Pre-sales marketing services by Indian subsidiary to the foreign parent company

 Case covered:

M/s Infinera India Pvt Ltd, Prestige Solitaire, Level 4-401, No 6, Brunton Road, 560025

Facts of the case:

The appellant is a 100% Export Oriented Unit under the STPI scheme and is a wholly-owned subsidiary of Infinera Corporation, USA. The Appellant is predominantly engaged in software development services for the products developed by Infinera Corporation. In addition, the Appellant also provides pre-sale and marketing services for the optical networking equipment developed by Infinera Corporation. The Appellant and Infinera USA have entered into a “pre-sale and marketing services agreement” dated 1st April 2011 whereby the scope of work involves:

a.) Assist Infinera USA through the sales promotion and advertising for its product in India;

b.) Conduct market research and keep Infinera USA advised and informed regarding all matters within India, which may be of reasonable business interest or concern to India; and

c.) Provide informational, educational and service programs in India, as may be requested by Infinera USA from time to time.

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Pronouncement of AAAR:

The Appellant has also relied on the Advance Ruling given under GST law, by Maharashtra Authority for Advance Ruling in the case of M/s Asahi Kasei Pvt Ltd in connection with the question whether service supplied by the applicant under the service agreement would constitute ‘support service’ or ‘intermediary service’. The Authority after examining the provisions of law and the terms of the agreement held that the activities of the applicant cannot be classified as ‘intermediary service’. Notwithstanding the above, we find that the ruling given by the Authority at Maharashtra has examined the case of the applicant in the light of the terms of the agreement placed before it. The Authority, in that case, found favor with the terms of the agreement and held that the applicant, in that case, was not an ‘intermediary’. Although the Pre-sales and Marketing Agreement in this Appellant’s case does mention that they are independent contractors and are not to act as an agent of Infinera US in any manner, we find that the actual activity performed by the Appellant as outlined by BAPA is one of the facilitating the supply of goods by Infinera US to their customers in India. For the above reasons we are not inclined to give any weightage to the ruling given in the case of Asahi Kasei India Pvt Ltd. In view of the foregoing discussion, we uphold the decision of the AAR that the pre-sales and marketing services provided by the Appellant of the products of the overseas client- Infinera US, is in the nature of facilitating the supply of the products of the overseas client and is appropriately classified as an ‘intermediary service’ as defined under Section 2(13) of IGST Act.