Marketing Support is Business Support, Not Intermediary

Hon’ble CESTAT’s significant clarity; Marketing Support is Business Support, Not Intermediary

Hon’ble Chennai CESTAT recent ruling offers crucial support for taxpayers facing GST demands on marketing, sourcing support services, etc. Here are the key takeaways:

📌Purpose-Based Interpretation;

Contracts should be interpreted based on their purpose and the joint intent of the parties, not just the labels used.

📌Clarification on Agency;

Providing marketing support, conducting campaigns, and offering leads do not automatically make the Indian entity an agent of the foreign counterpart. The key test is whether the Indian entity’s actions bind the foreign principal in legal relations with third parties

📌Substance Over Form;

The actual activities and their impact on legal relations matter more than the terminology used in the contract

📌Distinct Activities;

Business support activities like marketing and generating leads are distinct from acting as an intermediary.

📌Payment Structure;

Payments for specific support activities, rather than a percentage of business generated, indicate that the Indian entity is not acting as an intermediary.