GoDaddy activities in India are bundle of support services exported - No Service Tax: AAR
GODADDY India Web Services Private Limited (GoDaddy India) proposes to enter into a 'Services Agreement' with GoDaddy.com, LLC('GoDaddy US') located in Arizona, USA and incorporated in Delaware, USA. GoDaddy US is a domain name registrar and provides other web services to customers across the world. GoDaddy India proposes to provide a gamut of services to its client GoDaddy US. It shall provide support services in an integrated manner to assist GoDaddy US develop its brand in India, carry on its operations efficiently and serve customers in India. GoDaddy US, through its website 'GoDaddy.com' is engaged in the business of providing name registration, web hosting, designing and other services.
GoDaddy India will provide the following services to GoDaddy US:
1. Direct Marketing:
2. Branding Activities:
3. Offline Marketing:
4. Supervision of quality of third party customer care center services:
5. Payment processing services:
For these services, GoDaddy India will charge a fee equal to the operating costs incurred by it plus a mark-up of 13% on such costs, which will be received by the applicant from GoDaddy US in US Dollars. It is contemplated that GoDaddy US would be the only customer of GoDaddy India. It would not provide any services for or on behalf of GoDaddy US in India or outside India.
GoDaddy India has approached the Authority for Advance Rulings for ruling on the taxability of their activities.
The AAR decided the case on 4th March 2016. The questions and the rulings are:
Question No.1: Whether, in the facts and circumstances the various support services proposed to be provided by the Applicant to GoDaddy US are a "bundle of Services" being naturally bundled in the ordinary course of business and accordingly is a single service, being 'business support service', in terms of Section66F of the Finance Act?
Ruling: the various support services proposed to be provided by the Applicant to GoDaddy US are a "bundle of Services" being naturally bundled in the ordinary course of business and accordingly is a single service, being business support service, in terms of Section 66F of the Finance Act.
Question No. 2: If the answer to Question 1 is positive, whether, in the facts and circumstances of the case, the place of provision of business support service by the Applicant, is outside India in terms of Rule 3 of the Place of Provision of Service Rules, 2012 ("POPS"). If the services provided by the Applicant are not considered as naturally bundled then in the facts and circumstances enumerated, which of the individual service shall qualify for classification under Rule 3 of the POPS as service provided by a service provider located in India to a service recipient located outside India?
Ruling: the place of provision of business support service provided by the applicant, is outside India in terms of Rule 3 of the Place of Provision of Service Rules, 2012.
Question No. 3: Whether in the facts and circumstances and in the light of the answers to questions 1 and 2 above, the services to be provided by the Applicant to GoDaddy US that fall to be classified under Rule 3 of the POPS qualify as export of taxable services in terms of Rule 6A of the STR and therefore remain non-taxable for purpose of payment of service tax under the Finance Act?
Ruling: the services to be provided by the applicant to GoDaddy US would fall to be classified under Rule 3 of the Place of Provision of Services Rules, 2012 qualify as export of taxable services in terms of Rule 6A of the Service Tax Rules, 1994 and therefore remain non-taxable for purpose of payment of service tax under the Finance Act.
Question No.4: Whether in the facts and circumstances of the case, by providing the support services being business support to GoDaddy US, the Applicant is providing any service to the customers of GoDaddy US in India?
Ruling: In facts and circumstances of the case, by providing the payment processing services to GoDaddy US, the applicant is not providing any service to the customers of GoDaddy US in India.
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