Marketing/Recruitment/Referral Consultant To Foreign Universities On Principal To Principal Basis Is Not 'Intermediary Service': AAR

The Telangana Bench of the Authority of Advance Ruling (AAR) has held that marketing, recruiting, or referring consultants to foreign universities on a principal-to-principal basis is not 'intermediary service'.

The bench of S.V. Kasi Visweswara Rao and Sahil Inamdar observed that the supplier is located in India while the recipient of services, i.e., foreign colleges and universities, is located outside India. Since the activity of the applicant supplier is an independent service of 'marketing, recruitment, or referral consultant', it will fall under Section 13(2) of the IGST Act to determine its place of supply. The place of supply of the services of the applicant shall be the location of the recipient of those services, i.e., the location of foreign colleges and universities that are outside India. The applicant and foreign colleges and universities are nowhere related to each other and thus cannot be treated as the establishment of a distinct person in accordance with Explanation 1 to Section 8 of the IGST Act.

The applicant has entered into agreements with foreign universities and colleges to provide referral services. Broadly, under the scope of services, the applicant provides referrals of the aspirants or applicants who wish to apply and study abroad to universities or colleges located outside India. The applicant is responsible for preparing the case of the aspiring student and referring it to the concerned foreign college or university, as per the requirements of the aspiring student and the fitment to the college or university. The applicant is not bound to refer a student to a college or university in particular. On the contrary, the applicant, considering the merits of the aspiring student and the particulars of the college or university, refers to the case.

The college or university retains full and complete discretion about whether to accept a student applicant for enrollment. The applicant has no authority to accept an applicant or guarantee a student's acceptance by the college or university. Thus, the applicant works as an independent contractor, providing its own service of'marketing, 'recruitment, and referral' to foreign colleges and universities.

The issue raised was whether, in view of the given facts and circumstances, the activity of providing services as 'a'marketing, recruitment, or referral consultant' by the applicant to foreign universities or colleges on principal-to-pprincipal basis would qualify as 'intermediary'. Yet another issue raised was whether the activity of the applicant would be liable to levy GST or would qualify as 'export of services' in terms of Section 2(6) of the Integrated Goods and Services Tax Act, 2017.

The term 'intermediary' is defined in Section 2(13) of the IGST Act. “Intermediary" is a broker, agent, or any other person who facilitates or arranges services between two or more persons, while the main service is performed by the service recipient of the intermediary's services. A person would qualify as 'intermediary' only if he facilitates the supply of service between two or more people. A person who provides the service on a principal-to-principal basis without facilitating a service between two persons will not be termed 'intermediary'.

The AAR held that the activity of the applicant for a foreign college or university should qualify as 'export of service' in terms of Section 2(6) of the IGST Act, provided the payments are received in convertible foreign exchange.

Applicant's Name: M/s. Center for International Admission and Visas (CIAV)

Date: 9.05.2024

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