Page 136 - GSTL_16th July 2020_Vol. 38_Part 3

374 GST LAW TIMES [ Vol. 38
is engaged in providing research and development services in respect of various
automotive applications to its overseas group companies.
2.2 The subject application is filed in respect of the Technical services
provided by Applicant in respect of seating systems and electronic control units
to service recipients situated outside India. Applicant entered into a technical
assistance agreement with the other Lear entities situated abroad as per which,
the Applicant is requred to perform activities such as engineering, R&D and
technical assistance including advanced product and process development,
product design and product engineering. The intangible that are developed as a
result of these activities are owned by the Service receiver and in consideration
for providing such services, the Applicant is charging based cn the number of
hours spent along with certain agreed reimbursements.
2.3 Applicant has bifurcated the activities performed in lieu of the
aforementioned agreement into two divisions, namely :
• Seating Division; and
• E-Systems Division.
2.4 In the Seating Division, the Applicant carries out development of
design of seats and seat parts as per the requirement of the customer. Applicant’s
team conceptualizes the design & drawing or technical illustrations in computer
environment using various computer software including Computer Aided De-
sign software upon completion of which, the Applicant checks whether such de-
sign meets the requirement of the customer or not. For this, Applicant uses com-
puter graphic simulation technologies which enables the Applicant to create 3-D
graphic simulations that replaces fabricated prototypes. The entire testing is car-
ried out in virtual environment, no prototypes are ever received from the service
receiver for testing purposes. Once the design is tested and approved in India,
the same is stored on the server of the customer for verification and approval. In
case the customer has any suggestions, comments, etc. the design is again modi-
fied by the Applicant and above referred process is reiterated. Once the design is
finally approved by the customer, the activity of Applicant is concluded. In the
subject case there is no import of prototype from the service receiver for testing
purposes. This activity was being treated by the applicant as export of service
under the Service Tax Laws.
2.5 In the E-Systems Division, applicant develops Electronic Control
Units (“ECU”) as per the requirements of its customers. ECU is a composite box
which controls various electronic functions of the car such as power windqw,
audio system, wiper, auto lock, lighting, etc. These are embedded systems and
control she electrical sub-systems that are present in a transport vehicle. On re-
ceipt of orders from Original Equipment Manufacturers (OEM) to develop ECU,
the concerned Overseas Lear entity places back to back orders to different Lear
entities (including the Applicant) for developing software for each of the opera-
tions which are controlled by ECU as mentioned above. Generally, the whole
work is divided among multiple entities depending upon their available capacity
to ensure that the development of ECU is completed in a defined timeline as per
the requirement of the end customers. Out of the entire lifecycle for development
of integrated software, initial 5-6 weeks are attributed towards development of
function specific software by each Lear entity including the Applicant who are
participating in the development project. Upon completion of the function specif-
ic development of software, the last 2-3 weeks are allocated for verification of

GST LAW TIMES  16th July 2020  136