RECIPIENT OF SERVICES UNDER

GST

A Final Draft submitted in partial fulfillment of the course Taxation Law - II, 8th

SEMESTER during the Academic Year 2019-2020

SUBMITTED BY:

Raj Vardhan Singh

Roll No. - 1635

B.B.A LL.B

SUBMITTED TO:

Prof. Ganesh Pandey

CHANAKYA NATIONAL LAW UNIVERSITY, NAYAYA NAGAR,

Page | 1
MEETHAPUR, PATNA-800001

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 DECLARATION BY THE CANDIDATE

I hereby declare that the work reported in the B.B.A.LL.B.(Hons.) Project Report entitled
“RECIPIENT OF SERVICES UNDER GST” submitted at Chanakya National Law
University, Patna is an authentic record of my work carried out under the supervision of
Prof. Ganesh Pandey.
I have not submitted this work elsewhere for any other degree or diploma. I am fully
responsible for the contents of my Project Report.

(Signature of the Candidate)

Raj Vardhan Singh
Chanakya National Law University, Patna
 TABLE OF CONTENTS

ACKNOWLEDGEMENT.........................................................................................................4

RESEARCH METHODOLOGY...............................................................................................5

AIMS AND OBJECTIVES........................................................................................................5

SCOPE AND LIMITATION.....................................................................................................5

INTRODUCTION......................................................................................................................6

RECIPIENT OF SERVICES: ANALYSIS THROUGH LANDMARK CASES.....................7

LOCATION OF RECIPIENT OF SERVICES........................................................................12

CONCLUSION........................................................................................................................12

BIBLIOGRAPHY....................................................................................................................23
 ACKNOWLEDGEMENT

A project is a joint endeavor which is to be accomplished with utmost compassion, diligence

and with support of all. I am overwhelmed in all humbleness and gratefulness to
acknowledge from the bottom of my heart to all those who have helped me to put these ideas,
well above the level of simplicity and into something concrete effectively and moreover on
time.
This project would not have been completed without combined effort of my teachec Pof. G.P
Pandey whose support and guidance was the driving force to successfully complete this
project. I express my heartfelt gratitude to her.
I owe the present accomplishment of my project to my friends, who helped me immensely
with sources of research materials throughout the project and without whom I couldn’t have
completed it in the present way.
 RESEARCH METHODOLOGY

 Primary method of research was adopted in the making of this project.

 Various literary works and Books from the library and the internet, were used
extensively in collecting the data essential for this study.
 The method of writing used in this project is primarily analytical.

AIMS AND OBJECTIVES

 To understand the process of determination of recipient of sevices under GST

 To understand what are the necessary attributes of supply of services.

SCOPE AND LIMITATION

This project is limited in its scope due to paucity of time, multiplicity of areas to be covered
due to inherent vastness of the subject matter and limited financial resources. However, the
reasearcher has aimed to keep a fairly broad scope in order to gain a complete picture of the
topic.
 INTRODUCTION
Services are capable of being contracted from one place, supplied from another and paid for at
yet another. Moreover a service can be partially received at multiple locations. This introduces
unique complexity in identifying the true location of the recipient in case of services.
Determining location of recipient of services is pre-requisite for identifying the jurisdiction
where consumption either by a B2B recipient or by a B2C recipient happens.

Location of recipient of services has been defined in section 2(14) of the IGST Act to mean:

(i)Where a supply is received at a place of business for which the registration has been obtained,
the location of such place of services.

(ii) Where a supply is received at a place other than the place of business for which registration
has been obtained (a fixed establishment elsewhere), the location of such fixed establishment; 

(iii) Where a supply is received at more than one establishment, whether the place of business or
fixed establishment most directly concerned with the receipt of the supply; and

(iv) In absence of such places, the location of the usual place of residence of the recipient.

Usual place of residence, in case of an individual means, the place where the person ordinarily
resides. In other cases it means the place where the person is incorporated or otherwise legally
constituted.
RECIPIENT OF SERVICES: ANALYSIS THROUGH LANDMARK CASE.

Recently, in the case of Global Reach Education Services Pvt Ltd ("Applicant"), the West
Bengal Authority for Advance Rulings (Goods and Services Tax) ("AAR") ruled that marketing
and promotional services (such as promoting foreign universities' courses in India, providing
market intelligence, supporting student recruitment etc.) provided by the Applicant to foreign
universities amounted to "intermediary services" for the purposes of Goods and Services Tax
("GST"). Accordingly, the supply of such services by the Applicant did not qualify as an "export
of service" for GST purposes ("Ruling").

The Ruling appears to unsettle past precedent on the understanding of "intermediary services",
and is likely to have a significant impact on non-resident entities engaging Indian agents for
advertising, marketing, and promotion activities across industries and sectors. Although advance
rulings are binding only on the applicant seeking the ruling, and the concerned jurisdictional
GST officer, in practice, they are often considered as having precedential and persuasive value
by subsequent rulings.

Background
The Applicant had tied up with various universities around the world for promoting and
marketing their courses in India among prospective students, for which it received consideration
in convertible foreign exchange on a commission basis. The Applicant was required to provide
market intelligence about latest educational trends in India, and to also ensure payment of
requisite fees to universities by prospective students enrolling in foreign programmes through the
Applicant.

In this background, the Applicant sought an advance ruling from the AAR on whether services
provided by it to foreign universities could be considered an "export of service" within the
meaning of section 2(6) of the Integrated Goods and Services Tax Act, 2017 ("IGST Act").

Applicable Law
Section 2(6) of the IGST Act defines "export of service" as a supply of service which satisfies all
of the following conditions: (a) the supplier of service is located in India; (b) the recipient of
service is located outside India; (c) the "place of supply" (explained below) is located outside
India; (d) payment for supply has been received in convertible foreign exchange; and (e) the
supplier and the recipient are unrelated parties.

The taxability under GST of any supply, whether of goods or services, is to be determined in
accordance with the "place of supply" of that good or service. Insofar as cross-border supplies
are concerned (i.e. where either the supplier or the recipient are located outside India), the "place
of supply" is to be determined in accordance with sections 11 (in case of cross-border supplies of
goods) and 13 (in case of cross-border supplies of services) of the IGST Act.1

Section 13 of the IGST Act contains several rules for determining the "place of supply" of cross-
border services. As a general rule, the "place of supply" of cross-border services is deemed to be
the location of the recipient of services. Where the location of the recipient of services is not
available in the ordinary course of business, the "place of supply" is deemed to be the location of
the supplier of services. This general rule is subject to special rules provided under sub-sections
(3) to (13) of section 13 for specific type of services. For instance, as per section 13(4) of the
IGST Act, the place of supply of services supplied directly in relation to an immovable property
is the place where the immovable property is located or intended to be located. Similarly, as per
section 13(8) of the IGST Act, the "place of supply" of intermediary services is intermediary
services is the location of the supplier of services.

Per section 2(13) of the IGST Act, the term "intermediary" is defined to mean a broker, agent, or
any other person who arranges or facilitates the supply of goods or services or both, or securities,
between two or persons. A person who supplies such goods or services or both or securities on
his own account is excluded from this definition.

Arguments raised by the Applicant

The Applicant's arguments were largely focused on the question of whether the place of supply
of services was in India, since most other conditions for "export of service" were prima facie
satisfied.

1
Circular No. 2/1/2017-IGST dated 27.09.2017 for clarification on the place of supply of satellite launch services
by ANTRIX Corporation Ltd.
The Applicant argued that it provided such services as an independent service provider and not
as an agent of any foreign university. The Applicant also argued that it did not facilitate the
provision of any service by foreign universities to students in India, and that its role was limited
to promoting foreign universities' courses in India. The fact that the Applicant was paid on a
commission basis was argued to be irrelevant in determining the Applicant's standing as an
independent service provider, since it was merely a mechanism for determining the quantum of
compensation payable.

On this basis, the Applicant submitted that the services supplied by it could not be classified as
"intermediary services" for the purposes GST. By consequence, the place of supply of services
was the location of the recipient as per section 13(2) of the IGST Act. Since the recipients were
always situated outside India, the place of supply was outside India and the supply amounted to
an "export of service" being a zero-rated supply for the purposes of GST.

Ruling of the AAR

The AAR rejected the Applicant's contention and ruled that the services supplied by the
Applicant did not amount to "export of services" for the purposes of GST, and were therefore
taxable in India.

For the purpose of arriving at this conclusion, the AAR relied primarily (and almost exclusively)
on the agreement between the Applicant and the Australian Catholic University ("Agreement"),
which was submitted by the Applicant at the hearing to further its contention that services had
been supplied on a principal-to-principal basis. On reviewing the Agreement, the AAR noted the
following:

 Per Clause 3.1 of the Agreement, the Applicant was required to promote the courses of
the University to find suitable prospective students and assist in their recruitment (by
providing all necessary information and assistance in completing and submitting forms to
the University) in accordance with the procedures and requirements of the University;
 Per Clause 4.1 of the Agreement, the Applicant was under an obligation to collect all fees
and charges payable from prospective students and forward the same to the University,
 and to ensure that relevant fees and charges accompanied all applications and acceptance
of offer documents.
 Per Clause 4.4(h) of the Agreement, the Applicant was not allowed to undertake any
promotional or advertising activity without the prior written approval of the University;
 Per Clause 4.4(i) of the Agreement, the Applicant was neither entitled to receive any fees
or charges from students nor allowed to deduct any amounts from the fees or charges
payable by students to the University.
 Per Clause 9.2 of the Agreement, the Applicant was subject to audit by the University in
the course of supplying services to the University; and
 Per Clause 9.4 of the Agreement, the Applicant was subject to performance evaluation by
the University, especially with respect to recruitment targets achieved.

In addition, the Applicant was to be paid on a commission basis, which was expressed as a
percentage of the tuition fee for each student recruited / enrolled through the Applicant, provided
the University had actually received the course fees. The Applicant was also not entitled to claim
any consideration for promotional activities unless students were enrolled through it. If students
were enrolled directly by the University either through distant education or through online
services, the Applicant was not entitled to any consideration, regardless of whether it had
provided any promotional services.2

Based on these findings, the AAR observed that the principal service supplied by the Applicant
was facilitating recruitment of students, while course promotion was only an incidental supply.
Had course promotion been the principal supply, the Applicant would have been remunerated for
its promotional activity regardless of whether it had facilitated recruitment or not. Put differently,
since the Applicant received commission solely based on recruitment / enrolment through it, the
principal supply was clearly the facilitating of recruitment, and course promotion services were
only ancillary thereto. The Applicant was therefore supplying services as a representative of the
University, and not as an independent service provider.

2
Circular No. 107/26/2019-GST ; CBEC-20/06/03/2019-GST, Central Board of Indirect Taxes and Customs, GST
Policy Wing ,New Delhi, Dated the 18th July, 2019
Accordingly, the services supplied by the Applicant amounted to "intermediary services" for the
purposes of GST. The place of supply of intermediary services, determined in accordance with
section 13(8) of the IGST Act was the location of the supplier i.e. the location of the Applicant.
Since the Applicant was located in India, the supply did not amount to "export of service" for the
purposes of GST.

Analysis of the Ruling

The Ruling is certain to cause some ripples in the advertising, marketing, and promotion
industries. Foreign entities wishing to enter the Indian market or support existing businesses in
India typically engage Indian entities to undertake market research, provide advertising and
promotion services, and disseminate information among prospective customers. An Indian entity
supplying such services has conventionally been understood to not be an "intermediary",
provided it supplied such services on its own account, and not on behalf of the foreign entity.

While the IGST Act has defined the term "intermediary", it has not laid down any qualitative
parameters to assess whether a certain service falls within the definition of "intermediary
service" under section 13(8) of the IGST Act. In the absence of guiding principles, reference may
be made to the Guide on Taxation of Services ("Education Guide")1 issued by the Central Board
of Excise and Customs ("CBEC")2 and relevant decisions under the service tax regime that
existed prior to the introduction of GST in India.

As per the Education Guide, an "intermediary" is a person who arranges or facilitates a supply of
goods or services or both between two persons, without material alteration or further processing. 3
The Education Guide also laid down the three guiding principles 4 to determine whether an entity
was acting as an intermediary.

Thus, in Re Universal Services India Pvt. Ltd,5 the New Delhi AAR ruled that payment
processing services would not be considered intermediary services if the service provider was
providing the services separately on his own account. It was reasoned that the payment
processing services were themselves a main service and were separate from the web hosting
services, which the service recipient was providing to third party consumers, and with which the
payment processing service provider had no concern. Similarly, in GoDaddy India Web Services
(P.) Ltd., In re,6 business support services in the form of marketing and promotion, oversight of
third party call centers and payment processing, were not construed as intermediary services
since they were provided as a main service by the service provider on his own account, even
though third party customers benefitted from such services being provided to the service
recipient3.

In the present case, the Applicant had provided course promotion and recruitment services to
various foreign Universities. At all points, the Applicant only provided services to such foreign
universities and not to prospective students in India. The mere fact that the Applicant assisted
Indian students with their recruitment, and in fee collection, does not change the nature of the
relationship between the Applicant and foreign universities. It must be remembered that in such a
tripartite situation, the third party (in this case, a prospective student in India) is never the
"recipient of services" as far as the supplier of services (in this case, the Applicant) is concerned.
This principle has been succinctly illustrated by the Mumbai Bench of the Customs, Excise and
Service Tax Appellate Tribunal ("CESTAT") in Vodafone Essar Cellular Ltd v. Commissioner
of Central Excise, Pune – III7 as follows:

"5.1. We have perused the agreement entered into between the appellant and the foreign
telecom service providers. As per the said agreement, the appellant has agreed to provide
telecom services to the customer of the foreign telecom service provider while he is in India
using the appellant's telecom network. The consideration for the service rendered is paid by
the foreign service provider. There is no contract/agreement between the appellant and the
subscriber of the foreign telecom service provider to provide any service. Since the contract
for supply of service is between the appellant the foreign service provider who pays for the
service rendered, it is the foreign telecom service provider who is the recipient of the
service. From the provisions of law relating to GST in UK and Australia, relied upon by the
appellant, this position becomes very clear. Your customer's customer is not your customer.
When a service is rendered to a third party at the behest of your customer, the service
recipient is your customer and not the third party. For example, when a florist delivers a

3
GST FLYERS by CENTRAL BOARD OF EXCISE & CUSTOMS NEW DELHI as updated on 1st January
2018
 bouquet on your request to your friend for which you make the payment, as far as the florist
is concerned you are the customer and not your friend." [Emphasis supplied]

Similar reasons were adopted by the AAR in both Universal Services and GoDaddy.

Further, the term "recipient of services" is defined by section 2(93) of the Central Goods and
Services Tax Act, 2017 ("CGST Act") as follows:

(93) "recipient" of supply of goods or services or both, means—

(a) where a consideration is payable for the supply of goods or services or both, the person
who is liable to pay that consideration;

In the present case, foreign universities were solely responsible for compensating the Applicant
for the services supplied by it. Thus, foreign universities were always the "recipient" of services
supplied by the Applicant. Had the Applicant been supplying services to Indian students, the
Applicant would have received consideration from Indian students. However, the fact was that
no remuneration / consideration was received by the Applicant from Indian students. Indeed, the
Applicant was expressly forbidden from receiving any fees or charges from Indian students and
from deducting any amounts from the fees or charges payable by such students to the foreign
universities. Accordingly, it could not be said that the Applicant was supplying services to both
foreign universities, as well as Indian students. By consequence, the Applicant could not be said
to have provided "intermediary services" to foreign universities and Indian students. As such, the
Ruling may require reconsideration.
 LOCATION OF THE RECIPIENT OF SERVICES.

Location of recipient of services has been defined in section 2(14) of the IGST Act to mean:

(i)Where a supply is received at a place of business for which the registration has been obtained,
the location of such place of services.

(ii) Where a supply is received at a place other than the place of business for which registration
has been obtained (a fixed establishment elsewhere), the location of such fixed establishment; 

(iii) Where a supply is received at more than one establishment, whether the place of business or
fixed establishment most directly concerned with the receipt of the supply; and

(iv) In absence of such places, the location of the usual place of residence of the recipient.

A better understanding can be made out through this tabular form:

S.N Case Location of Recipient of Service

o

A where a supply is received at a place of business such place of business

for which the registration has been obtained

B where a supply is received at a place other than such fixed establishment

the place of business for which registration has
been obtained (a fixed establishment elsewhere)

C where a supply is received at more than one the location of the establishment
establishment, whether the place of business or most directly concerned with the
fixed establishment receipt of the supply

D in absence of such places the location of the usual place of

residence of the recipient;
 CONCLUSION

The basic principle of GST is that it should effectively tax the consumption of such supplies at
the destination thereof or as the case may at the point of consumption. So place of supply
provision determines the place i.e. taxable jurisdiction where the tax should reach. The place of
supply determines whether a transaction is intra-State or inter-state.

The location of supplier of goods has not been defined under GST law, the reason thereof may
be that the goods being tangible in nature it is easy to identify the location of supplier and
recipient. Generally the location of supplier would be the place from where the goods are
supplied and location of recipient being place where the goods are received and consumed.

As per section 2(14) and (15) of IGST Act, the location of a service provider or receiver (as the
case may be) is to be determined by applying the following steps sequentially: A. where the
supply is made from/received at a place of business for which registration has been obtained,
the location of supplier of services would be the location of such place of business. B. where
the supplier of is not covered by A above: (i) where supply is made from/received at a place of
business for which registration has been obtained (a fixed establishment elsewhere), the
location of such establishment; (ii) where supply is made from/received at more than one
establishment whether the place of business or fixed establishment, the location of the
establishment most directly concerned with the provision or receipt of the service; and (iii) in
the absence of such places, the usual place of residence of the supplier or the recipient. It is
important to note that in the case of a service receiver, the place relevant for determining
location is the place where the service is “used” or “consumed”.
 BIBLIOGRAPHY
 Central Goods and Services Act
 State Goods and Services Act
 Integrated Goods and Services Act
 Study Material Tax Laws, Executive Programme, Institute of Company Secretaries of India
 Taxmann, GST Manual with GST Law Guide (7th Edition 2018-Revised and Reprint)
 GST (Meaning and Scope of Supply), Directorate General of Taxpayer Services
(Availiable at: https://cbic-gst.gov.in/pdf/e-version-gst-fliers/eflier-meaning-
scopeofsupply14062017.pdf
 https://www.taxmann.com/blogpost/2000000259/determination-of-place-of-supply-
under-gst.aspx
 Circular No. 107/26/2019-GST ; CBEC-20/06/03/2019-GST, Central Board of Indirect
Taxes and Customs, GST Policy Wing ,New Delhi, Dated the 18th July, 2019
 Notification No, 12/2017-Integrated Tax dated 15.11.2017 for apportionment of IGST with
respect to advertisement services under Section 12(14) of the IGST Act, 2017;
 Circular No. 2/1/2017-IGST dated 27.09.2017 for clarification on the place of supply of
satellite launch services by ANTRIX Corporation Ltd.
 Notification No. 02/2017-Integrated Tax dated 19.06.2017 notified to empower the
Principal Commissioner of Central Tax, Bengaluru West to grant registration in case of
OIDAR Services provided or agreed to be provided by a person located in non-taxable
territory and received by a non-taxable online recipient.
 Place of Supply Under GST Services: Where Location of Supplier & Recipient is in India,
QuickBook.com
 GST FLYERS by CENTRAL BOARD OF EXCISE & CUSTOMS NEW DELHI as
updated on 1st January 2018