‘INTERMEDIARY SERVICES’ CANNOT BE CLASSIFIED AS ‘EXPORT OF SERVICES’
By: – DR.MARIAPPAN GOVINDARAJAN
Goods and Services Tax – GST
Dated:- 2-3-2019
Intermediary
The term 'intermediary' is defined under section 2(13) of the IGST Act as a broker, an agent, or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account.
From the above definition it can be inferred that an intermediary can be a broker, an agent or any other person who arranges and facilitates the supply of goods and/or services between two or more persons and who cannot change the nature of supply as provided by the principal.
An intermediary cannot alter the nature or value of the service, the supply of which he facilitates on behalf of his principal, although the principal may authorize the inter
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as go-between his principal and his principal's customers. Thus, aforesaid activities of the appellant clearly in the nature of arranging or facilitating supply of goods by foreign entity to customers in India, the same is considered to be as intermediary services as defined under section 2(13) of the Central Goods and Services Tax Act, 2017 particularly when he is not supplying goods neither on behalf of the principal or on his own account but the same is supplied by the principal, a foreign entity. Therefore the Appellate Authority held that the contention of the appellant that promotion and marketing services provided by him to such foreign entity on his account, excluded from purview of the definition of 'intermediary service' is not acceptable.
Intermediary services – Export of services?
Section 2(6) of the Integrated Goods and Services Tax Act, 2017 ('IGST Act' for short) defines the expression 'export of services' as the supply of services, when-
(i) the supplier of service
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stinct persons.
Whether the intermediary services amount to export of services? For this question the answer is given in the following case laws-
In re 'Vishakhar Prashant Bhave' – 2018 (12) TMI 227 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA the question for which advance ruling was sought is as to whether the commission received by the applicant in convertible foreign exchange for rendering services as an intermediary between an exporter abroad receiving such services and an Indian importer of an equipment is an 'export of service' falling under section 2(6) of IGST Act and outside the purview of section 13(8)(b) attracting zero rated tax under section 16(1)(a) of IGST Act. The AAR held that since the place of supply of services in this case is in taxable territory, the said intermediary services cannot be treated as export of services under the provisions of GST laws.
In re 'Global Reach Education Services Private Limited' – 2018 (8) TMI 392 – APPELLATE AUTHORITY FOR ADVANCE RULI
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the applicant gets a positive response from the subscriber, they scan the credentials and the business potential of the subscriber to whom it is proposed to market the CRS software. Based on the organizational and workflow analysis of the subscriber and following a back ground check of their prior activities, the applicant logs on a request into the system through the website maintained by Sabre APAC called Subscriber Communication Management System. If the subscriber agrees to use the CRS software, order forms are collected from them to begin the process for activation of the CRS Software. Once the subscriber is registered successful and a Pseudo City Code is allotted in its favor. Once the code is allotted and the setup is activated the applicant's engineers install user interfaces to access the CRS Software in the subscriber's computer systems.
The Authority found that the job of the applicant is to scout for the subscribers in India. The applicant explains and educates the subscri
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Kunte as =
Sir
Nice enlightening article. Can you also please confirm that the Tax on such intermediary Services to a foreign clients needs to charged under CGST+SGST or only IGST?
As per my understanding / interpretation under provisions of Section 8(2) read with Section 12, the Tax is to be paid under IGST.
Is this interpretation correct? Please confirm or correct my interpretation in this respect.
With Regards,
Dated: 4-3-2019
Reply By KASTURI SETHI as =
It is inter-State supply. IGST applicable. Excellent Article by Dr.Govindarajan, Sir.
Dated: 5-3-2019
Reply By DR.MARIAPPAN GOVINDARAJAN as =
As mentioned by Shri Sethi IGST applicable. Thanks both of you for your good comments on my article.
Dated: 5-3-2019
Reply By ChandrakantBacharam Ghevade as =
What is state code to be mentioned in invoice
Dated: 30-4-2019
Reply By KASTURI SETHI as =
The code of that State is to be mentioned on the invoice in which State the supplier of intermediary service is located.
Date
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