AAAR: Services are Intermediary to Facilitate Supply of Products without a Supply on Own Account

An advance ruling had been passed by the Authority of Advance Ruling (AAR) Get to know about AAR (Authority for Advance Rulings) under GST India along with its mechanism. Also, we have described its objectives, powers, orders, etc that states that “Services are intermediary services to facilitate the supply of products without a supply on their own account” and now the Karnataka branch of Appellate Authority of Advance Ruling (AAAR) also sustained the same ruling.

In this matter, Rajendran Santhosh is the Appellant, who is said to be an employee of a foreign company engaged in the manufacture and sale of various categories of distribution transformer components and accessories.

The appellant states that he is employed by the H-J Family of Companies as a regional sales manager for the Middle East and Indian markets. The office of the H-J Family of Companies is in the United States. He is required to keep sales development status updated and report to the sales manager located at the European office on a weekly basis. As per the provided details, The customers contacted or approached by him places their orders for the company’s products and pay into the company’s account.

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The applicant does not even raise any invoice for the order, and the Appellant is get paid lump sum compensation on a monthly basis for the above services. Along with it the company also provides a credit card issued in the name of the company to fulfill the reimbursing reasonable travel expenses, office needs, and other business expenses that are required while providing the above services.

In this matter, The Authority for Advance Ruling (AAR) Karnataka ruled that the services that applicant are providing to M/s H-J Family of Companies can be considered as supply of services and it would be classifiable under HSN 9983.11 under the description “Other professional, technical and business services”.

Thus the applicant needs to be registered under the CGST Act, 2017 Get to know about GST levy terms on disposal of the company’s capital goods under the CGST Act 2017. Also, we mentioned GST on the disposal of capital assets, if no ITC is claimed on capital goods. Read more, and on the services he has been providing, the tax will be applicable under the as listed below:

• in case of intra-State Supply under CGST at 9%
• Under KGST at 9%
• in case of inter-State supply at 18% as per the IGST Act

However, the Appellant stated that after the CGST Act, 2017, services are categorized under United Nations Central Product Classification. Therefore, the classification of “Business Auxiliary Services” (which included the term “Commission Agent”) from the old service tax regime has been stopped.

The AAAR responded in this matter with the statement “If a person either ‘facilitates’ or alternately ‘arranges’ any supply of goods or service (or both), between two or more persons, and does not supply such goods or service (or both) on his own account, he would be regarded as an ‘intermediary’. At the risk of being repetitive, the Appellant is clearly facilitating the supply of the products of H-J Family of Companies directly to the latter’s customers and is not supplying such goods on his own account. Therefore, the Appellant does not fall within the ambit of the exclusion”.

Thus AAAR rejected the contention of the applicant and held that the service of sales presentations of the products of H-J Family of Companies can be classified as “Other professional, technical and business services” under Service Code 9983.11 and the same is being presented as an ‘intermediary service’ under Section 2(13) of the IGST Act.