Supply of Marketing and Pre-sales technical support services to foreign entity qualifies as ‘intermediary’ service

Categories: Advance Ruling
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Facts:

M/s Ansys Software Pvt. Ltd. (‘the Applicant’ or ‘Ansys India’) is a wholly owned subsidiary of M/s Ansys Inc., US (‘the Parent Company’ or ‘Ansys US’). The Applicant is inter-alia engaged in the business of distribution of Ansys software (‘the software’) in India, the proprietary right of which lies with the Parent Company. As a distributor, the Applicant resells the ‘right/ license to use’ the software to customers in India. Towards this, the Applicant pays GST at applicable rate.

In some cases, customers directly place order for purchase of right/ license to use of the software from Ansys US. In such cases, the Parent Company directly raises invoice to customers and the customer directly pays to the Parent Company.

In such cases the Ansys US engages Ansys India for providing Marketing and Pre-sales technical support services (i.e. understanding customer’s business requirement and showcasing solutions using the software, co-ordinating customers and Ansys US for signing of software license, following up for collection of Invoice value etc.). Further, by means of a separate arrangement, the Parent Company also engages the Applicant for providing technical support services, once the ‘right/ license to use’ the software is sold to customers in India (i.e. 24*7 customer support services for any technical support or post sale technical services). The arrangement also provides for remunerating the Applicant for the services rendered.

Issue involved:

The Applicant is before the Authority for Advance Ruling, Karnataka (“AAR Karnataka”) to sought ruling on:

  • Whether marketing and Pre-sales technical support services provided by the Applicant will be classified as Intermediary Services in terms of Section 2(13) of the Integrated Goods and Services Tax Act, 2017?
  • Whether the post sales technical support services provide by the Applicant would be classified as Information Technology Support Services falling under SAC 998313?

Applicant’s Contention:

In case of direct sales, Ansys India helps the customers to understand the functionality of Ansys Software, how it is relevant for customer’s needs in terms of automated solutions, reduced response and turnaround time and cost savings in developing a new product. And hence, we are providing intermediary services to the Parent Company.

With regard to post sale technical services, the Applicant refers to Notification No. 11/2017 CT Rate dated June 28, 2017 (“Services rate notification”) and concludes that, it can be classified under SAC 998313 “Information Technology Consulting and Support Services”.

Held:

The AAR Karnataka in Advance Ruling No. KAR ADRG 30/2019 dated September 12, 2019 held as under:

  • As regard the Marketing and Pre-sales technical support services, the Applicant is performing all the necessary pre-sales co-ordination work so that the Parent Company can make the supply of the software. Performing the necessary work would amount to facilitation of the supply. And as the Applicant is facilitating the supply of Marketing and Pre-sales technical support services directly by the Parent Company to others, and not making the supply on its’ own account, the Applicant would be covered under the definition of ‘intermediary’.
  • As regard post sale technical services, the services provided by the Applicant to the Parent Company can be classified under SAC 998313 “Information Technology Consulting and Support Services”