2022 (6) TMI 755 - AAR - GST

Classification of services - rate of GST - Intermediary services - Overseas Commission Agent is covered within the definition of the term intermediary as provided under section 2(13) of the IGST Act, 2017 or not - import of services or not - Levy of GST on RCM basis under section 5(3) of the IGST Act, 2017 on commission paid to the Overseas Commission Agent. Overseas Commission Agent is covered within the definition of the term intermediary as provided under section 2(13) of the IGST Act, 2017 or not - HELD THAT - Any person, who enables the supply of goods/services between two persons, is considered as intermediary. However, where a person is providing services or supplies of goods on his own account to his customers, It cannot be termed as intermediary. As per the agreement dated 05.03.2021, Mr Bobby Kapoor, has to arrange or facilitate the supply of goods of the applicant to international Market and in return he shall get the commission on agreed terms - on perusal of legal provisions, agreement dated 05.03.2021 other records submitted by the applicant in this regard, it is observed that Mr Bobby Kapoor, a overseas commission agent, fall within the definition of intermediary as provided under section (2)13 of the IGST Act, 2017. Services received by applicant form the Overseas Commission Agent falls within the meaning of the term import of services or not - HELD THAT - As per facts circumstances, services received by applicant form the Overseas Commission Agent falls within the meaning of the term import of services means the supply of any services where, (i) the supplier of service is located outside India; (ii) the recipient of service is located in India; and (iii) the place of supply of service is in India. On perusal of said legal provisions, it is found that the services can be called as import of services only when it is satisfied all the three conditions mentioned therein. On perusal of records, it is found that the conditions (i) (ii) are satisfied in as much as Mr Bobby Kapoor, supplier of service, is located within India. Now in respect of (iii) condition, section 13 of the IGST Act, 2017 specifically deals with place of supply of a service as to whether a service can be termed as import of service or otherwise. On perusal of section 13 of the IGST Act, 2017 is relevant to the issue in hand which provides that the place of supply of the intermediary services would be the location of the supplier of such services (i.e. location of intermediary service provider). Thus the condition (iii) is not satisfied as the place of supply of service is not in India. Thus, the services received by the applicant is out of the ambit of import of services in as much as the condition (iii), is not satisfied in terms of section 13(8)(b) of IGST Act, 2017 as place of supply of service is out of India, since the location of Mr. Bobby Kapoor, is UAE, which is a place outside India. Whether the applicant is required to pay GST on RCM basis under section 5(3) of the IGST Act, 2017 on commission paid to the Overseas Commission Agent? - HELD THAT - On perusal of section 5 of the IGST Act, 2017, it is found that the said section deals with levy and collection of tax i.e. IGST and section 5(3) of the IGST Act, 2017 provides that the Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. In the present case, the import of services shall be treated as inter-state supply of services and the same is chargeable to IGST under reverse charge i.e. service recipient located within Indian territory has to pay the tax. Since the transaction is related to an intermediary service which is out of the ambit of import of services as discussed in foregoing paras, accordingly we observe that GST under reverse charge is not payable on the same.

Summary

Issues Involved:
1. Whether the Overseas Commission Agent is covered within the definition of 'intermediary' under section 2(13) of the IGST Act, 2017.
2. Whether services received by the applicant from the Overseas Commission Agent fall within the meaning of 'import of services' under section 2(11) of the IGST Act, 2017.
3. Whether the applicant is required to pay GST on a reverse charge mechanism (RCM) basis under section 5(3) of the IGST Act, 2017 on the commission paid to the Overseas Commission Agent.

Detailed Analysis:

Issue 1: Definition of 'Intermediary'
The applicant sought clarification on whether the Overseas Commission Agent falls under the definition of 'intermediary' as per section 2(13) of the IGST Act, 2017. The definition states that an "Intermediary" means a broker, an agent, or any other person 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 on his own account.

Upon reviewing the Memorandum of Understanding (MOU) dated 05.03.2021, it was observed that the Overseas Commission Agent, Mr. Bobby Kapoor, facilitates the export of goods by arranging purchase orders from foreign customers. He does not supply goods on his own account but rather connects the applicant with potential buyers and earns a commission based on the FOB value of the consignment exported. Therefore, it was concluded that Mr. Bobby Kapoor falls within the definition of 'intermediary' as per section 2(13) of the IGST Act, 2017.

Issue 2: Import of Services
The applicant questioned whether the services received from the Overseas Commission Agent qualify as 'import of services' under section 2(11) of the IGST Act, 2017. The definition requires that:
(i) The supplier of service is located outside India;
(ii) The recipient of service is located in India; and
(iii) The place of supply of service is in India.

While the first two conditions were satisfied (Mr. Bobby Kapoor is located in UAE and the applicant is located in India), the third condition was not met. According to section 13(8)(b) of the IGST Act, 2017, the place of supply for intermediary services is the location of the supplier of services, which in this case is outside India (UAE). Consequently, the services received do not qualify as 'import of services' since the place of supply is not in India.

Issue 3: GST on Reverse Charge Mechanism (RCM)
The applicant sought clarity on whether they are required to pay GST on a reverse charge mechanism basis under section 5(3) of the IGST Act, 2017 for the commission paid to the Overseas Commission Agent. Section 5(3) specifies that the Government may notify categories of supply of goods or services on which tax shall be paid on a reverse charge basis by the recipient.

Since the transaction in question pertains to intermediary services which do not qualify as 'import of services' (as the place of supply is outside India), it was concluded that GST under reverse charge is not applicable. Therefore, the applicant is not required to pay GST on the commission paid to the Overseas Commission Agent under section 5(3) of the IGST Act, 2017.

Ruling:
(i) The Overseas Commission Agent is covered within the definition of 'intermediary' as per section 2(13) of the IGST Act, 2017.
(ii) Services received from the Overseas Commission Agent do not fall within the meaning of 'import of services' under section 2(11) of the IGST Act, 2017.
(iii) The applicant is not required to pay GST on a reverse charge mechanism basis under section 5(3) of the IGST Act, 2017 on the commission paid to the Overseas Commission Agent.