Promotion and Marketing services to overseas client is an ‘Intermediary Services’

Facts of the Case:                                                                                     

  • Appellant provides promotion & marketing services to prospective customers of its overseas client which is into selling scientific equipment. It solicits orders from clients in India and purchased by clients, the appellant provides installation & after-sales services against a commission of 12% for every order.
  • Procurement formalities including paper work is Not done by the Appellant.
  • With given arrangements, Appellant submitted the following contentions before the Learned Authority for Advance Ruling (LAAR):
    • Services so provided by it are Not ‘intermediary services’ but provided directly to the client on principal to principal basis.
    • Marketing & Promotion services along with After Sale services are to be categorized as ‘Composite Supply’
    • Such provision of services are in the nature of Export of Services thereby becoming a zero-rated supply.

Findings and Ruling:

LAAR dismissed all the claims of the appellant which were also upheld by the Appellate Authority of Advance Ruling (AAAR) under Karnataka GST Act as well on following grounds:

  • Appellant is an inter-mediator for the said overseas client for arranging & facilitating supply of goods in India and is not supplying those goods on his own account. Hence the services are ‘intermediary’ in nature.
  • Marketing & Promotion and After Sales services cannot be categorized as ‘Composite Supplies’ because these are independent in nature and are not naturally bundled. No one service can be taken as ‘principal supply’ in this case.
  • For classifying a supply as export, its ‘place of supply’ need to be determined. However for determination of the same, advance ruling cannot be sought as per GST Law.


Source: [2019] 102 37 (AAAR-KARNATAKA)