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Whether services rendered by the
intermediary to the students of foreign
universities are export of services?
[Global reach education services (p) Ltd ) (AAR-West Bengal)]
According to Section 2(6) of the Integrated Goods And Services Tax Act, 2017, reads as “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 this ruling the decision is based on above provision and place of supply.
Facts of the case:
- The applicant promotes the courses of foreign universities among prospective students
- for providing the above services to the foreign universities, for which it receives consideration in convertible foreign exchange. The service recipient is located outside India and is not an establishment of a distinct person in accordance with Explanation 1 to section 8 of the IGST Act.
- The place of supply of the services is outside India in terms of section 13(2) of the IGST Act. The supply of services by the applicant should, therefore, be treated as export of service within the meaning of section 2(6) of the IGST Act.
- Also applicant said that it is not providing any intermediary service. The place of supply should, therefore, be determined under section 13(2) and not under section 13(8)(b) of the IGST Act. The place of supply should, therefore, be the location of the recipient outside India.
Following observations were found by the athority
- The Applicant receives consideration in the form of commission from the foreign University for these services rendered to prospective students. The Applicant, therefore, submits that the principal supply, therefore, is the service of promoting the courses of the Universities abroad, and the services incidental thereto are naturally bundled to the composite supply of business auxiliary services.
- Applicant also submits the Agreement with a specific University, namely, Australian Catholic University, the Agreement may be considered as the prototype of all Agreements made with the various Universities abroad and all discussions regarding the Agreement is to be taken as relevant to and applicable for all the Agreements entered into by the Applicant with the Universities abroad.
- According to Clause 2.3 of the Agreement is stated below for ready reference:
“2.3 The Education Agent is engaged as an independent contractor by the University. For the avoidance of doubt the relationship between the Education Agent engaged under this agreement under University;
- is not one of employer and employee; and
- is not one of principal and agent.”
- The nature of the relationship should, therefore, be ascertained from other clauses of the Agreement. According to the other clause it is evident that The Applicant cannot claim any consideration for its promotional activity unless the students get enrolled through it. If the students get enrolled directly by the University through distant education or online services, the Applicant will not be paid any consideration whether or not it has provided any promotional service (Clause 8.3 of the Agreement).
- In fact, the Applicant is not allowed to undertake any promotional or advertising activity without prior written approval from the University [clause 4.4(h) of the Agreement]. Apart from the above consideration received from the University, the Applicant is not allowed to receive any fees or charges from the students or deduct anything from the charges or fees payable by the students to the University [clause 4.4(i) of the Agreement].
- Promotional service is incidental and ancillary to the above principal supply and the Applicant is paid consideration in the form of Commission, based on performance in recruiting students, as a percentage of the tuition fee collected from the students enrolled through the Applicant. The Applicant, therefore, represents the University in the territory of India and acts as its recruitment agent.
- Also Agreement clearly says, “The University engages the Education Agent to be its representative to perform the Services from the commencement date in the Territory and on the terms set out in this Agreement until the Expiry date.” It is, therefore, clear that whatever services the applicant provisions are provided only as a representative of the University and not as an independent service provider.
- Therefore the place of supply should be determined under section 13(8)(b) of the IGST Act and not under section 13(2) of the IGST Act. The place of supply under the above legal framework is the territory of India. As the condition under section 2(6)(iii) of the IGST Act is not satisfied, the Applicant’s service to the foreign universities does not qualify as “Export of Services”, and is, therefore, taxable under the GST Act.
The services of the applicant are not “Export of Service” and are taxable under the GST Act.