2021 (8) TMI 522 - AAR - GST

Levy of IGST - export of service or not - marketing and consultancy services supplied by the applicant - Intermediary Services or not - HELD THAT - The applicant is covered and fits into the definition of 'intermediary as defined under the IGST Act and, therefore, provisions pertaining to 'place of supply' in case of intermediary services as provided in sub-section 8 of section 13 are relevant - Commission received by the applicant 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 not an export of service. Said supply will be treated as inter-state supply and IGST will be levied @18%. In the instant case the intermediary services are provided to the recipient located outside India and the Interstate provisions as contained under Section 7 (5) (c) shall be applicable and hence IGST is payable under such transaction.

Summary

Issues involved:
1. Interpretation of whether marketing and consultancy services provided by the applicant fall under export of service or intermediary services.

Analysis:
The case involved a dispute regarding the nature of services provided by the applicant, M/s. DKV Enterprises Private Limited, as marketing and consultancy services. The applicant claimed that they were acting as a consultant for a foreign company, assisting in the sale of products to specific refineries in India. They argued that their services should be considered as export of service, as they were not directly providing services to Indian clients and were billing the foreign company in foreign currency. The key question was whether these services could be classified as export of service or as intermediary services.

The Authority for Advance Ruling initially ruled that the services provided were not export of service but intermediary services, subject to IGST. The applicant then appealed this ruling before the Appellate Authority for Advance Ruling, arguing that the original ruling misinterpreted the nature of the service. They also referred to a judgment in the case of IBM India Pvt Ltd. to support their claim that their services should be considered export of service.

During the hearing, the applicant's representative reiterated their arguments, emphasizing that the services provided fell under export of service. They also requested the case to be remanded back to the original authority for re-examination in light of recent developments. The Appellate Authority accepted this request and remanded the case for further review.

Upon re-examination, the Authority for Advance Ruling found that the applicant's services qualified as intermediary services under the IGST Act. They highlighted that the applicant's role as an intermediary between a foreign exporter and an Indian importer did not constitute export of service. As per the provisions of the IGST Act, the services provided were considered as interstate supply, attracting IGST at the rate of 18%.

In conclusion, the Authority upheld the earlier ruling that the services provided by the applicant were intermediary services and not export of service. Therefore, IGST was applicable on the transactions, and the applicant was liable to pay tax accordingly.