GST Applicability on ‘Intermediary’ services – AAAR Karnataka
by ReinHeads Team | Aug 24, 2020
AAAR Karnataka* – GST Applicability on ‘Intermediary’ services
| Facts |
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- Mr. Rajendran Santosh (‘the Appellant’) is employed as the Regional Sales Manager for the Indian and Middle East markets by H-J Family of Companies (‘the Company’) having its office in USA
- The Company is engaged in manufacturing and selling various categories of transformer components and accessories
- The Appellant makes presentation before clients as per the details specified by the Company and report the sales development status for the Middle East and Indian Markets to the European Office on a weekly basis
- The Appellant does not raise any invoice either for the products ordered by customers or for the services rendered by him to the Company. The Appellant is paid a monthly lump sum compensation for the services rendered to the Company
- The Appellant neither conclude contracts between the customers and the Company nor directly receive/ deal with the products of the Company in any manner. The customers directly enter into a contract with the Company
- The Appellant sought Advance Ruling on the questions inter-alia that whether the services rendered by Appellant to the Company shall be classifiable as supply of taxable service and thereby subject to GST?
- The Authority for Advance Ruling (‘the AAR’) held that the services rendered by the Appellant would be classifiable as “Other professional, technical and business services” under Service Code 9983.11 and thereby subject to GST @18%
- Aggrieved by the AAR ruling, the Appellant filed an appeal before the Appellate Authority for Advance Ruling (‘the AAAR’)
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| Issue before the AAAR |
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- Whether the Appellant providing services to the Company qualifies as an ‘intermediary’ under Section 2(13) of the Integrated Goods and Service Tax, 2017 (‘IGST Act’)?
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| Discussion and Findings of the AAAR |
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- The AAAR upheld the ruling of AAR and ruled that the services in respect of making sale presentation of the products is classifiable as “Other professional, technical and business services” under Service Code 9983.11
- Further, the AAAR held that the Appellant providing such services to the Company qualifies as an ‘intermediary’ under Section 2(13) of the IGST Act on account of following key reasons:
- Services of making the sales presentation amounts to facilitating the sales and distribution of products by the Company
- A general understanding of the term ‘arranging’ or ‘facilitation’ would cover a wide range of activities ranging from marketing/ sales promotion, locating prospective buyers for client’s products, etc.
- Purpose of making sales presentation by the Appellant is with the sole intention of facilitating the sale of products of the Company
- The Appellant is not supplying the products on behalf of the Company rather only facilitating the supply of goods between the Company and the customers
- The Appellant is not supplying the goods on his own account
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*Advance Ruling No. KAR/AAAR 14-G/2019-20 dated 18.02.2020 (The Authority for Advance Ruling, Karnataka)
