Case Title | Rajendran Santhosh |
Court | Karnataka AAAR |
Honorable Judges | Member Nagendra Kumar & Member M.S. Srikar |
Citation | 2020 (02) GSTPanacea 31 HC Karnataka KAR/AAAR-14-G/2019-20 |
Judgement Date | 18-February-2020 |
Council for Petitioner | Roopashi Khatri |
Council for Respondent | NA |
Section | Section 100 |
In Favour of | In Favour of Revenue |
The Karnataka bench of Member D.P.Nagendra Kumar & Member M.S.Srikar has held that 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.
FACTS OF THE CASE
The Appellant is an individual stated to be an employee of an overseas company engaged in business of manufacturing and selling various categories of distribution transformer components and accessories. The Appellant states that he is employed as the Regional Sales Manager for the Middle East and Indian markets by H-J Family of Companies having its office in the United States
The Appellant is required to make a presentation of the various categories of distribution transformer components and accessories offered by the company. The company specifies the presentation and the technical details of the products. The Appellant reports to a Sales Manager based in the office of the Company in Europe. The Appellant is required to report the status of the sales development (with customers in the Middle East and Indian Markets) to the Sales Manager based in the European Office on a weekly basis. The customers approached by the Appellant place their orders for the products with the Company and make payments to the Company’s account. The Appellant does not raise any invoice for the products ordered by the said customers.
The Appellant is paid a lump-sum compensation monthly for the aforementioned services. The Appellant does not raise any invoice to the Company for the said services. In addition to the aforementioned compensation, the Company provides a credit card (that has been issued in the name of the company) for the purpose of reimbursing reasonable travel expenses, office needs and other business expenses incurred by the applicant in performing the said services.
In this connection the Appellant sought an advance ruling in respect of the following question:
What is the classification of the services rendered by Mr. Santosh to H-J Family of Companies?
Is Mr. Santosh required to be registered under the CGST Act, 2017?
What is the liability of Mr. Santosh to pay tax on the services rendered by him to H-J Family of Companies?
What is the time and value of the supply of services rendered by Mr. Santosh to H-J Family of Companies?
The Karnataka Authority for Advance Ruling vide ruling No KAR ADRG NO 64/2019 dated 20-09-2019 held as follows:
- The services provided by the applicant to M/s H-J Family of Companies would result in the supply of services within the meaning of that term.
- The services provided would be classifiable under HSN 9983.11 under the description “Other professional, technical and business services”
- The applicant is required to be registered under the Central Goods and Services Tax Act, 2017
- The rates of tax applicable for the service provided are
- In case of intra-State Supply Under CGST at 9% & Under KGST at 9%
In case of inter-State supply at 18% under the IGST Act
The time of such supply would be determined as per the provisions of sub-section (2) of section 13 of the CGST Act, 2017 and the value of such supply would be the amount received by the applicant from the recipient of services and also includes the amounts reimbursed to the applicant by the recipient of services for the expenses incurred
The Appellant was aggrieved by the ruling given and has filed this appeal on the following grounds
The Advance Ruling Authority has erred in the finding that the appellant is an intermediary and not an employee within the meaning of the CGST Act; that the Authority has erred in the appreciation of evidence (including the Appellant’s Income-tax returns and the marketing brochure of H-J Family of Companies) in determining the nature of services performed by the Appellant under the GST law and has erred in the application of the established principles of law in the classification of income under an indirect tax legislation
COURT HELD
Considering the facts as recorded, held that 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
Bench uphold the decision of the AAR that the service of sales presentations of the products of H-J Family of Companies is classifiable as “Other professional, technical and business services” under Service Code 9983.11 and the same is being rendered as an ‘intermediary service’ as defined under section 2(13) of the IGST Act.
Bench also uphold the other findings of the lower Authority with regard to liability to register, the rate of tax and the time and value of supply.
ANALYSIS OF THE JUDGEMENT
In the GST regime, an intermediary refers to a person who facilitates the supply of goods or services or both between two or more persons but excludes a person who supplies such goods or services or both on his own account.
The phrase ‘such goods or services’ used in the definition of ‘intermediary’ implies that the person should not be supplying on his risk and reward entirely, the very goods or services whose supply he is arranging or facilitating. In the instant case, the Appellant is facilitating the supply of the products of H-J Family of Companies.
He is not supplying the products of H-J Family of Companies on behalf of the Principal. He is only facilitating the sales with the prospective customers. The actual supply of the products is done by the Principal directly to the customer. The service of facilitating a supply of goods between the Principal and the customers is provided by the Appellant to the overseas client (H-J family of Companies). The Appellant is not supplying such goods on his own account
In view of the foregoing discussions, Bench uphold the decision of the AAR that the service of sales presentations of the products of H-J Family of Companies is classifiable as “Other professional, technical and business services” under Service Code 9983.11 and the same is being rendered as an ‘intermediary service’ as defined under section 2(13) of the IGST Act.
Bench also uphold the other findings of the lower Authority with regard to liability to register, the rate of tax and the time and value of supply
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