Whether the “Commission” received by the applicant for providing services as an “Intermediary” between an exporter and an Indian importer, is an “export of service” falling under Section 2(6)?

PJ/Case Law/2018-2019/3521

CASE LAW

Case:VISHAKHAR PRASHANT BHAVE
Citation:GST-ARA-23/2018-19/B-87-Mumbai
Issue: Whether the “Commission” received by the applicant for providing services as an “Intermediary” between an exporter and an Indian importer, is an “export of service” falling under Section 2(6)?
Brief Facts: The Applicant, Ms. Vishaka Prashant Bhave, is the proprietor of the firm M/s. Micro Instruments, Mumbai, is a sole Proprietary Concern, duly Registered under the CGST/SGST and IGST Acts having Reg. no. 27AHSPB0847K1Z2 and is carrying on trading business in Laboratory Instruments, its spare parts, Laboratory Equipment, and other related activities . One of the activities of Micro relates to providing services to its Principals at Germany, by way of procuring Purchase Orders (P.O.) from the parties desirous of purchasing advanced type of Laboratory Equipment, by negotiating the terms of supply including fixation of price above the floor price fixed by the Principals (known to the Applicant alone). If Micro can negotiate better price than the floor price, the difference between the floor price and actual price is given to Micro by way of “Commission” in “convertible foreign exchange”
Appellant’s contention: The applicant contended that the commission received by them in in International/cross border transaction, for acting as a Broker or facilitator, in procuring from an Indian Customer/s purchase order for importing Laboratory Equipment from Germany 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 and outside the purview of section 13(8)(b) and attracting zero rated tax under section 16(1)(a) of the IGST act.
Respondent’s Contention & Reasoning of Judgment:As refers to the section 2(13) of IGST Act, 2017 defined intermediary , in simple terms “intermediary” can be explained as a firm or a person, etc. who acts as a link between parties for the conduction of business. From the above definition we find 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. 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 and 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.Section 8 of the Integrated Goods and Services Tax Act, 2017 deals with the provisions of intra-State. Applying the provisions of Section 8(2) which states that ‘subject to the provisions of Section 12, in case where the location of the supplier and the place of supply of services are in the same State or in the same Union territory, the supply of service shall be treated as intra-State supply’. As per intra-State provisions contained in Section 8(2), the said provisions are subject to the provisions of Section 12 of the IGST Act. As per Section 12, the provisions of Section 12 would be applicable only for determining the place of supply of service where the location of supplier of services and the recipient of the services is in India. When recipient is located outside India the said provisions of Section 12 cannot be made applicable and since provisions of Section 8(2) are inter-linked with provisions of Section 12, the same cannot be made applicable in case the recipient of service is located outside India. Thus we find that in case the intermediary services are provided to the recipient located outside India, the inter-state provisions as contained under Section 7(5)(c) shall be applicable and hence IGST is payable under such transaction.
Decision: Services provided by applicant falls under sec 7(5) (c) of IGST Act, and IGST is payable under such transaction.
Comment: The phrase ‘supply of services in the taxable territory’ is to be determined in general terms like if the service provider is located in India, it shall be considered that services have been provided in India. Like in the present case, since Appellant has providing the services of commission agent, it shall be considered that the services have been provided in India and by virtue of the provision contained in section 7(5) (c), it will be considered as inter-state supply on which IGST will be payable, IGST will be payable in the present case by appellant.

Prepared by Kasif

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PJ/Case Law/2018-2019/3521

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