Designing & developing patterns on behalf of OEMs is intermediary service: AAR

Case Details: Authority for Advance Rulings, Maharashtra Precision Camshafts Ltd., In re - [2022] 139 taxmann.com 44 (AAR-MAHARASHTRA)

Judiciary and Counsel Details

• • Rajiv Magoo & T.R. Ramnani, Member

Facts of the Case

The applicant was providing assistance in designing and development of patterns and tools to manufacture the camshafts. It filed an application for advance ruling to determine whether the activity of design and development of patterns used for manufacturing of camshafts, for a customer is a composite supply, the principal supply being supply of services.

AAR Held

The Authority for Advance Ruling observed that the impugned activity would include not only identifying third party vendors who can manufacture pattern and tools but also explaining and closely working with such designs which shall be provided to third party vendors by applicant on behalf of overseas machinist/OEMs for developing patterns and tools for further supply. Therefore, the impugned activity would involve three parties i.e., applicant, overseas machinists/OEMs and third party vendors and it would be in nature of intermediary services as applicant shall be connecting third party vendors in India with requirements of its overseas machinists/OEMs where ownership of patterns and tools remains with overseas machinists. Thus, it was held that the impugned activity would be treated as supply of service in form of intermediary services.

List of Cases Reviewed

• • Vijay Baburao Shirke, In re [2020] 120 taxmann.com 103/[2021] 83 GST 1 (AAAR – Mah.) (para 2.22)
  • Dolphine Die Cast (P.) Ltd., In re [2020] 116 taxmann.com 746/81 GST 479 (AAR – Kar.) (para 3.6).