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GST - Definition of 'intermediary' u/s 2(13) of IGST Act is not same as that u/r 2(f) of POPS Rules, 2012: AAAR


By TIOL News Service

KOLKATA, AUG 06, 2018: THE appellant is primarily engaged in promoting the courses of Foreign Universities in India among prospective students. They had approached the Advance Ruling Authority for deciding the determination of liability to pay GST on their output services.

The ARA came to the following conclusion -

++ It is evident that the Applicant is facilitating recruitment / enrolment of students to foreign Universities.

++ Promotional service is incidental and ancillary to the above principal supply and the Applicant is paid consideration in the form of Commission, based on performance in recruiting students, as a percentage of the tuition fee collected from the students enrolled through the Applicant.

++ The Applicant, therefore, represents the University in the territory of India and acts as its recruitment agent. In fact, Clause 2. 1 of the Background forming part of the Agreement clearly says, "The University engages the Education Agent to be its representative to perform the Services from the commencement date in the Territory and on the terms set out in this Agreement until the Expiry date." It is, therefore, clear that whatever services the applicant provisions are provided only as a representative of the University and not as an independent service provider.

++ Being an intermediary service provider, the place of the Applicant's supply shall be determined under section 13(8)(b) of the IGST Act and not under section 13(2) of the IGST Act. The place of supply under the above legal framework is the territory of India. As the condition under section 2(6)(iii) of the IGST Act is not satisfied, the Applicant's service to the foreign universities does not qualify as "Export of Services", and is, therefore, taxable under the GST Act.

We reported this order as 2018-TIOL-06-AAR-GST.

The applicants are now in appeal before the Appellate authority against this finding on the ground that the ARA had wrongly considered them as 'recruitment agent facilitating the recruitment or enrolment of students to foreign universities'.

It is argued that they are providing 'business auxiliary services' to foreign universities by promoting their courses and its services are in the nature of marketing or promotion of courses offered by these foreign universities.

That the function of an 'intermediary' is to facilitate or arrange the supply of goods or services between two or more persons whereas the appellant was providing services on its own account, in the nature of marketing and promotion of courses, and remuneration paid for these services was based on a percentage of fees paid by the students admitted to the Foreign University.

Adverting to the agreement entered into between them and Australian Catholic University and the decision of Authority for Advance Rulings (Central Excise, Customs & Service Tax), New Delhi in the case of GoDaddy India Web Services Ltd. - 2016-TIOL-08-ARA-ST and wherein it was held that the definition of 'intermediary' as envisaged under rule 2(f) of the POPS Rules, 2012 does not include a person who provides the main service on his own account and the applicant GoDaddy India was providing "business support services" to GoDaddy US. They also refer to the CESTAT, Chandigarh decision in Sunrise Immigration Consultants Pvt. Ltd. - 2018-TIOL-1849-CESTAT-CHD in support.

The Appellate authority referred to the agreement extracted and observed thus –

+ The appellant cannot have the liberty to pick and choose only some portions of the agreement by saying that such and such clause is not being undertaken by it. The agreement has to be considered in its entirety.

The case laws cited by the appellant were distinguished by observing as below –

+ The appellant in the instant case was free to refer students to Australian Catholic University (ACU) or any other University of its choice. Further, the fee paid to the appellant was not tied to the promotional activities or expenses incurred to promote Courses of ACU but as a percentage of fees paid by the students who got admitted to ACU. In other words, no consideration was paid in spite of incurring expenses by the appellants for promoting activities of ACU, if no student joined ACU.

+ It is amply clear that the issue of 'main service' decided by the CESTAT in the case of M/s Sunrise Immigration Consultants Pvt. Ltd. (supra) cannot be imported into "intermediary", as defined under the IGST Act, 2017 as the definition of "intermediary" under section 2(13) of IGST Act, is not the same as that under rule 2(f) of the POPS Rules, 2012 inasmuch as under GST an "intermediary" is an entity who arranges/facilitates for the supply of services of another entity, which may include ancillary services, whereas under POPS, 2012, the intermediary arranges/facilitates for provisions of services of the main service provider.

+ In this case, the Appellant promotes the courses of the University, finds suitable prospective students to undertake the courses, and, in accordance with University procedures and requirements, recruits and assists in the recruitment of suitable students, and hence, the Appellant is to be considered as an intermediary in terms of Section 2(13) of the IGST Act.

Concluding that the Appellate authority concurs with the decision of the Authority for Advance Ruling that the services of the Appellant are not 'Export of Services' under the GST Act and are exigible to tax, the appeal was dismissed.

In passing: Defining definitions –

POPS, 2012

IGST Act, 2017

Substituted as per amending notification 14/2014-ST w.e.f 01.10.2014

2(f) - Intermediary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the "main" service) or a supply of goods, between two or more persons, but does not include a person who provides the main service or supplies the goods on his account.

Earlier definition:

(f)"intermediary" means a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the 'main' service) between two or more persons, but does not include a person who provides the main service on his account.;"

2(13) - "intermediary" means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account;

(See 2018-TIOL-02-AAAR-GST)


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