The present appeal has been filed under Section 100 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Axt, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by Vservglobal Private Limited (referred to as the “Appellant”) against the Advance Ruling No GST-ARA-03/2017-18/B-59 dated 07.07.2018.
The Appellant Authority for Advance Ruling held the ruling given by the Advance Ruling Authority and it was observed that the services being offered by the Appellant are a package of services. This was nothing but a composite supply, of which the principal supply is that of intermediary services.
The claim of the Appellant about principal supply being ‘Back office Support’ and `Accounting’ and other services being ancillary is not viable as these services cannot be considered as ancillary services to the ‘Accounting Services’ and/or `Back Office Support’ services.
As the submission made by the Appellant states, they are asserting that they are providing services to clients on own account, and therefore they cannot be categorized as an intermediary. It is observed that the Appellant has misconstrued the definition of “intermediary” as provided in Section 2(13) of the GST Act, 2017. It is seen that the services they are giving are in relation to the goods in question which belong to either their overseas client or the client’s supplier. Hence, the above statement made by the Appellant is clearly not viable.
Therefore, it should be made clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions unless a mention is specifically made to such dissimilar provisions. A reference to the CGST Act would also mean a reference to the same provisions under the MGST Act.
Analysis:
- Litigation would increase on services that are within the scope of intermediary services since India is a major export hub for information technology-enabled services.
- Advance rulings only apply to the applicant and not always on the industry but the authorities could rely on the advance rulings as an example in departmental proceedings.
- The industry needs to reassess the cross-charge mechanism for back-office support services as a manner of remuneration was also considered to be an important factor for determining services to be intermediary services.