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Promotion and marketing, branding etc. without securing orders or facilitating provision of service are naturally bundled services of support and accordingly are covered under Rule 3 of the Place of Provision of Service Rules, 2012.
Facts
The Applicant proposes to enter into a “service agreement” with a foreign company providing web services to customers across the world. Services to be provided include marketing and promotion services, direct marketing, branding, offline marketing by conducting road shows, arranging seminars, supervising third party customer care center services, payment processing etc. for a consideration of cost plus mark-up of 13% in US dollars. The Applicant is not authorised to enter into any contract on behalf of the foreign company or secure orders or facilitate the provision of services. The question before the authority is whether the aforesaid services are support services naturally bundled in terms of section 66F of the Act and if so, whether the place of provision is outside India and whether the service qualifies as export in terms of Rule 6A of the Service Tax Rules, 1994.
Held
The Authority noted that the services proposed to be provided are with a sole intention of promotion of the brand of the foreign company by augmenting its business and therefore would support their business interests in India. Further it was held that the definition of ‘intermediary’ under Rule 2(f) of the Place of Provision of Service Rules, 2012 excludes a person who provides the “main service” on his own account. Supporting the business of the foreign company is the main service and processing payments and supervision of third party call centers are ancillary and incidental to the main service of support which is offered as a package for a lumpsum payment. Thus in view of these indicators the proposed services are support services naturally bundled in the normal course of business and fall under Rule 3 of the POPS as per which the place of provision is the location of the service receiver. There is no contract between the applicant and the customers of the foreign company in India and no consideration is received from the Indian customers. The benefit of the service accrues to the foreign company outside India and thus the support service is provided outside India i.e. the location of the service receiver. Further since the payment is received in convertible foreign exchange and all other clauses of Rule 6A of the service tax rules are satisfied the service qualifies to be an export.
