applicant submitted that in the capacity of consultant, they will promote the sale of and solicit orders for the products throughout the Territory in accordance with the marketing plans and objectives of Grace. The Consultant shall have no power to bind Grace and shall negotiate for orders of the products to be transmitted to Grace for acceptance, only at the prices and in accordance with the terms, conditions, policies and instructions specified by Grace, any of which may be changed at any time by Grace.
In return, as full compensation for its services the consultant will earn the commissions on the sale of the products in the Territory pursuant to orders solicited by itself and accepted by Grace. Net sales price of the products shall mean Grace ‘s FOB price in U.S. dollars for the products exclusive of freight, customs duties, taxes (including sales and value added taxes) packaging, insurance and any charges for technical service invoiced by Grace.
The consultant’s commissions will be paid monthly, on the fifteenth day of the month following receipt by Grace of payment from its customers in respect of which the commissions were earned and are expressly conditioned upon such receipt by Grace. Grace may adjust commissions to reflect returns, allowances or credits in respect of sales of products during prior months, and may adjust the commission rales upward or downward where required by competitive conditions, but only when mutually agreed. Unless otherwise agreed in writing, all payments due to the consultant under the agreement will be made by bank transfer in U.S. dollars to the consultant account.
After the examination of the nature of the marketing and consultancy services provided by the applicant consultancy between the applicant and its overseas client, now we take up the issue at hand i.e., whether the services provided by the applicant are export services or not.
The applicant in the present case by providing marketing and consultancy services, facilitates the supply of goods i.e., fluid cracking catalysts and its additives from Grace Davison (Singapore) to it’s clients in the Territory i.e, India. Besides, the condition that transaction not being done on his own account makes the applicant rightly fit into the definition of intermediary in the instant case.
In order to identify the taxability of Goods and Services under GST, it is important to know the place of supply of said Goods or Services to make the said supply eligible to the kind of tax payable on transaction i.e., whether CGST and SGST or IGST, In case of Intermediary the provision of place of supply is mentioned under Section 13 (8) of IGST Act, 2017 as stated under:
” 8) The place of supply of the following services shall be the location of the supplier of services, namely;- (a) services supplied by a banking company, or a financial institution, or a ton-banking financial company, to account holders; (b) intermediary services; (c) services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month”.
This provision makes it clear that place of supply of Intermediary Services would be the location of the supplier of services i.e., in the instant case, it is nothing but the location of the applicant.
Coming to the determination of the tax, ‘Intermediary Service’ is covered under Section 7 (5)(c).
(5) Supply of goods or services or both,- (a) when the supplier is located in India and the place of supply is outside India; (b) to or by a Special Economic Zone developer or a Special Economic Zone unit; or (c) in the taxable territory, not being an intra-State supply and not covered elsewhere m this section, shall be treated to be a supply of goods or services or both in the course of inter-State trade or commerce”.
In the instant case the intermediary services are provided to the recipient located outside India and the Interstate provisions as contained under Section 7 (5) (c) shall be applicable and hence IGST is payable under such transaction.
Read AAAR Order : AAAR remanded case back to AAR to examine afresh & dispose
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