In re NCS Pearson INC (GST AAR Karnataka)
he applicant is an intermediary located in non taxable territory and provides services of online exams/tests via electronic software to the non taxable online recipients in India which he has classified into three categories. For activities mentioned under Type l, the applicant is clear regarding the taxability and has approached the Authority only for Type 2 and Type 3 activities performed by them. In the following paras, we will discuss Type 2 and Type 3 activities as mentioned by the applicant.
Type 1 Test:
Tests that are self-administered by the candidates (‘test-takers’) and are wholly digital in nature. The test contains only multiple choice questions. The test-taker uses an Internet browser for the entire process ranging from creating a personal profile, selecting the desired test, remitting payment, taking the test, scoring and viewing results. The tests are not required to be taken from the test centers and can be taken from any location as desired by the candidate. The scores are provided by the electronic software based on a computer-based algorithm in its entirety and the test-taker gets the result in electronic format immediately on completion of the test. In view of this, the entire test experience is electronic without any human intervention.
Type 2 Test:
6.2. These tests are similar to type 1 test regarding the creating personal profile, schedule an appointment for the test and remitting payment on the Pearson VUE website , however, with the major difference being that on the day of the test, the candidate is required to go to the test center, where an administrator will verify the identity of the candidate, validate test registration and appointment of the candidate. After that the test administrator will assign a computer to the candidate to take a test. During the test-taking process, the candidate is continuously monitored by the invigilator. While the test is in progress, the candidate is allowed to take a break with the approval of the invigilator. For instance, if the candidate wants to take a break, he/she needs to notify the invigilator by raising their hands. The invigilator will come to the candidate’s desk and allow the candidate to take a break / refreshments in a supervised area. Once the break time is over, the invigilator will again do a physical check of the candidate and escort them back to the computer desk to allow the candidate to complete the test. Once the candidate has completed the test, the scores are provided by a computer-based algorithm on the electronic software and the test-taker gets the result immediately on completion of the test at the test center itself. The test administrator is responsible for sharing the candidate’s printed unofficial score report. In addition to this, the entire process is recorded by cameras as a video and such video recording of the test-taker’s testing session is reviewed by a test security official to validate any testing issues (or to confirm any testing suspicions) that may have arisen during the test administration.
Held- The applicants argue that it is impossible to complete the provision of service in the absence of administrators since verification and registration of the candidates is undertaken by them. However, we observe that provision of taking tests online at designated test centers are naturally bundled activities and are supplied in conjunction with each other in the ordinary course of business and therefore can be termed as Composite Supply as per Section 2 (30) of CGST Act, 2017. Here, since the main object of the whole activity is to take online tests, so the principal supply would be OIDAR service provided by the applicant to non taxable online recipients.
Type 3 Test:
These tests contain a mixture of multiple choice questions and analytical writing assessment section i.e. essay-based questions. For candidates from India, the test is taken at test centers in India at a computer workstation which is physically administered and supervised by an invigilator (proctor) as described in the type 2 test above. The candidates may create a profile, schedule the appointment and remit payment using a registration center (call center). The test is completed in parts viz. at the end of the exam, the test-taker is able to see the final score for multiple choice questions and an indicative score (which is not final) for essay based questions marked by the computer-based algorithm. However, the essay based questions are then sent to a human-evaluator in the USA for assessment and final scoring. In addition to this, in case where the difference in score for a single essay question between the electronic computed based algorithms scoring vis-a-vis human scoring is more than 1 point, then the essay based questions are again sent to an expert evaluator for assessment and scoring. Once the entire aforesaid scoring activity is completed, the test-taker is then e-mailed a URL to access their official score, typically within a week’s time.
Held– We note that since tests are scored after human intervention in type 3, it should be outside the purview of OIDAR. In fact, the second example provided by the applicant in the grounds of applications while discussing Type 2 case, helps and fits in type 3 scenario.
Read AAAR Order: Type-3 test by ‘NCS Pearson Inc’ classifiable as OIDAR service: AAAR
