Appellate Authority for Advance Ruling,
Karnataka (‘AAAR’) in the case of Airbus Group India Private Limited,
2021-VIL-63-AAAR, dealt with the scope of ‘intermediary services’ under
Goods and Services Tax (‘GST’) after the issuance of a Circular by the CBIC.
Facts of the Case
·
The
Appellant, a subsidiary of a foreign company, entered into an agreement with
its Parent company to provide certain services including supplier
identification and performance review, technical advisory to suppliers for
meeting quality standards, etc.
·
The
agreement stipulated that all operative decisions were handled by the Parent
company such as selection of suppliers, negotiation, and further communications
with them, etc.
·
The
Authority for Advance Ruling (‘AAR’) held that such an arrangement falls under
‘intermediary services’.
AAAR Ruling
·
Appellant
is neither a broker nor an agent. The expression ‘any other person’ in the
definition of ‘intermediary’ also include a person who is not similar to a
‘broker’ or ‘an agent’. The Doctrine of Ejusdem Generis cannot be
applied.
·
Since
the Appellant’s role, inter alia, was to continuously assess the
supplier performance, it constitutes ‘facilitation/arrangement’. Thus, the
Appellant is providing ‘intermediary services to its Parent company.
·
That
the recent Circular No. 159/15/2021-GST dated September 20, 2021, issued
by CBIC goes against the Appellant.
| Remarks
·
While we agree with the AAAR that the Doctrine of Ejusdem
Generis is not applicable (on a different reasoning), the decision by
the AAAR may be incorrect under GST laws.
·
The AAAR has wrongly interpreted the recent clarification issued
by CBIC in concluding that the Appellant is providing the ancillary services
and not the main services.
·
Now, assuming that the Circular favours the Appellant and since
AAAR decision is binding on the Appellant under GST laws, the moot question is
‘which will prevail, the circular or AAAR’?
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