The Applicant, a subsidiary of Airbus Invest SAS (the Holding Company) had entered into a global regional agreement in order to provide primarily assistance to carry out the activities globally. Under the said agreement, the activities to be performed by the Applicant included:
In respect thereto, the Applicant had sought an advance ruing before the Karnataka AAR to ascertain whether the activities proposed to be carried out in India by the Applicant would constitute as supply of ’Other professional, technical and business services‘ falling under SAC 9983 or as ’Intermediary service‘ classifiable under SAC 9961/9962 or any other classification of services and also whether the services rendered by the Applicant being an export service in terms of Section 2(6) of the IGST Act would not be liable to GST considering it zero rated supply.
The Karnataka AAR observed that the Applicant plays an important role in identifying the local capabilities in India i.e. identifying the vendors and making them understand the product requirement, advising and guiding them on technical aspect of the product along with the ethical aspect in relation to such activities.
It was further observed by the AAR that without the assistance of the Applicant, the holding Company would not be able to procure the goods from the vendors. Final approval even if taken by the Holding Company does not make a difference to the role of facilitation undertaken by the Applicant.
The AAR also observed that the work of facilitation undertaken by the Applicant as technical advisory, guidance and business support assistance concerning quality control standards, performance and safety standards of the suppliers, merely facilitate the supplies to their holding company as all these activities are directed at the vendors which in a way forms part of intermediary services.
It was also observed that the nature of the payment does not form part of the definition of Intermediary. Basis which the cost-plus mark-up method of payment can also be one of the ways for payment in such cases.
Basis the above observations and referring to the definition of the term intermediary services as per section 2(13) of IGST Act, the AAR held that the instant activity of the Applicant being an intermediary service, classifiable under SAC 998599 and applicable rate of GST @ 18% in terms of entry No. 23(ii) of Notification No. 11/2017 – CT (Rate) dated 28 June 2017.
The AAR further ruled that since the Applicant is covered under Intermediary Services classifiable under SAC 998599, the place of supply would be in India in terms of Section 13(8) of the IGST Act shall be considered and the services rendered by the applicant shall not qualify as ‘export of services' in terms of section 2(6) of the IGST Act.
Airbus Group India Private Limited [Advance Ruling No. 31/2021 dated 01 July 2021]
GLS Comments:
Recently, a division bench of the Bombay HC in the case of Dharmendra M Jani [2021-TIOL-1326-HC-MUM-GST] created a lot of stir by pronouncing a dissenting judgement. In this case, while Justice Bhuyan held the Intermediary Service provision to be ultra vires to the scheme of GST law and the Constitution, Justice Ahuja, upheld the constitutional validity of the said provision.
Given the contradictory views of both the judges, the matter has now been referred to the Chief Justice of the Bombay HC on the administrative side for his verdict. Until then, a clarification by the CBIC will go a long way in easing out difficulties of the trade and industry.
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