M/s. Oceanic Consultants Private Limited (for brevity ‘the Appellants’) have filed the subject appeal against the Letter issued under C.No. IV/GST/D-I/Tech./LUT/Oceanic/17/3716, dated 7-11-2017 (for brevity ‘the impugned order’) passed by the Deputy Commissioner, Central Goods and Services Tax Commissionerate, Chandigarh-I (for brevity ‘the adjudicating authority’).

Brief facts of the case

1. Briefly stated that the Appellant is a company incorporated under the provisions of Companies Act, 1956. The Appellant is registered under GST vide GSTIN 04AAAC04243L1ZK w.e.f. 1-7-2017. The Appellant, in terms of Section 16(3)(a) of the IGST Act, applied with a Letter of Undertaking for Export of services without payment of IGST in terms of Notification No. 37/2017-Central Tax, dated 4-10-2017 vide application dated 27-10-2017 in the prescribed form RFD-11.

2. The Adjudicating Authority sought the details regarding the nature of business operations and how it qualifies as export of services under Section 2(6) of the IGST Act. The Appellant vide letter dated 27-10-2017 filed a reply explaining the nature of activities undertaken by it.

3. In response to the above, the Adjudicating Authority passed the impugned order on 7-11-2017 rejecting the LUT application filed by the Appellant holding that the Appellant is engaged in providing marketing services to different universities, by covering events on behalf of foreign universities, for students in India seeking admission to foreign universities and that the Appellant is engaged in advertising and promotion of various courses on behalf of foreign universities. That the service provided by the appellant is completed with the grant of admission and issuance of travel visa document and it was only thereafter that the students travelled to foreign country. Since services culminated in India prior to travel abroad by the student the Appellant is working as an agent and arranging services between two persons i.e. the Indian students and the foreign Universities and therefore the services provided by the Appellant to the foreign Universities are classifiable as Intermediary services.

4. Being aggrieved, the appellants filed the appeal against the impugned order on the grounds which are summarised as under :

(i)      The impugned order is passed without jurisdiction

(ii)    The impugned order is passed in gross violation of principles of natural justice as opportunity for personal hearing was not accorded.

(iii)   Service provided by the appellant to OCA qualify as export of services.

(iv)   Appellant is not an Intermediary for Section 2(13) of the IGST Act and the service provided by Appellant to OCA is a main service itself. No assistance or facilitation by the Appellant as a link between OCA and Indian students for any main service. Consideration for service provided by Appellant to OCA is not based on the number of students who takes admission in foreign universities/institutions.

(v)     The application for bond is accepted but application for LUT is rejected.

(vi)   Only services are to be exported and not the taxes on the same

Personal hearing

5. Personal hearing in the case was held on 28-8-2018 and Sh. Tarun Sharma Learned C.A. for M/s. Lakshmikumaran & Sridharan Advocates and Ms. Manisha Gupta, Employee of the Appellants, appeared on behalf of the appellants and reiterated the written submissions made in their appeal and also submitted compilation of case laws relied upon by them.

Discussion & findings

6. I have gone through the details of the impugned Order/Letter, rejecting the Application for LUT, by the adjudicating authority, the grounds of appeal and the submissions made by the appellant at the time of personal hearing. The main issue to be decided in this case is whether the rejection has been made in terms of the Legal provisions guiding issuance of LUT under GST and also whether the services in which the Appellant is engaged amounts to Export of services or Intermediary Services.

7. I find that the Appellant has entered into a Memorandum of understanding (MOU) dated 23-11-2009 with M/s. Oceanic Consultants Pvt. Ltd. an Australian Corporation (for brevity OCA) incorporated under the laws of Australia and situated in Australia which holds Recruitment Agency Agreement with various overseas Foreign Educational Universities/Institutions who seek to attract international students to study the educational courses provided by them. In terms of the said agreements OCA is engaged as the representative of the foreign Educational University/Institution for carrying out the promotion and marketing of admissions to educational courses provided by the said foreign Universities/institutions to intending Indian candidates to provide information like requirements for acceptance of course minimum level of English language proficiency educational qualification or work experience required, course content & duration, etc. which enable them to make informed decisions about studying in foreign university/institution; and to assist with the completion and submission of application forms along with requisite documents; to provide market intelligence about the recruitment of these students to the foreign university/institution. The Appellant does not appear to do any independent work but provides support services in an integrated manner to assist OCA to develop its brand in India, carry on its operations efficiently and augmenting its business in India.

8. The foreign University/Institutions remit commission to OCA in convertible foreign exchange on the basis of converted leads i.e. on per student basis who take admission in the foreign University/Institution. In terms of aforesaid MOU, the Appellant was engaged by OCA to promote and market OCA brand in India and the services provided by OCA to foreign educational universities/institutions in providing suitable Indian students.

9. Further by virtue of their own admission and in terms of aforesaid MOU, the Appellant was engaged by OCA to promote and market OCA brand in India and the services provided by OCA to foreign educational universities/institutions in providing suitable Indian students. In terms of the aforesaid agreement/MOU as applicable during the relevant period, the Appellant assisted intended people to become students of OCA clients i.e. foreign universities/institutions and for that purpose provide all necessary information about the course, course fee, minimum level of English Language proficiency etc and assisted them in completing admission application forms and its submission with those foreign universities/institutions as admitted in para 6 of the statement of facts and again in para C13 of the Grounds of Appeal.

10. Appellant admits that, “The scope of support service provided to OCA is to ultimately assist the Indian students who are intending to seek admission in the foreign universities which are having agency arrangement with OCA. The Appellant make aware the intending students about the courses, fee, filing of application and relevant parameters of the foreign universities where they seek admission for the educational courses. These activities are primarily agreed to be provided by OCA to foreign universities as per the agency agreement. Thus, the Appellant has merely helped OCA in provision of service agreed to be provided to foreign universities. Such an arrangement between OCA and the Appellant is in the nature of sub-contracting the main work assigned by the foreign university to OCA and not as intermediary service provided by the Appellant to OCA.”

11. The term intermediary defined under Section 2(13) of IGST Act, 2017, is reproduced as below :

‘(13) ”intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account’.

Intermediaries are brokers, agents or any other person who arrange or help in the supply of goods or services or both, or securities, between two or more persons. These activities by the agents are not done for themselves but for other entity (Principal). The Principal in this case is the Foreign University who has engaged OCA as the representative of the foreign Educational University/Institution for carrying out the promotion and marketing of admissions to educational courses provided by the said foreign education Universities/institutions to intending Indian candidates.

12. Further, Section 13(8)(b) of IGST Act, 2017 defines the place of supply of services where the location of the supplier of the services or the recipient of services is outside India.

13(1) the provisions of this section shall apply to determine the place of supply of services where the location of the supplier of the services or the recipient of services is outside India.

….. (8) the place of supply of the following services shall be the location of the supplier of services namely :-

(a)     services supplied by a banking Company, or a financial institution ,or a non-banking financial company, to account holders

(b)     intermediary services

Therefore in view of the provisions of Section 13(8)(b) of the IGST Act, the place of supply of service in case of intermediary service is the location of the supplier of services which is India, which is in the taxable territory in the case of Appellant and thus the same is liable to be taxed in the case of the Appellant as services culminate in India prior to travel abroad by the student.

13. Section 2(6) of IGST Act, 2017 defines the Export of services which is reproduced as under :

(6) ”export of services” means the supply of any service when, –

(i)      the supplier of service is located in India;

(ii)    the recipient of service is located outside India;

(iii)   the place of supply of service is outside India;

(iv)   the payment for such service has been received by the supplier of service in convertible foreign exchange; and

(v)     the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;

In view of the above, for the services to be classifiable as ‘Export of services’, all the ingredients stipulated under clause (i) to (v) should be fulfilled, but condition (iii) of Section 2(6) of IGST Act, 2017 is not satisfied in the case as discussed above.

Therefore in view of the provisions of law the service provided to the foreign Universities are classified as Intermediary services and in light of the non-fulfillment of the condition for export for supply of service out of India, the services undertaken by the applicant were considered to not fall under “Export of services”, therefore, the LUT application applied was rejected on the above grounds and directions given to pay the applicable tax regularly.

Therefore in view of the provisions of law the service provided to the foreign Universities are classified as Intermediary services and in light of the non-fulfillment of the condition for export for supply of service out of India, the services undertaken by the applicant were considered to not fall under “Export of services”, therefore, the LUT application applied was rejected on the above grounds and directions given to pay the applicable tax regularly.

14. The principal service supplied by the Appellant was facilitating recruitment of students, while course promotion was only an incidental supply. In other words, since the Appellant was working as a sub-contractor in respect of the main work assigned by the foreign university to OCA and such supply was clearly facilitating the recruitment, the course promotion and marketing services were only ancillary thereto. The Appellant was therefore supplying services as a representative of the University, on account of being engaged specifically as per the MOU with the recruitment agent OCA and not as an independent service provider, as mentioned in Para 2 of the scope of Work in the MOU between OCA and the Appellant. Since the Appellant introduces the students to OCA and doesn’t supply such goods on own account, the Appellant works as an intermediary under GST Act.

15. The Appellant is aggrieved that the department has taken contradictory stands with respect to grant of LUT and bond. The appellant applied for export of services without payment of IGST vide prescribed application in RFD-11, dated 31-7-2017 in terms of Section 16(3)(c) of the IGST Act and Notification No. 16/2017-Central Tax, dated 7-7-2017, along with a Bond of INR 25,00,000/-. The Bond application was duly accepted and communicated to the Appellant vide C.No. IV/GST/D-I/Tech/LUT/Oceanic/17, dated 4-8-2017. The appellant pointed out that the Department has accepted the Bond application for export of services but rejected the LUT. The Appellant has failed to go through Circular No. 8/8/2017-GST, dated 4-10-2017 wherein sub-para 2(1) authorizes the jurisdictional Deputy/Assistant Commissioner to accept the LUT/Bond. In exercise of this power the jurisdictional officer is authorized to establish that the services amount to Export or not. Therefore the vested power has been correctly exercised by the jurisdictional officer.

16. The Appellant has cited a catena of case laws and in support of their contention has placed reliance on the case of M/s. Sunrise Immigration Consultants Pvt. Ltd. v. CCE & ST – Appeal Case No. ST/52205/2015, on the issue of main service decided by the Hon’ble Customs, Excise & Service Tax Appellate Tribunal, Chandigarh dated 16-3-2018. The cited judgment cannot be applied to the present case because the definition of Intermediary under Section 2(13) of the IGST Act, 2017 is not the same as that under Rule 2(f) of the POPS Rules, 2012, inasmuch as under GST an “Intermediary” is an entity who arranges/facilitates for the supply of services of another entity, which may include ancillary services, whereas under POPS, 2012, the Intermediary arranges/facilitates for provisions of services of the main service provider.

The Appellant finds suitable intending students to undertake the course and in accordance with the University procedures and requirements and recruits and assists in the recruitment of the suitable students on behalf of the OCA and hence the Appellant is to be considered as an Intermediary in terms of Section 2(13) of the IGST Act.

17. I place reliance on a recent Order-in-Appeal dated 24-7-2018 passed by the Learned GST Appellate Authority for Advance Ruling, AAAR West Bengal, for Appeal Case No. 01/WBAAAR/Appeal/2018, dated 26-4-2018, in the case of M/s. Global Reach Education Services Private Limited [2018 (15) G.S.T.L. 618 (App. A.A.R. – GST)] on the issue of Intermediary services which applies to the present case completely.

“In this case, the Appellant promotes the courses of the University, finds suitable prospective students to undertake the courses, and, in accordance with University procedures and requirements, recruits and assists in the recruitment of suitable students, and hence, the Appellant is to be considered as an intermediary in terms of Section 2(13) of the IGST Act.

In view of the above discussions, we are in conformity with the West Bengal Authority for Advance Ruling, that the services of the Appellant are not ‘Export of Services’ under the GST Act, and are eligible to tax.”

18. In the present case, the services provided by the Appellant located in India to the recipient located outside India in lieu of consideration charged for the said services amounts to ‘supply’ of services. Now, in order to determine whether the said transaction will be Export of Services, the ‘place of supply’ of such services must be determined.

Section 13 of IGST Act determines the place of supply of services where either the location of supplier or the location of recipient is outside India. Here, default Section 13(2) provides that the ‘place of supply’ shall be the ‘location of the recipient’ unless the services falls within the ambit of specified Sections from 13(3) to 13(13) of the IGST Act.

In pursuance of Section 13(8)(b)of the IGST Act, 2017, the place of supply of the “Intermediary services” shall be the ‘location of the supplier of services’.

19. In the present case, the appellant is rendering services on behalf of the OCA and not as an independent Service provider. In terms of the aforesaid agreement/MOU, with the OCA, as applicable during the relevant period, the Appellant assists intended people to become students of OCA clients, i.e. foreign Universities/Institutions and for that purpose provides all the necessary information about the course, course fee, minimum Level of English Language proficiency etc., and assists them in completing Admission application forms and its submission with those foreign universities/institution and the services culminate in India prior to travel abroad by the student.

Commission is paid to the OCA in respect of each student enrolled through the recruitment agent on the basis of converted leads i.e. on per student basis who takes admission by the foreign University/Institution. Appellant receives consideration from OCA as per terms of MOU.

Therefore since the nature of activities or services undertaken by the appellant are as a facilitator, and hence, the Appellant is to be considered as an intermediary in terms of Section 2(13) of the IGST Act. As such, I observe that the case laws quoted and relied upon by the appellant do not support their case as they do not refer to provisions of the GST law.

20. I find that the appellant has failed to observe the provisions of law, so far as the facts of the case are concerned. The contraventions of various provisions of Central Goods and Services Tax Law and the Integrated Goods and Services Tax Law, stand clearly proved against the appellant, as such duty, interest and penalty, as per above provisions of law are held to be recoverable/imposable upon them.

ORDER

21. The Appellate authority concurs with the decision of the Adjudicating authority that the services of the Appellant are not ‘Export of Services’ under the GST Act and are exigible to tax, I find no infirmity in the impugned order.

22. In view of the above, the appeal of the Appellant is rejected and the impugned order is upheld. The Appeal is disposed off, accordingly.