Service Tax - Services provided by GoDaddy India Web Services to GoDaddy US bundle of services - place of provision is outside India; are export of services and no Service Tax is payable: AAR
By TIOL News Service
NEW DELHI, MAR 08, 2016: GoDaddy India Web Services Private Limited (The applicant) proposes to enter into a 'Services Agreement' with GoDaddy.com, LLC(hereinafter also referred to as 'GoDaddy US') located in Arizona, USA and incorporated in Delaware, USA. GoDaddy US is a domain name registrar and provides other web services to customers across the world. Applicant proposes to provide a gamut of services to its client GoDaddy US. It shall provide support services in an integrated manner to assist GoDaddy US develop its brand in India, carry on its operations efficiently and serve customers in India, which are as under;
a. Marketing and promotion services: Applicant proposes to engage in promotion and marketing of GoDaddy US services in India. This would essentially include increasing the awareness of services provided by GoDaddy US and establishment of the brand GoDaddy in India. Towards this, the applicant proposes to provide the following services:
1. Direct Marketing: Applicant shall advise GoDaddy US regarding various aspects of the market situation prevailing in India from time to time. Applicant would also advise GoDaddy US regarding upcoming events, festivals, holidays in India and accordingly the suitable timing for rolling our campaigns or advertisements in India (either in various social media or by way of dispatch of personal emails to GoDaddy US existing customers in India).
2. Branding Activities: Applicant shall assist GoDaddy US in developing its brand in India by arranging for advertisement activities of GoDaddy US. An independent (third party owned) advertisement agency in India would be appointed by GoDaddy US directly. Such agency would negotiate the price for purchase of time slots or space for display of advertisement in the electronic or print media and coordinate regarding timing for display of the advertisement with Indian advertisement companies.
3. Offline Marketing: Applicant shall undertake marketing and promotional activities in India for GoDaddy US. Towards this, the applicant shall take part in seminars, talk shows or any other events as speakers to spread awareness regarding the GoDaddy brand and services offered by
GoDaddy US.
b. Supervision of quality of third party customer care center services: GoDaddy US intends to provide its customers in India a superior experience and quality services. GoDaddy US also intends to provide the customers with an avenue where the customers have round the clock access to technical support and assistance in relation to the services of GoDaddy US.
c. Payment processing services: GoDaddy US will provide its services and products to customers in India through its website. To ensure maximum reach to the customer base in India and enable customers to procure the service without any difficulty in making payments, GoDaddy US desires to provide an online payment facility to its customers in India.
In consideration for the above-mentioned support services, the applicant shall charge a fee equal to the operating costs incurred by the applicant plus a mark-up of 13% on such costs, which will be received by the applicant from GoDaddy US in US Dollars. It is contemplated that GoDaddy US would be the only customer of the applicant. Applicant would not provide any services for or on behalf of GoDaddy US in India or outside India.
GoDaddy US, through its website 'GoDaddy.com' is engaged in the business of providing name registration, web hosting, designing and other services. The nature of services provided by GoDaddy US is outlined below:
a. Domain name registration and transfer services: GoDaddy US registers and transfers both generic top level domains, including the prominent domains such as .com, .net, .org, and .info, as well as country code top level domains including, .us,.ca,.mx,.fr,.it,.de and.es. Any user desirous of obtaining any particular domain can access a website of GoDaddy US and place a request for the same.
b. Website hosting and e-mail: GoDaddy US provides web hosting services which allow its users to develop their own websites/webpages by using the development tools and applications which are available online on GoDaddy's website. GoDaddy US hosts the website of its users on its servers/dedicated servers located outside India.
c. Designing services: GoDaddy US assists its users in creating various designs for website header, website content, website logo, business card, letter head etc., so that the users can build their own website.
d. Sale of on-demand products: GoDaddy US also provides its domain users with email, calendar and other standard services with limited features. Additional features (like multiple email ids', additional space, synchronization etc.) are also available to the users for a service fee, which varies based on the service level requested by the users.
e. Trouble shooting services: All the users of GoDaddy US are also entitled to trouble shooting services in relation to any of the services which they have procured from GoDaddy US.
Applicant seeks rulings with regard to the following questions of law.
Question No.1: Whether, in the facts and circumstances as explained in Annexure I, the various support services proposed to be provided by the Applicant to GoDaddy US are a "bundle of Services" being naturally bundled in the ordinary course of business and accordingly is a single service, being 'business support service', in terms of Section 66F of the Finance Act?
Applicant inter-alia submits that they would provide in an integrated manner, a bundle of support services in relation to marketing, branding, offline marketing, oversight of quality of third party customer care center and payment processing on a principal to principal basis in terms of the draft Service Agreement; that these services would be provided with the sole intention of promoting the brand 'GoDaddy' in India.
Applicant submits that, the services proposed to be provided by the applicant would be provided as a package and the payment for the entire package would be a consolidated/lump sum payment; that the nature of various services provided collectively is incidental or ancillary to provision of marketing and support services to the business of GoDaddy US; that it is apparent that the services proposed to be provided by the applicant satisfy the illustrative tests laid down by the Education Guide and accordingly such services would be naturally bundled in the ordinary course of business.
Revenue inter-alia submits that various services i.e., marketing, event management services and collection of money from customer on behalf of GoDaddy US, proposed to be provided by the applicant to GoDaddy US are not a bundle of services; that there is involvement of the applicant with GoDaddy US as well as customers in India; that the services so provided appear to be covered under "Intermediary Services", which falls under Rule 9 of Place of Provisions of Service Tax Rules, 2012.
AAR found: It has been submitted by the applicant that services to be provided by the applicant are not peculiar only in applicant's case but are provided by various Indian entities to their overseas customers in India as a single package. Further, supporting the business of GoDaddy US in India is the main service and processing payments and oversight of services of third party Call Centers are ancillary and incidental to the provision of main service i.e., business support service. Further, applicant would provide said services as a package and the payment for the entire package would be a consolidated lump sum payment. Applicant submits that in view of all these indicators, service provided by them to GoDaddy US is a bundle of services, which is bundled in normal course of business. This point has not been controverted by the Revenue.
AAR agreed with the submissions of the applicant that proposed services are a bundle of services, bundled in normal course of business and not intermediary service and ruled:
In the facts and circumstances, the various support services proposed to be provided by the Applicant to GoDaddy US are a "bundle of Services" being naturally bundled in the ordinary course of business and accordingly is a single service, being business support service, in terms of Section 66F of the Finance Act.
Question No. 2: If the answer to Question 1 is positive, whether, in the facts and circumstances of the case, the place of provision of business support service by the Applicant, is outside India in terms of Rule 3 of the Place of Provision of Service Rules, 2012 (herein after referred to as "POPS"). If the services provided by the Applicant are not considered as naturally bundled then in the facts and circumstances enumerated in Annexure I, which of the individual service shall qualify for classification under Rule 3 of the POPS as service provided by a service provider located in India to a service recipient located outside India?
AAR Ruled:
In the facts and circumstances of the case, the place of provision of business support service provided by the applicant, is outside India in terms of Rule 3 of the Place of Provision of Service Rules, 2012.
Question No. 3: Whether in the facts and circumstances and in the light of the answers to questions 1 and 2 above, the services to be provided by the Applicant to GoDaddy US that fall to be classified under Rule 3 of the POPS qualify as export of taxable services in terms of Rule 6A of the STR (inserted vide Notification No. 36/2012-S.T. dated 20.06.2012 and therefore remain non-taxable for purpose of payment of service tax under the Finance Act?
AAR Ruled:
In the facts and circumstances, the services to be provided by the applicant to GoDaddy US would fall to be classified under Rule 3 of the Place of Provision of Services Rules, 2012 qualify as export of taxable services in terms of Rule 6A of the Service Tax Rules, 1994 (inserted vide Notification No. 36/2012-S.T. dated 20.6.2012) and therefore remain non-taxable for purpose of payment of service tax under the Finance Act.
Question No.4: Whether in the facts and circumstances of the case, by providing the support services being business support to GoDaddy US, the Applicant is providing any service to the customers of GoDaddy US in India?
AAR Ruled:
In facts and circumstances of the case, by providing the payment processing services to GoDaddy US, the applicant is not providing any service to the customers of GoDaddy US in India.
Question No.5: in any event, without prejudice to the other questions, whether the service of collection of payments from customers of GoDaddy US in India, is a transaction in money and hence not subject to service tax?
As this point is not pressed by the applicant, same has not been considered.
(See 2016-TIOL-08-ARA-ST)
