GST update on taxability of commission agent in cross border transactions

The leviability of GST on a particular transaction is dependant on the place of supply of service in case of cross border transactions. GST will be levied only if the place of supply of service is in India. The commission agents are covered by the definition of ‘intermediary’ given under section 2(13) of the Integrated Goods and Services Tax Act, 2017. Since there is special provision for determining Place of Supply in case of intermediary services in section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017 which reads as follows:-

Section 13 Place of supply of services where location of supplier or location of recipeint is outside India:-

(8) The place of supply of the following services shall be the location of the supplier
of services, namely:––

(a) services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders;

(b) intermediary services;

(c) services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month.

This provision has the implication that in case of commission agent located outside India, no GST will be leviable even if the service provider is located outside India and recipient of service is in India as the place of supply is outside India. Hence, no GST will be payable under reverse charge mechanism. Similarly, in case the commission agent is located in India and the service receiver is outside India, the place of supply will be in India and so the same would be leviable to GST and will not be treated as export of service. This is for the reason that the definition of ‘import of service’ given under section 2(11) of the Integrated Goods and Services Tax Act, 2017 prescribes that it means supply of any service where supplier of service is located outside India, recipeint of service is located in India and place of supply of service is in India. Since, the place of supply in case of foreign commission agent is outside India, the transaction will not be considered as import of service so as to levy GST. Similarly, the definition of ‘export of service’ given under section 2(6) of the Integrated Goods and Services Tax Act, 2017 prescribes that it means supply of any service where supplier is located in India, recipeint is located outside India, place of supply of service is outside India and the payment for such service has been received by the supplier of service in convertible foreign exchange. Hence, in case of Indian Commission Agents, the GST will be leviable as the place of supply of service is in India and so the transaction cannot be considered as export of service.

It is pertinent to mention that similar provisions were there in Service Tax Laws and it can be said that the same situation is being carried forward in the GST regime too.

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GST update on taxability of commission agent in cross border transactions

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