Intermediary services under gst

Section 2 (13) of IGST Act, intermediary’ has been defined to mean 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.

Certain points that have to be observed in the definition are:

An intermediary is acting only as a middleman who is supplying goods and services between the principal and the third party;

             It can be a broker or agent or any other person.

If the intermediary is supplying the goods or services in his own name, then the status of ‘intermediary’ cannot be said to be available.

Section 20 (v) of IGST Act says, Provision of CGST Act shall Apply for registration in IGST Act.

Sec 24 (vii) of CGST Act says “persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise; is required to take compulsory GST registration without considering any turnover threshold limit.

Certain points that have to be observed in the above definition are:

As per sec 2(13) of IGST Act intermediary is a broker or an agent.
As per Sec 2(5) of CGST Act the term “Agent” includes broker or commission agent.

Tour and Travel Agent.

Facilitator of education service for universities or college
Stock Brokers
Land Broker
etc.

Section 13(8)(b) of IGST Act

Section 13(8)(b) says the place of supply in case of the ‘Intermediary services’ shall be the location of the supplier of services.

Diagnosis of Section 13(8)(b) of the IGST Act

At the start, it must be clarified that the services provided by intermediaries located in India to the recipient located outside India in lieu of fee/commission charged for the said services amounts to ‘supply’ of services. Now, in order to determine whether the transaction shall be Export of Services and/ or an intra-state supply or inter-state supply, the ‘place of supply’ of such services must be determined.

In pursuance of Section 13(8)(b) of the IGST Act, the place of supply in case of the ‘Intermediary services’ shall be the location of the supplier of services’

Example
XYZ is a company registered in Canada and taking services of finding prospective customers in India by an Indian ABC company registered at Delhi. ABC co. is providing intermediary services to this Canada co. and charging commission for the same.

Section 13(8)(b), the location of supplier shall be the place of supply in case of intermediary services. Since, the location of the supplier is Delhi and place of supply is also Delhi in given case, therefore this transaction will not be covered within the definition of export of services.

AAR

Global Reach Education Services Pvt. Ltd: In this case, the applicant was promoting the foreign university and was helping them in enrolling Indian students. In providing the promotional services, the promotional company was charging commission/fee from the foreign university. In this very case, the authorities found that the Indian representative was an intermediary acting as an independent representative. Citing Section 13(8)(b) of the IGST Act, the Hon’ble West Bengal Advance Ruling Authority ruled that the place of supply shall be the place of supplier of service and such intermediary services would not be termed as export of services.

Regards:

CMA Md Rehan

Partner

CKC LLP

rehan@cmackc.com