2021 (7) TMI 74 - AAR - GST

Classification of services - services provided by the applicant to its overseas client - export of services or not - Place of supply - intermediary services or not - HELD THAT - The supplier of service i.e., the applicant is located in India and the recipient of the service i.e., the overseas supplier of goods to whom the applicant provides services is located outside India. However, the nature of activities going to be undertaken by the applicant towards arranging or facilitating supply of goods envisages the services closely akin to the services provided by an intermediary as defined in clause (13) of section 2 of the IGST Act, 2017. The crux of the definition of term intermediary is lying with the phrase arranges or facilitates the supply of goods or services or both between two or more persons. Another condition which requires to be fulfilled is that the person shall not supply such goods or services on his own account - In the instant case, the applicant has admitted that he procures purchase order for supply of goods from the buyers located in India. He then connects such prospective buyers with the supplier of goods who are located outside the country. The supplier of goods thereafter despatches the goods directly to the buyers. Intermediary services or not - HELD THAT - It has been admitted by the applicant that the value of supply of services in the form of commission is determined at the rate normally prevalent in the market which is generally 1% or 2% depending on the volume of trade. It clearly establishes the fact that the supply of services as provided by the applicant is inextricably linked with the supply of goods made by the overseas supplier - the applicant being supplier of services by way of arranging or facilitating sales of goods for various overseas suppliers and admittedly the same is not being done on his own account, satisfies all the conditions to be an intermediary as defined in clause (13) of section 2 of the IGST Act, 2017. Place of supply - HELD THAT - The place of supply is determined under section 13 of the IGST Act, 2017 where location of supplier or location of recipient is outside India. In the present case, the applicant being the supplier of services is located in India and the recipient of services being located outside the country attracts the provisions of the aforesaid section of the Act ibid - the supply shall be treated as an intra-State supply in terms of sub-section (2) of section 8 of the IGST Act, 2017 and tax will be levied accordingly. This transaction will, therefore, not be covered within the definition of export of services as provided in Section 2(6) of IGST Act, 2017 as it is not satisfying one of the conditions of place of supply being outside India, as enumerated in Section 2(6)(iii) of the IGST Act, 2017 and consequently shall not be treated as zero-rated supply as provided in section 16 of the IGST Act, 2017. The services of the applicant by way of arranging sales of goods shall not be considered as export of service as defined under clause (6) of section 2 of the IGST Act, 2017.

Summary

Issues: Classification of services as export of services under the IGST Act

Issue 1: Classification of services provided by the applicant
The Authority for Advance Ruling, West Bengal examined whether the services provided by the applicant, involving arranging sales of goods for overseas manufacturers/traders, qualify as 'export of services' under the IGST Act, 2017. The applicant contended that the services should be considered as export of services as per the relevant provisions.

Issue 2: Interpretation of the term 'intermediary'
The Authority analyzed the definition of 'intermediary' under clause (13) of section 2 of the IGST Act, 2017, which includes a person who arranges or facilitates the supply of goods or services between two or more persons but does not supply such goods or services on their own account. The key consideration was whether the applicant's activities aligned with the definition of an intermediary.

Issue 3: Determination of place of supply
The Authority delved into the determination of the place of supply under section 13 of the IGST Act, 2017, particularly when the location of the supplier is in India and the recipient is outside the country. This analysis was crucial in deciding the tax implications and whether the services could be categorized as zero-rated supply.

Detailed Analysis:
The Authority noted that the applicant's role in connecting buyers with overseas suppliers, receiving commission, and not assuming obligations on behalf of the parties resembled that of an 'intermediary.' Despite the applicant's assertions of not acting as an agent, the nature of services provided indicated characteristics of an intermediary as defined in the IGST Act.

The examination of the place of supply revealed that since the applicant, as the supplier of services, was located in India, the transaction did not meet the criteria for export of services under the IGST Act. Consequently, the services were deemed as an intra-State supply, attracting applicable tax implications.

In conclusion, the Authority ruled that the services rendered by the applicant in arranging sales of goods did not qualify as 'export of service' under the IGST Act, 2017. The ruling was subject to the provisions of the GST Act unless declared void under the specified sections.