Liaison Office connecting business in India with overseas business partner is nothing but a intermediary by whatever name called and subjected to levy of GST: AAR

Petitioner

Applicant is LO (Liaison Office) of UAE Entity and undertakes below activities in India viz.

1- Liaison between India office and Dubai office

2- Attending and representing DCCI in various seminars, conferences & trade fairs

3- Connecting businesses in India with business partners in UAE and vice versa

4- Organizing events & interactions with Indian stakeholders for sharing information about Dubai

Apart from above, no other activity is to be performed by applicant in India whether with or without any consideration.

All expenses incurred by applicant (predominantly office rent, salaries, consultancy services), are to be reimbursed from DCCI UAE on cost-to-cost basis. Thus, no consideration is to be charged / paid for aforementioned activities.

Thus, applicant is not a separate legal entity, rather it is a mere extension of DCCI UAE. Reimbursement of expenses received from DCCI UAE cannot be treated as consideration under GST law and hence, Applicant is not liable to obtain GST registration.

AAR

While on one hand applicant submitted that it is not undertaking any supply, on the other hand applicant accepts that it connects businesses in India with business partners in Dubai, which is nothing but supply of services. Thus the applicant acts as a conduit between some business partners in Dubai and certain businesses in India. It therefore appears that the applicant is acting as an intermediary in the subject case. Thus, we will now discuss the definition of an Intermediary as per GST Laws and see whether the applicant fits into the definition of an Intermediary.

As per the definition, an intermediary:

(i) means a broker, an agent or any other person, by whatever name called,

(ii) who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons,

(iii) but does not include a person who supplies such goods or services or both or securities on his own account.

In the subject case the applicant calls itself a liaison office and an intermediary can be called “by whatever name”. So in the subject case condition number (i) is satisfied.

The applicant has not categorically mentioned that it is arranging or facilitating supply of goods or services or both but has definitely said that it connects businesses in India with business partners in Dubai. The term business, in a general sense, means an activity which generates income, where there may be trading of goods or provision of services, etc. The applicant has not given details of their business partners in Dubai but we have no hesitation in concluding that these business partners would be companies doing business of some kind involving trading in goods or provision of services or securities or all of them. Similarly is the situation with ‘businesses in India”. These businesses also would be involving trading in goods or provision of services or securities or all of them. By connecting businesses in India with business partners in Dubai, applicant is actually arranging or facilitating the supply of goods or services or both, or securities, between two or more persons and therefore satisfies condition number (ii) mentioned above.

Further, it is very clear from the applicant’s submissions that it is not providing any services on its own account. Rather it is providing the service of connecting two or more business with an intention of promoting such businesses in Dubai and since it has stated that it is a liaison office of its Dubai Head Office, the applicant is not acting on its own account, rather it is acting on behalf of its Head Office and thus satisfies condition number (iii) mentioned above.

Thus the applicant is satisfying all the conditions of an intermediary and we have no hesitation in holding that, the applicant is an intermediary. As per the provisions of Section 13 (8) of the IGST Act, 2017, we find that the place of supply in subject case of the applicant as an intermediary would be the location of the supplier of services i.e. the location of the applicant which is located in the State of Maharashtra, India.

The applicant has relied upon the decision made by the Rajasthan Advance Ruling Authority in an application filed by M/s Habufa Meubelen. In the said case, M/s Habufa Meubelen are manufacturers of steel tube furniture and other furniture and home decoration. In the said case, the liaison office was set up only to represent the interest of the Head Office situated in Netherlands for the purpose of liaising with the suppliers for quality control.

The applicant has also relied upon the decision made by the Tamil Nadu Advance Ruling Authority in an application filed by M/s Takko Holding GMBH. In the Takko case, the applicant liaison office was set up only to act as a communication channel between its Head Office and Indian supplier of goods to its Head Office in terms of its procurement, order placement, quality checks, etc.

However in the subject case, the applicant connects businesses in India with business partners in Dubai. In other words applicant is providing services, to various business in India and Dubai. Hence, the facts of both the cited cases are different from the facts of the present case.

Ruling

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