Promotion & marketing of overseas university courses do not constitute export of services :AAR

In re Global Reach Education Services Pvt Ltd (GST AAR West Bengal)

Facts of the case

• The Applicant is engaged in providing Overseas Education Advisory wherein it promotes the courses provided by overseas universities and makes the prospective students aware about the courses. As a part of service, it also ensures the submission of requisite documents and payment of requisite fees by students to the Universities.
• The Applicant receives commission as consideration for promotional services rendered to prospective students in foreign currency basis the number of students enrolled in the university.

Issues before the Authority for Advance Ruling (‘AAR’)

The Applicant raised question before AAR that whether the service provided by the Applicant is classifiable as export or not.

Contentions of the Applicant

• Supply of services to overseas educational institution for promotion of their courses among prospective students qualifies as ‘Export of services’ as per Section 2(6) of the Integrated Goods and Services Tax Act, 2017 (IGST Act, 2017) as it is satisfying all the conditions mentioned in the said section.
• The Applicant supplies the services to foreign universities as independent service provider on his own account. Further, it is not acting as an intermediary or agent in terms of section 2(13) of the IGST Act. The agreements between the foreign universities and the Applicant also clarifies that the relationship between them is not one of Principal and Agent.
• Payment of consideration based on recruitment is merely the mechanics for determining the quantum of consideration payable. It has no bearing on the Applicant’s standing as an independent service provider.
• Therefore, the place of supply shall be determined under Section 13(2) of IGST Act and not under section 13(8)(b) of the IGST Act. Accordingly, the place of supply shall be the location of the recipient outside India. Hence, the services provided to the foreign universities by the Applicant should be treated as ‘Export’ within the meaning of Section 2(6) of the IGST Act.

AAR’s Ruling

It was held that that the services provided by the Applicant to overseas universities are not ‘Export of services’ and therefore, taxable as per the GST laws, on the following basis:

• Section 2(10) of IGST Act specifies certain conditions to be satisfies to qualify a service as ‘Export’. One of those condition is that the place of supply of service shall be outside India.
• Reference is made to the Agreement entered between the foreign university and the Applicant, wherein, the Applicant is defined as an Education agent. The Agreement further states that the Applicant is engaged by the universities as their representatives in India.
• The Applicant is remunerated only if the students get enrolled through it. In case, the students get enrolled directly by the University through distant education or online services, the Applicant will not be paid any consideration. Therefore, promotion of courses of universities is irrelevant for determining consideration in the present case. Further, the Applicant is not allowed to undertake any promotional or advertising activity without prior written approval from the universities
• The Applicant is facilitating recruitment/enrolment of students to foreign Universities Promotional service is incidental and ancillary to the above principal supply. The Applicant, therefore, represents the University in the territory of India and acts as its recruitment agent.
• The place of supply for the said services is in India as per Section 13(8)(b) of IGST Act. Accordingly, the services provided by the Applicant are not Export of service and are taxable as per GST laws.

Basis the above AAR Ruling, it is recommended that the Companies must review their existing agreements considering the GST laws and shall made sutiable amendments so as to avoid adverse implications under GST.