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2018 (12) TMI 227 - AAR - GSTLevy of GST - export of service or not - intermediary services - “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 - zero rated tax - section 16 (1) (a) of the Integrated Goods and Services Tax Act, 2017 - Place of supply - intra-state supply or not - rate of tax. Whether the commission received as an “intermediary” in International/ cross border transaction, for acting as a Broker or facilitator, in procuring from an Indian Customer/s purchase order/s (P.O.) for importing Laboratory Equipment from Germany, is liable to GST either under CGST/SGST Act, 2017 or the IGST Act, 2017? Held that:- The applicant is of the opinion that they are providing services as an intermediary. The facts also reveal likewise - 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. Applicant is covered by the said definition of an intermediary because they are definitely acting as a broker and facilitating the process for sale of materials by their foreign principals to the Indian parties because they locate the customer, negotiate the prices and probably ensure the sale, they also provide for discounts to the said customers, out of the commissions received bythem, as mentioned in the PO. It is very clear from the facts of transaction that the applicant is neither providing services nor supplying the goods on their own account. Since the applicant, being the supplier of service is located in India and the recipient of Service i.e. supplier of goods is located outside India, Section 13 of the IGST Act, 2017 would be applicable to determine the place of service - Since the place of supply of services in the instant case is in taxable territory, the said intermediary services cannot be treated as export of services under the provisions of the GST laws. In order to classify as ‘export of service’, as per section 2(6) of the Integrated Goods and Service Tax Act, 2017, one of the crucial condition as contained under sub-clause (iii) requires that the place of supply of service should be outside India - In the subject case, the place of supply shall be location of the supplier of services and therefore such ‘intermediary services’ cannot be classified as ‘export of services’. The provisions of inter-state supply and intra-state supply have clarity when both the recipient and the supplier of services are located in India. However as in the subject case, when the recipient is located outside India provisions of section 7(5)(c) shall be applicable - IGST is payable under such transaction. Ruling:- 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 not an “export of service” and GST will be levied. The said supply will be treated as Inter-State supply and not intra state supply and IGST will be levied @ 18%.
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