Is Our Export of Services attracts IGST under RCM and our Services considered as Intermediary Services

PJ/Case Law/2019-2020/3550

Fom Aluminium Machines Pvt. Ltd. (GST AAR Karnataka) - Advance Ruling No. KAR ADRG 09/2020 dated 12.03.2020
Brief Facts-M/s Aluminium Machines Pvt. Ltd. is engaged in the import of machines from the parent company in Italy and markets the machines in the domestic area and has only 1 office in India at Bangalore, where it is indulged in sales, service and administration. However, the applicant neither furnished any relevant facts pertaining to the questions raised in the application nor their view point on issues raised in the questions with the application.
The applicant are involved in three business activities i.e. (i) they import the machines in their own name, stocks the same and sells the machines, (ii) they book the orders for the parent company M/s Fom Industrie s.r.l., Italy for sale of machines earns sales commission and (iii) identifies the probable customers for M/s Universal Pack s.r.l., Italy by marketing their products and earns monthly 4000 euros irrespective of the result of the said marketing.
Issue-1) Is Our Export of Services attracts IGST under RCM?
2) Are our Services considered as Intermediary Services?
3) Is IGST paid under RCM eligible to ITC?
4) Provision in GST Returns to show the transactions?
5) We are not collecting IGST from our Customer and is absorbed as Cost-impact on the transaction value?

Reasoning by AAR and Decision-
1. AAR said that the applicant is, undoubtedly, a supplier and hence the question of levy of IGST on export of services, under RCM, does not arise.
2. It is observed from the agreement that the applicant is the sole agent of their parent company for the SAARC area and gets the commission for sale orders booked.
Moreover, in case of M/s Universal Pack s.r.l, the applicant is an agent without exclusive of the supplier for the SAARC area and is authorised to enter the market using the “Universal Pack India” brand on all commercial media used such as letterhead, business cards, website etc. Therefore the applicant is undoubtedly an agent of both the supplier under this type of transactions.
As per 2(13) of the IGST Act, 2017, “intermediary” means 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. Further, as per Section 13 (8) (b) of the IGST Act 2017, the place of supply of “intermediary services” shall be the location of the supplier of services.
Therefore the supply of services of the applicant under these transactions squarely falls under the Intermediary services and thereby the supply is in the taxable territory and thus the said supply is taxable, under forward charge mechanism.
3. In the instant case the applicant is not importing any services and hence payment of IGST under RCM does not arise.
4. No. rulings are given in respect of fourth and fifth questions, as they do get covered under Section 97(2) of the CGST Act 2017 and hence out of the jurisdiction of this authority.
Prepared By- CA Preksha Jain

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PJ/Case Law/2019-2020/3550

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